What changed in this filing

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Item 1. Financial Statements

2026-02-13 compared with 2025-08-14 · 349 added, 312 removed, 371 unchanged (64% of the section changed)

15 unchanged sentences

Current liabilities

Current portion of long-term debt, net

Accounts payable

2 unchanged sentences

Total current liabilities

Long-term debt

Long-term debt, net

Other liabilities

3 unchanged sentences

Preferred stock, 10,000,000 shares authorized, $ .001 par value, of which 200,000 shares are authorized as Class A Convertible stock.

No shares issued and outstanding at June 30, 2025 and September 30, 2024

No shares issued and outstanding at December 31, 2025 and September 30, 2025

Common stock, $ .001 par value:

75,000,000 shares authorized, 19,716,152 and 19,599,052 issued at June 30, 2025 and September 30, 2024, respectively

75,000,000 shares authorized, 18,110,874 and 17,970,453 issued at December 31, 2025 and September 30, 2025, respectively

Additional paid-in capital

Retained earnings

Treasury stock, at cost, 2,096,451 shares at June 30, 2025 and at September 30, 2024, respectively

Treasury stock, at cost, 339,644 shares at December 31, 2025 and at September 30, 2025, respectively

( 3,460,972 )

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30,

Nine Months Ended June 30,

Three Months Ended December 31,

Total net sales

7 unchanged sentences

Interest expense

( 1,221,926 )

Interest income

10 unchanged sentences

Share-based compensation

Taxes paid related to settlement of equity awards

Balance, December 31, 2025

( 3,460,972 )

Share-based compensation

Balance, March 31, 2025

( 21,368,537 )

Share-based compensation

Balance, June 30, 2025

( 21,368,537 )

See accompanying notes to the unaudited condensed consolidated financial statements.

6 unchanged sentences

( 3,460,972 )

Share-based compensation

Balance, March 31, 2024

( 21,368,537 )

Share-based compensation

Balance, June 30, 2024

( 21,368,537 )

See accompanying notes to the unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended June 30,

For the Three Months Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

1 unchanged sentence

Depreciation and amortization

Share-based compensation expense

Stock options

Restricted stock awards, MSOs and MSUs

Gain on disposal of property and equipment

Share-based compensation

Amortization of loan fees

Deferred income taxes

1 unchanged sentence

Accounts receivable

( 1,543,749 )

Contract assets

1 unchanged sentence

( 2,007,204 )

Prepaid expenses and other current assets

( 2,065,720 )

Prepaid expenses and other current assets

Other non-current assets

2 unchanged sentences

Accrued expenses

( 2,595,305 )

Income taxes payable

4 unchanged sentences

( 1,109,890 )

Proceeds from the sale of property and equipment

Net cash (used in) provided by investing activities

Net cash (used in) investing activities

( 1,109,890 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayments of term note

( 19,500,000 )

Proceeds from line of credit note

Repayments of line of credit note

( 4,768,490 )

Debt payments

( 1,514,510 )

Initial Term Loan principal payments

Taxes paid related to net share settlement of equity awards

Net cash (used in) financing activities

1 unchanged sentence

( 1,514,510 )

Net increase (decrease) in cash and cash equivalents

( 2,576,152 )

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of year

5 unchanged sentences

Transfer from prepaid inventory to inventory

Transfer from prepaid inventory to purchases of property and equipment

Transfer from prepaid inventory to goodwill

Transfer from prepaid inventory to intangible assets, net

Transfer from prepaid expenses and other current assets to PP&E

Transfer from other assets to PP&E

Transfer from intangible assets to goodwill

Transfer from prepaid expenses to other assets

Transfer from prepaid expenses to intangible assets

See accompanying notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

Summary of Significant Accounting Policies

Certain of Innovative Solutions and Support, Inc.’s (the “Company,” “IS&S,” “we” or “us”) significant accounting policies are described below.

Certain of Innovative Solutions and Support, Inc.’s (the “Company,” “IA,” “we,” or “us”) dba Innovative Aerosystems and its subsidiaries significant accounting policies are described below.

All of the Company’s significant accounting policies are disclosed in the notes to the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2025.

Description of the Company

Incorporated in Pennsylvania in 1988, IS&S is a vertically integrated provider of flight solutions and equipment to commercial air transport, general aviation markets, the United States Department of Defense (“DoD”) and allied foreign militaries.

Incorporated in Pennsylvania in 1988, IA is a vertically integrated provider of flight solutions and equipment to commercial air transport, general aviation markets, the United States Department of Defense (“DoD”) and allied foreign militaries.

We operate in one business segment that designs, develops, manufactures, sells and services avionics products and systems for retrofit applications and original equipment manufacturers (“OEMs”).

3 unchanged sentences

The condensed consolidated balance sheet as of September 30, 2025 is derived from the audited financial statements of the Company.

Operating results for the three and nine months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2025 which cannot be determined at this time.

Operating results for the three months ended December 31, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2026 which cannot be determined at this time.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2025.

3 unchanged sentences

Use of Estimates

The financial statements of the Company have been prepared in accordance with GAAP, which require management to make estimates and assumptions that affect the amounts reported in the financial statements.

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which require management to make estimates and assumptions that affect the amounts reported in the financial statements.

Actual results could differ from those estimates.

Estimates are used in accounting for, among other items, valuation of tangible and intangible assets acquired, long term contracts, evaluation of allowances for doubtful accounts, inventory obsolescence, product warranty cost liabilities, income taxes, revenue recognition on Engineering Development Contracts (“EDC”) programs, the useful lives of long-lived assets for depreciation and amortization, the recoverability of long-lived assets, evaluation of goodwill impairment and contingencies.

Estimates and assumptions are reviewed periodically and the effects of changes, if any, are reflected in the condensed consolidated statements of operations in the period they are determined.

Reclassification

Historically, the Company presented Customer service and Engineering and development contracts Net Sales and Cost of sales separately on the Consolidated Statements of Operations.

For the three and nine months ended June 30, 2025, the Company has aggregated these items into one category, “Services” and reclassified Customer service and Engineering and development contracts revenues as well as Cost of sales to conform the presentation of the Consolidated Statements of Operations for three and nine months ended June 30, 2024.

For additional information, see Note, 3 Summary of Significant Accounting Policies, (“Reclassifications ”) to the

Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024.

Estimates are used in accounting for, among other items, valuation of tangible and intangible assets acquired, evaluation of allowances for credit losses accounts, inventory obsolescence, product warranty cost liabilities, income taxes, engineering development contracts (“EDC”) revenue recognition, the useful lives of long-lived assets for depreciation and amortization, the recoverability of long-lived assets, evaluation of goodwill and indefinite-lived intangible assets impairment and contingencies.

Estimates and assumptions are reviewed periodically, and the effects of changes, if any, are reflected in the consolidated statements of operations in the period they are determined.

Business Combinations

The Company evaluates each of its acquisitions in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”), to determine whether the transaction is a business combination or an asset acquisition.

In determining whether an acquisition should be accounted for as a business combination or an asset acquisition, the Company first performs a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets.

In determining whether an acquisition should be accounted for as a business combination or an asset acquisition, the Company first performs a screening test to determine whether substantially all of the fair value of the gross assets

acquired is concentrated in a single identifiable asset or a group of similar identifiable assets.

If this is the case, the acquired set is not deemed to be a business and is instead accounted for as an asset acquisition.

4 unchanged sentences

When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions.

The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but these assumptions are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Any excess of the purchase price over the fair value of the net assets acquired is recognized as goodwill.

During the measurement period, which may be up to one year from the acquisition date, the Company adjusts the provisional amounts of assets acquired and liabilities assumed with the corresponding offset to goodwill to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date.

Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded within the Company’s condensed consolidated statements of operations.

We allocate the purchase price of acquired entities to the underlying tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values, with any excess recorded as goodwill.

8 unchanged sentences

Intangible Assets

The Company’s identifiable intangible assets primarily consist of license agreement and customer relationships.

The Company’s identifiable intangible assets primarily consist of license agreements, customer relationships and backlog.

Intangible assets acquired in a business combination are recognized at fair value using generally accepted valuation methods deemed appropriate for the type of intangible asset acquired and are reported separately from any goodwill recognized.

Intangible assets with a finite life are amortized over their estimated useful life and are reported net of accumulated amortization.

They are assessed for impairment in accordance with the Company’s policy on assessing long-lived assets for impairment described in the notes of the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024.

They are assessed for impairment in accordance with the Company’s policy on assessing long-lived assets for impairment described below.

Indefinite-lived intangible assets are not amortized, but are subject to an annual impairment test, or when events or circumstances dictate, more frequently.

The impairment review for indefinite-lived intangible assets can be performed using a qualitative or quantitative impairment assessment.

The quantitative assessment consists of a comparison of the fair value of the indefinite-lived

intangible asset with its carrying amount.

The quantitative assessment consists of a comparison of the fair value of the indefinite-lived intangible asset with its carrying amount.

The Company initially does a qualitative assessment for impairment of intangible assets and will utilize quantitative testing based on results from the qualitative assessment, if deemed necessary.

If the carrying amount exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

1 unchanged sentence

Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized.

The recorded amounts of goodwill from business combinations are based on management’s best estimates of the fair values of assets acquired and liabilities assumed at the date of acquisition.

The recorded amounts of goodwill from business combinations are based on management’s best estimates of

the fair values of assets acquired, and liabilities assumed at the date of acquisition.

Goodwill is assigned to the reporting units that are expected to benefit from the synergies of the business combination that generated the goodwill.

1 unchanged sentence

Reporting units are determined based on an evaluation of the Company’s operating segments and the components making up those operating segments.

Goodwill is tested for impairment at fiscal year-end on September 30 or in an interim period if certain changes in circumstances indicate a possibility that an impairment may exist.

Goodwill is tested for impairment annually, or in an interim period, if certain changes in circumstances indicate a possibility that an impairment may exist.

Factors to consider that may indicate an impairment may exist are:

● macroeconomic conditions;

● industry and market considerations, such as a significant adverse change in the business climate;

● cost factors;

● overall financial performance, such as current-period operating results or cash flow declines combined with a history of operating results or cash flow declines;

● a projection or forecast that demonstrates continuing declines in the cash flow or the inability to improve the operations to forecasted levels;

● any entity-specific events.

the macroeconomic conditions, industry and market considerations such as a significant adverse change in the business climate, cost factors, overall financial performance such as current-period operating results or cash flow declines combined with a history of operating results or cash flow declines or a projection/forecast that demonstrates continuing declines in the cash flow or the inability to improve the operations to forecasted levels, and any entity-specific events.

If the Company determines that it is more likely than not that the fair value of the reporting unit is below the carrying amount as part of its qualitative assessment, a quantitative assessment of goodwill is required.

1 unchanged sentence

If the fair value is greater than the carrying value, then the goodwill is deemed not to be impaired, and no further action is required.

If the fair value is less than the carrying value, goodwill is considered impaired and a charge is reported as impairment of goodwill in the condensed consolidated statements of operations.

If the fair value is less than the carrying value, goodwill is considered impaired and a charge is reported as impairment of goodwill in the consolidated statements of operations.

Cash and Cash Equivalents

Highly liquid investments, purchased with an original maturity of three months or less, are classified as cash equivalents.

Cash equivalents at December 31, 2025 and September 30, 2025 consist of cash on deposit and cash invested in money market funds with financial institutions.

Due to the short maturity of these instruments, the carrying values on our consolidated balance sheets approximate fair value.

Accounts Receivable

We record receivables derived from contracts with customers at net realizable value and they generally do not bear interest.

An allowance for estimated uncollectible accounts is established if uncollectability is considered probable.

This value may include an allowance for estimated uncollectible accounts to reflect any losses anticipated on the accounts receivable balances which is charged to the provision for doubtful accounts.

When determining uncollectability, we consider historical write-offs by customer, level of past due accounts and economic status of the customers.

Write-offs are recorded at the time a customer receivable is deemed uncollectible.

The Company had no allowance for credit losses as of fiscal periods ended December 31, 2025 and September 30, 2025, respectively.

Property and Equipment

Property, plant and equipment is recorded at cost.

Depreciation and amortization is generally provided on the straight-line method over the estimated useful lives of the various assets.

Major additions and improvements are capitalized, while maintenance and repairs that do not improve or extend the life of assets are charged to expense as incurred.

The Company’s property, plant and equipment is generally depreciated over the following estimated useful lives:

● Buildings and improvements are depreciated over estimated lives of ten to thirty-nine years .

● Furniture and office equipment is depreciated over estimated lives of five to seven years .

● Computer equipment is depreciated over an estimated life of five years .

● Equipment other is depreciated over estimated lives of one to nineteen years .

Long-Lived Assets

The Company assesses the impairment of long-lived assets in accordance with FASB ASC Topic 360-10, “ Property, Plant and Equipment.” This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

In addition, long-lived assets to be disposed of should be reported at the lower of the carrying amount or fair value less cost to sell.

The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to estimated future cash flows

expected to result from use of the asset.

If the carrying amount of the asset exceeds the estimated expected undiscounted future cash flows, the Company measures the amount of the impairment by comparing the carrying amount of the asset to its fair value.

The estimation of fair value is generally measured by discounting expected future cash flows.

Fair Value of Financial Instruments

11 unchanged sentences

These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2025 and September 30, 2024, according to the valuation techniques the Company used to determine their fair values.

Fair Value Measurement on June 30, 2025

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2025 and September 30, 2025, according to the valuation techniques the Company used to determine their fair values.

Fair Value Measurement on December 31, 2025

Quoted Price in

11 unchanged sentences

Money market funds

The June 30, 2025 and September 30, 2024 money market funds balance differs from the cash and cash equivalents balance on the condensed consolidated balance sheet due to the timing of sweep transactions within the PNC cash investment accounts.

Revenue from Contracts with Customers

The December 31, 2025 and September 30, 2025 money market funds balance differs from the cash and cash equivalents balance on the condensed consolidated balance sheet due to the timing of sweep transactions within the PNC cash investment accounts.

Revenue Recognition

The Company enters into sales arrangements with customers that, in general, provide for the Company to design, develop, manufacture and deliver large flat panel display systems, flight information computers, autothrottles and advanced monitoring systems that measure and display critical flight information, including data relative to aircraft separation, airspeed, altitude and engine and fuel data measurements.

6 unchanged sentences

In addition, the Company enters fixed-price contracts, in which the Company agrees to perform the specified work for a pre-determined price.

The contractual terms of the fixed-price contracts are usually long-term, however they often contain a termination for convenience clause that results in the Company treating these contracts as short-term under ASC 606.

The contractual terms of the fixed price contracts are usually long-term, however they often contain a termination for convenience clause that results in us treating these contracts as day-to-day under ASC 606.

To the extent our actual costs vary from the estimates upon which the price was negotiated, the Company will generate more or less profit or could incur a loss.

For the purpose of accounting for revenue under ASC 606, a contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

Payment terms are defined by when payment is typically due.

The Company applies judgment in

determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

Identify the performance obligations in the contract

6 unchanged sentences

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer.

To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration.

likely amount method depending on the nature of the variable consideration.

Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

4 unchanged sentences

5) Recognize revenue when or as the Company satisfies a performance obligation

The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below.

The Company satisfies performance obligations either over time or at a point in time.

Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or service to a customer.

Product sales revenue is recognized point-in-time when the product is sold and shipped to the customer.

Services revenues are recognized over time upon the completion of the identified performance obligations.

Historically, the Company has also recognized revenue from EDC contracts and is recognized over time using an input measure (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress.

Contract costs include material, components and third-party avionics purchased from suppliers, direct labor and overhead costs.

Bill-and-hold Arrangements

In certain situations, the Company recognizes revenue under bill-and-hold arrangements with its customers.

Revenue for bill-and-hold arrangements is recognized when product control transfers to the customer, even though the customer does not have physical possession of the product.

Control transfers when the bill-and-hold arrangement has been determined to have substantive reason, the product is identified as belonging to the customer, the product is ready for physical transfer to the customer, and the product cannot be used or directed to another customer.

Contract Estimates

2 unchanged sentences

Contract cost estimates are based on various assumptions to project the outcome of future events that often span more than a single year.

These assumptions include the amount of labor and labor costs, the quantity and cost of raw materials used in the completion of the performance obligation and the complexity of the work to be performed.

These assumptions include the amount of labor and labor costs;

the quantity and cost of raw materials used in the completion of the performance obligation and the complexity of the work to be performed.

As a significant change in one or more of these estimates could affect the profitability of our contracts, we review and update our contract-related estimates regularly.

4 unchanged sentences

The impact of adjustments in contract estimates on our operating earnings is typically reflected in consolidated revenues.

There were no material contract estimate adjustments to our condensed consolidated financial statements for the three and nine months ended June 30, 2025.

There were no material contract estimate adjustments to our condensed consolidated financial statements for the three months ended December 31, 2025.

Contract Balances

8 unchanged sentences

Increases due to invoicing prior to satisfaction of performance obligations

June 30, 2025

December 31, 2024

September 30, 2025

Amount transferred to receivables from contract assets

( 4,334,945 )

Contract asset additions

Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period

( 1,169,751 )

Increases due to invoicing prior to satisfaction of performance obligations

December 31, 2025

The balances for Account receivable were $ 14,500,225 and $ 12,956,476 for the fiscal periods ended December 31, 2025 and September 30, 2025, respectively.

The balances for Account receivable were $ 7,716,632 and $ 12,612,482 for the fiscal periods ended December 31, 2024 and September 30,2024, respectively.

Lease Recognition

The Company accounts for leases in accordance with ASU 2016-02, Leases (Topic 842).

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement.

Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable.

The Company does not have any financing leases that are material.

Income taxes are recorded in accordance with ASC Topic 740, “ Income Taxes ” (“ASC Topic 740”), which utilizes a balance sheet approach to provide for income taxes.

Under this method, the Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company’s assets, liabilities and expected benefits of utilizing net operating losses (“NOL”) and tax credit carry-forwards.

The impact on deferred taxes of changes in tax rates and laws, if any, are applied to the years during which temporary differences are expected to be settled and are reflected in the consolidated financial statements in the period of enactment.

At the end of each interim reporting period, the Company prepares an estimate of the annual effective income tax rate and applies that annual effective income tax rate to ordinary year-to-date pre-tax income for the interim period.

Specific tax items discrete to a particular quarter are recorded in income tax expense for that quarter.

The estimated annual effective tax rate used in providing for income taxes on a year-to-date basis may change in subsequent periods.

Deferred tax assets are reduced by a valuation allowance if, based on the consideration of all available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized.

Significant weight is given to evidence that can be verified objectively, and significant management judgment is required in determining any valuation allowance recorded against net deferred tax assets.

The Company evaluates deferred income taxes on a quarterly basis to determine if a valuation allowance is required by considering available evidence.

Deferred tax assets are recognized when expected future taxable income is sufficient to allow the related tax benefits to reduce taxes that would otherwise be payable.

The sources of taxable income that may be available to realize the benefit of deferred tax assets are future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and credit carryforwards, taxable income in carry-back years and tax planning strategies which are both prudent and feasible.

The accounting for uncertainty in income taxes requires a more likely than not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.

The Company records a liability for the difference between the (i) benefit recognized and measured for financial statement purposes and (ii) the tax position taken or expected to be taken on the Company’s tax return.

To the extent that the Company’s assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made.

The Company has elected to record any interest or penalties associated with uncertain tax positions as income tax expense.

The Company files a consolidated U.S.

federal income tax return.

The Company prepares and files tax returns based on the interpretation of tax laws and regulations and records estimates based on these judgments and interpretations.

In the normal course of business, the tax returns are subject to examination by various taxing authorities.

Such examinations may result in future tax and interest assessments by these taxing authorities, and the Company records a liability when it is probable that there will be an assessment.

The Company adjusts the estimates periodically as a result of ongoing examinations by and settlements with the various taxing authorities, and changes in tax laws, regulations and precedent.

The consolidated tax provision of any given year includes adjustments to prior years’ income tax accruals that are considered appropriate and any related estimated interest.

Management believes that it has made adequate accruals for income taxes.

Differences between estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material effect on the Company’s consolidated financial position but could possibly be material to its consolidated results of operations or cash flow of any one period.

Research and Development

Total research and development expense comprises both internally funded research and development (“R&D”), which is expensed in research and development in the consolidated statements of operations, and product development and design charges related to specific customer contracts.

Engineering development expense consists primarily of payroll-related expenses of employees engaged in EDC projects, engineering related product materials and equipment, and subcontracting costs.

R&D charges incurred for product design, product enhancements and future product development are expensed as incurred.

Product development and design charges related to specific customer contracts are charged to Cost of sales - Services based on the method of contract accounting (either percentage-of-completion or completed contract) applicable to such contracts.

Share-Based Compensation

The Company accounts for share-based compensation under ASC Topic 718, which requires the Company to measure the cost of employee or non-employee director services received in exchange for an award of equity instruments based on the grant-date fair value of the award using an option pricing model.

The Company recognizes such cost over the period during which an employee or non-employee director is required to provide service in exchange for the award.

Accordingly, adoption of ASC Topic 718’s fair value method results in recording compensation costs under the Company’s stock-based compensation plans.

Time-vested RSU’s are valued as of the closing price of the Company’s stock on date of grant.

The Company determines the fair value of its stock option awards at the date of grant using the Black-Scholes option pricing model.

The Company determines the fair value of its Market Stock Unit Awards (“MSUs”) and Market Stock Option Awards (“MSO”) using Monte Carlo Simulation Option pricing models and generally accepted valuation techniques require management to make assumptions and to apply judgment to determine the fair value of its awards.

These assumptions and judgments include estimating future volatility of the Company’s stock price, expected dividend yield, future employee turnover rates, and future employee stock option exercise behaviors.

Changes in these assumptions can materially affect fair value estimates.

The Company does not believe that a reasonable likelihood exists that there will be a material change in future estimates or assumptions used to determine share-based compensation expense.

However, if actual results are not consistent with the Company’s estimates or assumptions, the Company would adjust its estimates.

Such adjustments could have a material impact on the Company’s financial position.

Debt Issuance Costs

Debt issuance costs are capitalized as contra-liabilities and amortized as interest expense on a basis that approximates the effective interest method over the term for Initial Term Loan debt.

Contra-liabilities are netted against and presented as a direct deduction from the carrying amount of the Initial Term Loan debt.

Revolving Facility and the Delayed Draw Term Loan debt issuance costs are capitalized as assets and amortized using straight-line amortization to interest expense over the terms of the respective debt.

The capitalized assets related to the Revolving Facility and the Delayed Draw Term Loan are presented as Current Other Assets and Non-Current Other Assets on the Consolidated Balance Sheet.

Warranty Reserves

The Company offers warranties on some products of various lengths.

However, the standard warranty period is twenty-four months .

At the time of shipment, the Company establishes a reserve for estimated costs of warranties based on its best estimate of the amounts necessary to settle future and existing claims using historical data on products sold as of the balance sheet date.

The length of the warranty period, the product’s failure rates and the customer’s usage affect warranty cost.

If actual warranty costs differ from the Company’s estimated amounts, future results of operations could be affected adversely.

Warranty cost is recorded as Cost of sales, and the reserve balance recorded as an accrued expense.

While the Company maintains product quality programs and processes, its warranty obligation is affected by product failure rates and the related corrective costs.

If actual product failure rates and/or corrective costs differ from the estimates, the Company revises the estimated warranty liability accordingly.

Self-Insurance Reserves

Since January 1, 2014, the Company has self-insured a significant portion of its employee medical insurance.

The Company maintains a stop-loss insurance policy that limits its losses both on a per employee basis and an aggregate basis.

Liabilities associated with the risks that are retained by the Company are estimated based upon actuarial assumptions such as historical claims experience and demographic factors.

The Company estimated the total medical claims incurred but not reported, and the Company believes that it has adequate reserves for these claims at September 30, 2025 and 2024.

However, the actual value of such claims could be significantly affected if future occurrences and claims differ from these assumptions.

At December 31, 2025 and September 30, 2025, the estimated liability for medical claims incurred but not reported was $ 300,000 and $ 153,000 , respectively.

The Company has recorded the deficit of funded premiums over estimated claims incurred but not reported of $ 300,000 as a current liability in the accompanying consolidated balance sheet.

Treasury Stock

We account for treasury stock purchased under the cost method and include treasury stock as a component of shareholders’ equity.

Treasury stock purchased with intent to retire (whether or not the retirement is actually accomplished) is charged to common stock.

Concentrations

Major Customers and Products

In the three months ended June 30, 2025, one customer, Lockheed Martin Corporation (“Lockheed Martin”), accounted for 52 % of net sales.

In the nine months ended June 30, 2025, one customer, Lockheed Martin accounted for 47 % of net sales.

In the three months ended June 30, 2024, two customers, Pilatus Aircraft Ltd (“Pilatus”) and Lufthansa Technik AG, accounted for 21 % and 10 % of net sales, respectively.

In the nine months ended June 30, 2024, one customer, Pilatus accounted for 26 % of net sales.

In the three months ended December 31, 2025, four customers accounted for 22 %, 17 %, 11 % and 10 % of net sales, respectively, although not all the same customers in each year.

In the three months ended December 31, 2024, three customers accounted for 38 %, 9 % and 8 % of net sales, respectively.

Major Suppliers

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Although there are a limited number of suppliers of particular components, management believes other suppliers could provide similar components on comparable terms.

For the three and nine months ended June 30, 2025, the Company had two and one suppliers, respectively, that were individually responsible for greater than 10% of the Company’s total inventory related purchases.

For the three and nine months ended June 30, 2024, the Company had two and one suppliers, respectively, that were individually responsible for greater than 10% of the Company’s total inventory related purchases.

For the three months ended December 31, 2025, the Company had two suppliers that were individually responsible for greater than 10% of the Company’s total inventory-related purchases.

For the three months ended December 31, 2024, the Company had one supplier that was individually responsible for greater than 10% of the Company’s total inventory-related purchases.

Concentration of Credit Risk

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Cash balances are maintained with two major banks.

Balances on deposit with certain money market accounts and operating accounts may exceed the Federal Deposit Insurance Corporation limits.

Balances on deposit with certain money market accounts and operating accounts may exceed

the Federal Deposit Insurance Corporation limits.

The Company’s customer base consists principally of companies within the aviation industry.

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We are evaluating the impact of the standard on our disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires companies to enhance the disclosures about segment expenses.

The new standard requires the disclosure of the Company’s Chief Operating Decision Maker (CODM), expanded incremental line-item disclosures of significant segment expenses used by the CODM for decision-making, and the inclusion of previous annual only segment disclosure requirements on a quarterly basis.

This ASU should be applied retrospectively for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

We are evaluating the impact of the standard on our disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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This ASU should be applied prospectively for fiscal years beginning after December 15, 2024, with retrospective application permitted.

We are evaluating the impact of the standard on our disclosures.

The Company is currently evaluating the impacts of this guidance on the Company’s Consolidated Financial Statements.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires companies to enhance the disclosures about segment expenses.

For all public business entities, ASU 2023-07 was effective for annual periods beginning after December 31, 2023 and interim periods with fiscal years beginning after December 15, 2024;

early adoption is permitted.

The Company evaluated and adopted this guidance in the fiscal year ended September 30, 2025.

The Adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

Supplemental Balance Sheet Disclosures

September 2024 Honeywell Agreement

On September 27, 2024, the Company entered into a second Asset Purchase and License Agreement (the “September 2024 Honeywell Agreement”) with Honeywell, International Inc.

(“Honeywell”), pursuant to which Honeywell sold, assigned or licensed certain assets related to its various generations of military display generators and flight control computers, including a sale of certain inventory, equipment and customer-related documents;

an assignment of certain contracts;

and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its various generations of military display generators and flight control computers to repair, overhaul, manufacture sell, import, export and distribute certain products to the Company for consideration of $ 14.2 million in cash.

The allocation of the purchase price is based upon certain preliminary valuations and other analyses.

The allocation of the purchase price has not been finalized as of the date of this filing due to the timing of the transaction and due to the fact that, while legal control has been transferred, the Company has not received physical possession of certain of the acquired assets and thus these assets will be subject to settlement adjustments upon transfer as outlined in the September 2024 Honeywell Agreement.

As a result, the purchase

price amount for the transaction and the allocation of the preliminary purchase consideration are preliminary estimates, and may be subject to change within the measurement period.

The following purchase price allocation table presents the Company's estimates of the fair value of assets acquired and liabilities assumed as of the acquisition date, and subsequent measurement period adjustments recorded during the three and nine months ended June 30, 2025:

Amounts Recognized as of

Acquisition Date

Purchase Price

(as previously reported)

Period Adjustments

Total consideration

Prepaid inventory (a)

Prepaid equipment and other current assets

Intangible assets (b), (d)

( 1,490,000 )

Goodwill (c),(d)

Net assets acquired

(a) Prepaid inventory consists primarily of raw materials acquired by the Company but not in the Company’s physical possession as of the acquisition date.

The fair value of raw materials was estimated to equal the replacement cost.

(b) Intangible assets consists of backlog, customer relationships, and license agreements related to the license rights to use certain Honeywell intellectual property and are recorded at estimated fair values.

The estimated fair value of these license agreements are based on a variation of the income valuation approach and are determined using the relief from royalty method.

The estimated fair value of the backlog and customer relationships are based on a variation of the income valuation approach known as the multi-period excess earnings method.

Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024, Note 5, “Intangible assets” for further details.

(c) Goodwill represents the excess of the purchase consideration over the preliminary fair value of the net assets acquired.

The goodwill recognized is primarily attributable to the expected synergies from the September 2024 Honeywell Agreement.

Goodwill resulting from the September 2024 Honeywell Agreement has been assigned to the Company’s one reporting unit.

(d) For the three months ended March 31, 2025, the fair market value of Intangible Assets, mostly related to Acquired Backlog was revised down to reflect lower forecasted margin.

Transition services agreement

Concurrent with the September 2024 Honeywell Agreement, the Company entered into a transition services agreement (the “2024 TSA”) with Honeywell, at no additional cost, to receive certain transitional services and technical support during the transition service period.

The Company accounted for the 2024 TSA separate from business combination and has recognized $ 140,000 in prepaid expenses and other current assets within the consolidated balance sheets for the services to be received in the future from Honeywell.

The prepaid expense related to the 2024 TSA was determined using the with and without method.

For the three and nine months ended

June 30, 2025, the Company recognized no additional adjustments to prepaid expenses and other current assets within the consolidated balance sheets for services received from Honeywell.

Unaudited actual and pro forma information

The following unaudited pro forma summary presents consolidated information of the Company, including the product lines, as if the transaction had occurred on October 1, 2023:

Three Months Ended June 30,

Nine Months Ended June 30,

These pro forma results are for illustrative purposes and are not indicative of the actual results of operations that would have been achieved, nor are they indicative of future results of operations.

The unaudited pro forma information for all periods presented was adjusted to give effect to pro forma events that are directly attributable to the transaction and are factually supportable.

The adjustments are based on information available to the Company at this time.

Accordingly, the adjustments are subject to change, and the impact of such changes may be material.

The unaudited pro forma results do not include any incremental cost savings that may result from the integration.

June 2023 Honeywell Agreement

On June 30, 2023, the Company entered into an Asset Purchase and License Agreement with Honeywell whereby Honeywell sold certain assets and granted perpetual license rights to manufacture and sell licensed products related to its inertial, communication and navigation product lines to the Company.

The transaction involves a sale of certain inventory, equipment and customer-related documents;

an assignment of certain customer contracts;

and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its inertial, communication and navigation product lines to repair, overhaul, manufacture sell, import, export and distribute certain products to the Company.

The Company determined that the transaction met the definition of a business under ASC 805;

therefore, the Company accounted for the transaction as a business combination and applied the acquisition method of accounting.

In connection with the transaction, the Company entered into a term loan with PNC Bank, National Association for $ 20.0 million to fund a portion of the transaction (the “Term Loan”) – Refer to the Company’s Annual Report on Form10-K for the fiscal year ended

September 30, 2024, Note 8, “ Loan Agreement ” for further details.

The purchase consideration transferred at the acquisition date was $ 35.9 million, which was entirely cash.

In the third quarter of 2024 and within one year from the acquisition date, the Company finalized its accounting of the transaction.

Amounts Recognized as of

Acquisition Date

Purchase Price

(as previously reported)

Period Adjustments

Cash consideration

Total consideration

Prepaid inventory (a)

( 3,012,626 )

Construction in progress

Intangible assets (b)

( 3,660,000 )

Assets acquired

( 3,531,201 )

Accrued expenses

( 3,531,201 )

Liabilities assumed

( 3,531,201 )

Net assets acquired

(a) Prepaid inventory consists of raw materials and finished goods acquired by the Company but not in the Company’s physical possession as of the acquisition date.

The fair value of raw materials was estimated to equal the replacement cost.

The fair value of finished goods was determined based on the estimated selling price, net of selling costs and a margin on the selling activities, which resulted in a change in the value of the finished goods.

(b) Intangible assets consist of license agreement related to the license rights to use certain Honeywell intellectual property and customer relationships and are recorded at estimated fair values.

The estimated fair value of the license agreement is based on a variation of the income valuation approach and is determined using the relief from royalty method.

The estimated fair value of the customer relationships is based on a variation of the income valuation approach known as the multi-period excess earnings method.

Refer to Intangible assets within Note 2, “ Supplemental Balance Sheet Disclosures ” for further details.

(c) Goodwill represents the excess of the purchase consideration over the estimated fair value of the assets acquired and liabilities assumed.

The goodwill recognized is primarily attributable to the expected synergies from the transaction.

Goodwill resulting from the transaction has been assigned to the Company’s one operating segment and one reporting unit.

In the third quarter of 2024 and within one year from the acquisition date, the Company identified measurement period adjustments related to fair value estimates.

The measurement period adjustments were due to the refinement of inputs used to calculate the fair value of the prepaid inventory, equipment, license agreement and customer relationships based on facts and circumstances that existed as of the acquisition date.

One of the refinements of inputs used was a change in classification of prepaid inventory to equipment of $ 3.7 million.

The adjustments resulted in an overall increase to goodwill of $ 3.0 million.

As a result of the measurement period adjustments to the estimated fair values of equipment and customer relationships, during the third quarter of 2024, the Company recognized $ 218,623 in additional depreciation expense in cost of sales and $ 67,500 in additional amortization expense in selling, general and administrative respectively, related to the effects that would have been recognized in previous quarters if the measurement period adjustments were recognized as of the acquisition date.

For the remaining measurement period adjustments, the change to the preliminary fair value estimates did not have a material impact to the condensed consolidated statement of operations.

During the fourth quarter of 2023, the Company identified measurement period adjustments related to the fair value estimates for accrued expenses.

While the Asset Purchase and License Agreement indicated an amount of liabilities related to open supplier purchase orders to be assumed by the Company as of the acquisition date, it was determined that there were no actual liabilities outstanding related to these open supplier purchase orders as of the acquisition date;

therefore, the $ 3.5

million assumed liabilities preliminarily recorded were reversed.

The adjustments resulted in an overall decrease to goodwill of $ 3.5 million;

the adjustments have no impact to the condensed consolidated statement of operations.

Transition services agreement

Concurrent with the June 2023 Honeywell Agreement, the Company entered into a transition services agreement (the “2023 TSA”) with Honeywell, at no additional cost, to receive certain transitional services and technical support during the transition service period.

The Company accounted for the 2023 TSA separate from the business combination and has recognized $ 140,000 in prepaid expenses and other current assets within the consolidated balance sheet as of the acquisition date for the services to be received in the future from Honeywell.

The prepaid expense related to the 2023 TSA was determined using the with and without method.

As of the three months ended June 30, 2025, the 2023 TSA has been fully amortized.

On July 22, 2024, the Company completed the July 2024 Honeywell Asset Acquisition of certain additional assets related to its communication and navigation product lines, including a sale of certain inventory and customer-related documents;

an assignment of certain contracts;

and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its communication and navigation product lines to manufacture, upgrade and repair certain additional products for consideration of $ 4.2 million in cash.

The Company accounted for the transaction as an asset acquisition and allocated the cost of the acquisition, including direct and incremental transaction costs, to the tangible and intangible assets based on their relative fair value as detailed under ASC 805.

Definite lived assets were recorded to the relative fair value of $ 2,601,000 to property and equipment and $ 430,000 to customer relationships and backlog.

Since license agreements are indefinite lived assets, they were recorded at fair value in the amount of $ 1,240,000 in accordance with ASC 805.

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value, net of write-downs for excess and obsolete inventory and consist of the following:

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September 30,

Prepaid insurance

Honeywell TSA Agreement

Intangible assets

A/P Pre-payments

Prepaid rotables

Dues, Services and pre-paid insurance

Unamortized debt issuance costs

Intangible assets and Goodwill

The Company’s intangible assets other than goodwill are as follows:

As of June 30, 2025

As of December 31, 2025

Gross Carrying

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( 3,015,790 )

( 1,289,494 )

Licensing and certification rights (c)

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( 4,313,818 )

(a) As part of the September 2024 Honeywell Agreement, the July 2024 Honeywell Asset Acquisition, and the June 2023 Honeywell Agreement transactions, the Company acquired intangible assets related to the license agreements for the license rights to use certain Honeywell intellectual property, backlog and customer relationships.

The license agreements have an indefinite life and are not subject to amortization;

(a) The license agreements have an indefinite life and are not subject to amortization;

the customer relationships have an estimated weighted average life of ten years .

(b) As part of the September 2024 Honeywell Agreement, the Company acquired intangible assets related to backlog with a useful life of four years .

(b) Backlog assets are amortized according to the timing of order fulfillment.

Intangible asset amortization expense is amortized as a component of selling, general and administrative expense and was $ 629,751 and $ 744,276 for the fiscal quarters ended December 31, 2025 and 2024, respectively.

The timing of future amortization expense is not determinable for the licensing and certification rights because they are amortized over a defined number of units.

The expected future amortization expense related to the customer relationships and backlog as of June 30, 2025 is as follows:

The expected future amortization expense related to the customer relationships as of December 31, 2025 is as follows:

Amortization Expense

2025 (three months remaining)

2026 (nine months remaining)

Property and equipment

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( 13,927,910 )

Depreciation and amortization related to property and equipment was $ 267,653 and $ 252,655 for the three months ended June 30, 2025 and 2024, respectively.

Depreciation and amortization related to property and equipment was $ 1,162,136 and $ 541,732 for the nine months ended June 30, 2025 and 2024, respectively.

In connection with June 2023 Honeywell Agreement, during the 18- month period following closing, which ended December 31, 2024, the Company received various inventory and PP&E, which was accounted for as of the acquisition date as prepaid inventory.

Rotables comprised a significant portion of the PP&E received during that 18-month period.

Rotables are parts that are not designed to be discarded after a certain period of use but rather are intended to be restored to a serviceable condition and reused.

The Company had historically depreciated rotables inventory on a straightline basis, over 5 years.

During the second quarter of 2025, the Company updated its analysis of the economic lives of various owned rotable assets.

As a result of this update, to better reflect the revised estimate of physical lives of rotable assets, the Company changed its useful lives estimate of rotable assets from 5 years to 10 years , effective as of January 1, 2025.

ASC Topic 250, “Accounting Changes and Error Corrections” (“ASC 250”), specifically ASC 250-10-45-17 states that, “ changes in accounting estimates should not be accounted for by restating or retrospectively adjusting the amounts reported in prior period financial statements or by reporting pro forma amounts.

Instead, a change in accounting estimate should be accounted for in the period of change and prospective periods .”

Adhering to the guidance found in ASC 250, the Company recognized the change in depreciation expense of Rotable assets prospectively as of January 1, 2025.

The change in accounting estimate decreased depreciation expense $ 0.4 million, or $ 0.02 per diluted share, and $ 0.7 million, or $ 0.04 for the three and nine months ended June 30, 2025, respectively.

Depreciation and amortization related to property and equipment was $ 395,624 and $ 622,799 for the three months ended December 31, 2025 and 2024, respectively.

Other assets consist of the following:

September 30,

Operating lease right-of-use assets

Unamortized debt issuance costs and operating lease right-of-use assets

Other non-current assets

Other non-current assets as of June 30, 2025 and September 30, 2024 consists primarily of deposits for medical claims required under the Company’s medical plan.

Other non-current assets as of December 31, 2025 and September 30, 2025 consists primarily of deposits for medical claims required under the Company’s medical plan.

Accrued expenses

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Salary, benefits and payroll taxes

Professional fees

Operating lease

Income tax payable

Warranty cost and accrual information for the three and nine months ended June 30, 2025 is highlighted below:

Inventory in transit

Royalties and ERC related expenses

Bonus Accruals

Income tax payable and other

Warranty cost and accrual information for the three months ended December 31, 2025 is highlighted below:

Three Months Ending

Nine Months Ending

June 30, 2025

December 31, 2025

Warranty accrual, beginning of period

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If the Company were to determine that it would be able to realize additional state deferred tax assets in the future, it would make an adjustment to the valuation allowance which would reduce the provision for income taxes.

On July 4, 2025, the reconciliation bill, commonly referred to as the One Big Beautiful Bill Act (OBBB) was signed into law, which includes a broad range of tax reform provisions that may affect the Company's financial results.

On July 4, 2025, the One Big Beautiful Bill Act (OBBB) was signed into law, which includes a broad range of tax reform provisions that may affect the Company's financial results.

The OBBB allows an elective deduction for domestic Research and Development (R&D), and a reinstatement of elective 100% first-year bonus depreciation, among other provisions.

The Company is currently evaluating the impact of these provisions which could affect the Company's effective tax rate and deferred tax assets in 2025 and future periods.

The Company is currently evaluating the impact of these provisions which could affect the Company's effective tax rate and deferred tax assets in fiscal year 2026 and future periods.

As a result of the 2017 Tax Cuts and Jobs Act, the Company must amortize amounts paid or incurred for specified research and development expenditures, including software development expenses, ratably over 60 months, beginning at the mid-point of the tax year in which the expenditures are paid or incurred.

The effective tax rate for the three months ended June 30, 2025 was 21.5 % and differs from the statutory tax rate primarily due to the effect of state income taxes, tax credits, temporary tax differences related to stock based compensation and certain non-deductible expenses.

The effective tax rate for the three months ended June 30, 2024 was 17.6 % and differs from the statutory tax rate primarily due to an increased R&D credit, as well as permanent items and state taxes.

The effective tax rate for the nine months ended June 30, 2025 was 19.9 % and differs from the statutory tax rate primarily due to the effect of state income taxes, tax credits, temporary tax differences related to stock based compensation and certain non-deductible expenses.

The effective tax rate for the nine-months ended June 30, 2024 was 19.9 % and differs from the statutory tax rate primarily due to an increased R&D credit, as well as permanent items and state taxes.

The effective tax rate for the three months ended December 31, 2025 was 30.8 % and differs from the statutory tax rate primarily due to the effect of state income taxes, tax credits, temporary and permanent tax differences related to stock-based compensation and certain non-deductible expenses.

The effective tax rate for the three months ended December 31, 2024 was 20.1 % and differs from the statutory tax rate primarily due to the effect of state income taxes, tax credits and certain non-deductible expenses.

Shareholders’ Equity and Share-Based Payments

At June 30, 2024, the Company’s Amended and Restated Articles of Incorporation provides the Company authority to issue 75,000,000 shares of common stock and 10,000,000 shares of preferred stock.

At December 31, 2025, the Company’s Amended and Restated Articles of Incorporation provides the Company authority to issue 75,000,000 shares of common stock and 10,000,000 shares of preferred stock.

Share-Based Compensation

The Company accounts for share-based compensation under the provisions of ASC Topic 718, “ Compensation – Stock Compensation,” by using the fair value method for expensing stock options, performance-based equity awards and stock awards.

Total share-based compensation expense was approximately $ 915,924 and $ 396,661 for the fiscal quarters ended December 31, 2025 and 2024, respectively.

Compensation expense related to share-based awards is recorded as a component of Cost of sales, Research and development expenses and Selling, general and administrative expenses.

Amended and Restated 2019 Stock-Based Incentive Compensation Plan

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On April 18, 2024, the Company amended the 2019 Plan to include an additional 1,950,000 authorized shares available for issuance.

As of June 30, 2025, there were 1,375,295 shares of common stock available for awards under the 2019 Plan.

As of December 31, 2025, there were 1,376,079 shares of common stock available for awards under the 2019 Plan.

If any award is forfeited, terminates or otherwise is settled for any reason without an actual distribution of shares to the participant, the related shares of common stock subject to such award will again be available for future grant.

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If there is any change in the Company’s corporate capitalization, the Compensation Committee must proportionately and equitably adjust the number and kind of shares of common stock which may be issued in connection with future awards, the number and kind of shares of common stock covered by awards then outstanding under the 2019 Plan, the aggregate number and kind of shares of common stock available under the 2019 Plan, any applicable individual limits on the number of shares of common stock available for awards under the 2019 Plan, the exercise or grant price of any award, or if deemed appropriate, make provision for a cash payment with respect to any outstanding award.

In addition, the Compensation Committee may make adjustments in the terms and conditions of any awards, including any performance goals, in recognition of unusual or nonrecurring events affecting the Company or any subsidiary, or in response to changes in applicable laws, regulations, or accounting principles.

In addition, the Compensation Committee may make adjustments in the terms and conditions of any awards, including any performance goals, in recognition of unusual or non-recurring events affecting the Company or any subsidiary, or in response to changes in applicable laws, regulations, or accounting principles.

New shares are typically issued upon option exercise, MSO exercise, MSU or RSU vesting.

The 2019 Plan will terminate on April 2, 2029, unless earlier terminated by the Company’s Board of Directors (the “Board”).

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or (iii) would require shareholder approval by law, regulation, or the rules of any stock exchange or automated quotation system.

2024 RSU Bonus Grants

On February 19, 2025, the Board authorized grants of 71,754 in Restricted Stock Units (“ 2024 RSU Bonus Grants ”) to key employees under the terms and conditions of the 2019 Plan as part of the Company’s initiatives to align employee compensation with Total Shareholder Return.

The Restricted Stock awards vest 50 % on the one year anniversary from date of grant and 50 % on the two year anniversary from date of grant, subject to the terms of the 2019 Plan.

Fiscal 2025 and 2024 RSU Bonus Grants

On February 19, 2025, the Board authorized grants of 71,754 in RSUs to key employees under the terms and conditions of the 2019 Plan as part of the Company’s initiatives to align employee compensation with Total Shareholder Return.

The RSUs vest 50 % on the one-year anniversary from date of grant and 50 % on the two-year anniversary from date of grant, subject to the terms of the 2019 Plan.

During the fiscal year ended September 30, 2025, the Board approved grants of RSUs to the non-employee directors on the Board as compensation for their services from the beginning of calendar year 2025 to vest on the date of the Company’s 2025 Annual Meeting of Shareholders.

After the 2025 Annual Meeting of Shareholders, the Board approved grants of RSUs to the non-employee directors on the Board as compensation for their services.

Under the terms of the awards, the RSUs will vest on the first anniversary of the grant

At the time of vesting, the RSUs will be settled in shares of the Company’s common stock at a rate of one share of stock for each unit, provided that, if a director resigns from the Board prior to the vesting date, such director shall only receive a pro rata portion of such award for time served.

During the fiscal year ended September 30, 2025, the Board approved grants of RSUs to both the Chief Executive Officer and the Chief Financial Officer that vest 25 % after one year with the remainder vesting quarterly over a three-year period.

During the fiscal year ended September 30, 2024, the Board approved grants of RSUs to the non-employee directors on the Board as compensation for their services from the beginning of calendar year 2024 to vest on the date of the Company’s 2024 Annual Meeting of Shareholders.

After the 2024 Annual Meeting of Shareholders, the Board approved grants of RSUs to the non-employee directors on the Board as compensation for their services.

Under the terms of the awards, the RSUs will vest on the first anniversary of the grant date.

During the fiscal year ended September 30, 2024, the Board approved grants of RSUs to both our Chief Executive Officer, Chief Financial Officer and the former Chief Financial Officer.

Certain RSUs awarded to our Chief Executive Officer vested immediately, with the remainder vesting quarterly over a three-year period.

The RSUs awarded to our Chief Financial Officer will vest over a four-year period.

The approved grants of the RSUs to our former Chief Financial Officer would have vested over a four-year period.

On November 8, 2023, our former Chief Financial Officer, notified the Company of his resignation from all of his positions with the Company, which resulted in the forfeiture of 11,503 RSUs.

As of December 31, 2025, there were 272,392 unvested restricted stock units outstanding under the 2019 Plan.

Market-Based Restricted Stock Units

During the three months ended December 31, 2024, to better align executive compensation with the Company’s Total Shareholder Return, the Board approved a special one-time grant of 201,000 market-based restricted stock units (“MSUs”) to the Company’s Chief Executive Officer under the terms and conditions of the 2019 Plan.

The MSU is a restricted stock unit containing vesting terms conditional upon the attainment of both 1) continued service to vesting and 2) stock price appreciation targets indexed against the Company’s actual stock price performance over a specified measurement period.

During the quarter ended December 31, 2024, to better align executive compensation with the Company’s Total Shareholder Return, the Board approved a special one-time grant of 201,000 MSUs to the Company’s Chief Executive Officer under the terms and conditions of the 2019 Plan.

The MSUs are restricted stock units containing vesting terms conditional upon the attainment of both 1) continued service to vesting and 2) stock price appreciation targets indexed against the Company’s actual stock price performance over a specified measurement period.

Under the terms of the 2019 Plan, no MSUs are eligible for vesting prior to the first anniversary of the date of grant of the award, with the exception of accelerated vesting permitted under certain conditions subject to the plan provisions.

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Any MSUs that have not vested on or before the fourth anniversary of the grant date are immediately forfeited.

Compensation expense for MSUs is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards using the graded vesting attribution method.

Forfeitures are recognized when incurred.

With respect to each MSU that becomes vested in accordance with the terms of the award agreement, the Grantee will be entitled to receive one share of common stock upon the settlement of the MSUs.

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Utilizing Monte Carlo simulation, the MSUs grant date fair value was estimated to be $ 1,109,340 with a $ 5.52 weighted average grant date fair value per award and the derived vesting periods were estimated to be between 1.2 years and 1.7 years.

For the three and nine months ended June 30, 2025, the Company recognized $ 253,779 and $ 483,722 , respectively of compensation expense related to MSU awards.

As of June 30, 2025, unrecognized compensation expense of $ 625,618 associated with non-vested MSUs will be recognized in future periods under the 2019 Plan.

During the three and nine months ended June 30, 2025, no MSUs vested or were forfeited.

On February 13, 2025, the market performance condition for 67,000 units of MSUs granted November 20, 2024 to the Company’s Chief Executive Officer was met, these shares will vest according to the Company’s Amended and Restated 2019 Stock-Based Incentive Compensation Plan.

For the three months ended December 31, 2025 and 2024, the Company recognized $ 425,157 and $ 117,108 , respectively of compensation expense related to MSU awards.

On each of February 13, 2025, July 10, 2025 and August 8, 2025, the market performance condition for the first, second and third tranches of 67,000 units of MSUs granted November 20, 2024 to the Company’s Chief Executive Officer were met.

On November 20, 2025, the service condition for all 201,000 units of MSUs granted November 20, 2024 to the Company’s Chief Executive Officer was met.

Consequently, on November 20, 2025, all 201,000 MSUs vested according to the terms of the 2019 Plan.

The unvested compensation expense of $ 425,157 as of the one-year anniversary date of grant was immediately expensed and recorded as compensation expense in the first fiscal 2026 quarter ended December 31, 2025.

Of the 201,000 vested MSUs, 87,917 MSUs were withheld by the Company to cover the recipient’s tax obligations resulting in a net settlement of 113,083 MSU’s converting into Common Stock.

Time Based Stock Options with market-based exercisability conditions

During the three months ended March 31, 2025, in a continuing effort to more closely correlate executive compensation with the Company’s Total Shareholder Return, the Board approved a grant of 72,062 time vested stock options with a market based exercise price condition (“MSOs”) to the Company’s Chief Executive Officer and 33,259 MSOs to the Company’s Chief Financial Officer under the terms and conditions of the Amended and Restated 2019 Stock-Based Incentive Compensation Plan.

The MSOs are similar to traditional time vested stock options and vest over four years , with 25 % vesting on the first anniversary of the grant date (February 19, 2026) and the remaining shares vesting quarterly at 6.25 % on the last business day of May, August, November, and February of calendar years two, three and four from date of grant.

However, the MSOs only become exercisable if the Company's share price reaches or exceeds the date of grant closing stock price of $ 8.59 plus a targeted market threshold of 15 % ($ 9.88 ) for 20 consecutive trading days at any time during the four-year vesting period.

During the three months ended March 31, 2025, in a continuing effort to more closely correlate executive compensation with the Company’s Total Shareholder Return, the Board approved a grant of 72,062 MSOs to the Company’s Chief Executive Officer and 33,259 MSOs to the Company’s Chief Financial Officer under the terms and conditions of the 2019 Plan.

The MSOs are similar to traditional time vested stock options and vest over four years , with 25 % vesting on the first anniversary of the grant date, or February 19, 2026, and the remaining shares vesting quarterly at 6.25 % on the last business day of May, August, November and February of calendar years two, three and four from the date of grant.

However, the MSOs only become exercisable if the Company's share price reaches or exceeds the date of grant closing stock price of $ 8.59 plus a targeted market threshold of 15 %, or $ 9.88 for 20 consecutive trading days at any time during the four-year vesting period.

Once this market threshold is met, the vested shares can be exercised according to the vesting schedule and the terms and conditions set forth in the 2019 Plan.

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With respect to each MSO that becomes exercised in accordance with the terms of the award agreement, the Grantee will be entitled to receive one share of common stock upon the settlement of the MSOs.

Compensation expense for MSOs is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards using the graded vesting attribution method.

Forfeitures are recognized when incurred.

The Company estimated the grant-date fair value of the MSOs awards using a Monte Carlo simulation with the following input assumptions:

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Contractual Term

Utilizing Monte Carlo simulation, the aggregate MSOs grant date fair value was estimated to be $ 474,998 with a $ 4.51 weighted average grant date fair value per option and vesting periods were estimated to be between 1 years and 4 years with a 10 year contractual term.

For the three and nine months ended June 30, 2025, the Company recognized $ 85,111 and $ 98,757 , respectively of compensation expense related to the MSO awards.

As of June 30, 2025, unrecognized compensation expense of $ 376,243 associated with non-vested MSOs will be recognized in future periods under the 2019 Plan.

During the three and nine months ended June 30, 2025, no MSOs vested or were forfeited.

The compensation expense related to stock options, and restricted stock awards issued to employees under the 2019 Plan was $ 355,653 and $ 191,623 for the three months ended June 30, 2025 and 2024, respectively.

The compensation expense related to stock options, and restricted stock awards issued to employees under the 2019 Plan was $ 769,304 and $ 566,952 for the nine months ended June 30, 2025 and 2024, respectively.

The compensation expense under the 2019 Plan related to restricted stock awards issued to non-employee members of the Board was $ 137,577 and $ 59,278 for the three months ended June 30, 2025 and 2024, respectively.

The compensation expense under the 2019 Plan related to restricted stock awards issued to non-employee members of the Board was $ 282,040 and $ 159,003 for the nine months ended June 30, 2025 and 2024, respectively.

Total compensation expense associated with the 2019 Plan was $ 832,120 and $ 250,901 for the three months ended June 30, 2025 and 2024, respectively.

Total compensation expense associated with the 2019 Plan was $ 1,633,823 and $ 725,955 for the nine months ended June 30, 2025 and 2024, respectively.

As of June 30, 2025, unrecognized compensation expense of approximately $ 1,997,084 net of forfeitures, related to non-vested restricted stock under the 2019 Plan, will be recognized in future periods.

As of June 30, 2025, unrecognized compensation expense of approximately $ 388,346 , net of forfeitures, related to non-vested stock options under the 2019 Plan, will be recognized in future periods.

For the three months ended December 31, 2025 and 2024, the Company recognized $ 68,831 and $ 0 , respectively of compensation expense related to the MSO awards.

As of December 31, 2025, unrecognized compensation expense of $ 237,834 associated with non-vested MSOs will be recognized in future periods under the 2019 Plan.

During the three months ended December 31, 2025, no MSOs vested or were forfeited.

The compensation expense related to stock options, and restricted stock awards issued to employees under the 2019 Plan was $ 302,540 and $ 206,527 for the three months ended December 31, 2025 and 2024, respectively.

The compensation expense under the 2019 Plan related to restricted stock awards issued to non-employee members of the Board was $ 119,395 and $ 73,026 for the three months ended December 31, 2025 and 2024, respectively.

Total compensation expense associated with the 2019 Plan was $ 915,924 and $ 396,661 for the three months ended December 31, 2025 and 2024, respectively.

As of December 31, 2025, unrecognized compensation expense of approximately $ 1,186,845 , net of forfeitures, related to non-vested restricted stock under the 2019 Plan, will be recognized in future periods.

As of December 31, 2025, unrecognized compensation expense of approximately $ 322,289 , net of forfeitures, related to non-vested stock options under the 2019 Plan, will be recognized in future periods.

The following table shows share-based compensation expense by line item within our Consolidated Statement of Operations:

Three Months Ended December 31,

Cost of sales

Research and development

Selling, general and administrative

Earnings Per Share

Three Months Ended June 30,

Nine Months Ended June 30,

Three Months Ended December 31,

Basic weighted average shares

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The number of incremental shares from the assumed exercise of time vested stock options , MSOs, and RSUs is calculated by using the treasury stock method.

The number of incremental shares from assumed vestings of MSUs is calculated using the ‘if-converted method.’ As of June 30, 2025, 67,000 and 44,421 weighted average outstanding MSUs were included in the three and nine months ended June 30, 2025 weighted-average diluted shares calculation, respectively using the if converted method.

As of June 30, 2025 and 2024, there were 361,613 and 361,613 options to purchase common stock outstanding, respectively, and 201,000 and 0 MSUs subject to vesting outstanding, respectively.

As of June 30, 2025 and 2024, there were 339,782 and 250,975 shares of restricted stock units subject to vesting outstanding, respectively.

The weighted average outstanding diluted shares calculation excludes time vested options and MSOs with an exercise

price that exceeds the average market price of shares during the period.

The number of incremental shares from the assumed vesting of MSUs is calculated using the ‘if-converted method.

As of December 31, 2025 and 2024, 109,239 and 0 weighted average outstanding MSUs were included in the three months ended December 31, 2025 and 2024 weighted-average diluted shares calculation, respectively using the if converted method.

As of December 31, 2025 and 2024, there were 361,613 and 361,613 options to purchase common stock outstanding, respectively, and 0 and 201,000 MSUs subject to vesting outstanding, respectively.

As of December 31, 2025 and 2024, there were 272,392 and 204,707 shares of restricted stock units subject to vesting outstanding, respectively.

The weighted average outstanding diluted shares calculation excludes time vested options and MSOs with an exercise price that exceeds the average market price of shares during the period.

Additionally, the weighted-average diluted shares calculation excludes RSUs that are deemed anti-dilutive when applying the treasury stock method.

For the three months ended June 30, 2025 and 2024, respectively, 241,934 and 529,918 diluted weighted-average shares outstanding were excluded from the computation of diluted EPS because the effect would be anti-dilutive.

For the nine months ended June 30, 2025 and 2024, respectively, 246,720 and 329,026 diluted weighted-average shares outstanding were excluded from the computation of diluted EPS because the effect would be anti-dilutive.

For the three months ended December 31, 2025 and 2024, respectively, 0 and 361,613 diluted weighted-average shares outstanding were excluded from the computation of diluted EPS because the effect would be anti-dilutive.

Commitments and Contingencies

Purchase Obligations

A “purchase obligation” is defined as an agreement to purchase goods or services that is enforceable and legally binding on the Company and that specifies all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions, and the approximate timing of the transaction.

These amounts primarily comprise open purchase order commitments entered in the ordinary course of business with vendors and subcontractors pertaining to fulfillment of the Company’s current order backlog.

The purchase obligations on open purchase orders were $ 33.8 million as of December 31, 2025.

Product Liability

The Company has product liability insurance of $ 50,000,000 .

The Company has not experienced any material product liability claims.

Legal Proceedings

In the ordinary course of business, the Company is at times subject to various legal proceedings and claims.

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Related Party Transactions

In recent years, the Company has had sales to AML Global Eclipse, LLC (“Eclipse”), whose principal shareholder is also a principal shareholder in the Company.

Prior balances are disclosed below for comparability.

Sales to Eclipse amounted to approximately $ 55,317 and $ 110,000 for the three months ended June 30, 2025 and 2024, respectively.

Sales to Eclipse amounted to approximately $ 72,197 and $ 203,000 for the nine months ended June 30, 2025 and 2024, respectively.

On October 18, 2024, the Company entered into a consulting agreement with Peduzzi Associated, ltd.

On October 18, 2024, the Company entered into a consulting agreement with Peduzzi Associates, ltd.

(“PAL”), an entity in which board member Maj.

General Dean serves as President.

PAL will provide consulting services in support of the Company’s business development growth into the DoD.

PAL provides consulting services in support of the Company’s business development growth into the DoD.

The term of the agreement is for one year and in consideration for services the Company will pay PAL a retainer of $ 9,500 per month.

For the three and nine months ended June 30, 2025, the Company paid PAL $ 28,500 and $ 85,500 , respectively.

For the three months ended December 31, 2025 and 2024, the Company paid PAL $ 30,000 and $ 28,500 , respectively.

Loan Agreement

On June 28, 2023, the Company and one of its subsidiaries entered into an Amendment to Loan Documents (the “Loan Amendment”) with PNC Bank, National Association (the “PNC”), which amends certain terms of that certain Loan Agreement entered into by the parties on May 11, 2023 (the “Loan Agreement” and, as amended, the “Amended Loan Agreement”) and (ii) a corresponding Term Note in favor of PNC (the “Term Note”), which together provide for a senior secured term loan in an aggregate principal amount of $ 20.0 million, with a maturity date of June 28, 2028.

Availability of funds under the Term Loan was conditioned upon the closing of the transactions contemplated by the Amended Loan Agreement and was used to fund a portion of the 2023 transaction with Honeywell.

Under the agreement, the Company has the right to prepay any amounts outstanding at any time and from time to time, whole or in part;

subject to payment of any break funding indemnification amounts.

The interest rate applicable to loans outstanding under the Term Loan is a floating interest rate equal to the sum of (A) the Term SOFR Rate (as defined in the Term Note) plus (B) an unadjusted spread of the Applicable SOFR Margin plus (C) a SOFR adjustment of ten basis points.

The Applicable SOFR Margin ranges from 1.5 % to 2.5 % depending on the Company’s funded debt to EBITDA ratio.

Commencing on June 30, 2023, the Term Loan consists of sixty equal monthly principal installments, over a period of ten years , with the balance payable on the maturity date of the Term Loan.

In addition to providing for the Term Loan, the Loan Agreement, together with a corresponding Revolving Line of Credit Note in favor of PNC, executed May 11, 2023, provided for a senior secured revolving line of credit in an aggregate principal amount of $ 10,000,000 , with an expiration date of May 11, 2028 (the “Revolving Line of Credit”).

On December 19, 2023, the Company and PNC entered into an Amendment to the Loan (the “Restated Loan Amendment”) and a corresponding Amended and Restated Revolving Line of Credit Note (“Restated Line of Credit Note”) and Amended and Restated Line of Credit and Investment Sweep Rider (the “Restated Rider”), to increase the aggregate principal amount available under the Company’s senior secured revolving line of credit from $ 10,000,000 to $ 30,000,000 and extend the maturity date until December 19, 2028.

On September 30, 2024, the Company and one of its subsidiaries, Innovative Solutions and Support, LLC (“ISSL,” entered into an Amendment to Loan Documents (the “Loan 2024 Amendment”) with PNC, which amends certain terms of the Loan Agreement to increase the line of credit with PNC.

Concurrently with the Loan 2024 Amendment, the Company entered into (i) an Amended and Restated Revolving Line of Credit in favor of PNC (the “A&R Revolving Line of Credit”), and (ii) an Amended and Restated Line of Credit and Investment Sweep Rider with PNC (the “A&R Rider”).

The A&R Revolving Line of Credit Note provides for a senior secured revolving line of credit in an aggregate principal amount of $ 35,000,000 , with an expiration date of December 19, 2028.

The interest rate applicable to loans outstanding under the A&R Revolving Line of Credit is a rate per annum equal to the sum of (A) Daily SOFR (as defined in the A&R Revolving Line of Credit Note) plus (B) an unadjusted spread of the Applicable SOFR Margin plus (C) a SOFR adjustment of ten basis points.

On September 30, 2024, in connection with the July 2024 Honeywell Asset Acquisition and the September 2024 Honeywell Agreement, the Company entered into the Loan 2024 Amendment with PNC, which amended certain terms of the Loan Agreement to increase the line of credit with PNC.

Concurrently with the Loan 2024 Amendment, the Company entered into (i) the “A&R Revolving Line of Credit Note and (ii) the A&R Rider.

The A&R Revolving Line of Credit Note provided for a senior secured revolving line of credit in an aggregate principal amount of $ 35 million, with an expiration date of December 19, 2028 (the “Revolving Line of Credit”).

The interest rate applicable to loans outstanding under the Revolving Line of Credit was a rate per annum equal to the sum of (A) Daily SOFR (as defined in the A&R Revolving Line of Credit Note) plus (B) an unadjusted spread of the Applicable SOFR Margin plus (C) a SOFR adjustment of ten basis points.

The Applicable SOFR Margin ranges from 1.5 % to 2.5 % depending on the Company’s funded debt to EBITDA ratio as defined in the A&R Revolving Line of Credit Note.

The A&R Rider provides for how PNC will make advances to the Company under the AR Revolving Line of Credit.

The Company was in compliance with all applicable covenants throughout and at June 30, 2025.

As of the three months ended June 30, 2025, the outstanding balance drawn on the A&R Revolving Line of Credit was $ 23,258,511 with an effective interest rate of 6.3 % percent.

As of June 30, 2025, the Company had availability of $ 11,741,489 under the A&R Revolving Line of Credit.

On July 18, 2025, the Company entered a new five-year , $ 100 million committed credit agreement (the "Credit Agreement") with a lending syndicate led and arranged by JPMorgan Chase Bank, N.A..

See footnote 9.

Subsequent Events, for additional disclosures related the July 18, 2025 Credit Agreement.

The A&R Rider provided for how PNC will make advances to the Company under the A&R Revolving Line of Credit.

On July 18 th , 2025, the outstanding balance drawn on the A&R Revolving Line of Credit of $ 25,342,529 was fully paid.

On July 18, 2025, Innovative Solutions and Support, Inc.

(the “Company”), its wholly-owned subsidiary Innovative Solutions and Support, LLC (“Borrower”) and certain domestic subsidiaries entered into a Credit Agreement (the “2025 Credit Agreement”) with J.P.

Morgan Chase Bank, N.A.

(the “Bank”) and the other lender parties thereto, which Credit Agreement provides for the Bank to extend to the Borrower credit facilities in an aggregate principal amount of up to $ 100.0 million (the “New Credit Facilities”), consisting of the following:

1) a USD $ 25,000,000 initial term loan facility (the “Initial Term Loan”),

2) a USD $ 30,000,000 revolving credit facility (the “Revolving Facility”) and a;

3) a USD $ 45,000,000 delayed draw term loan facility (the “Delayed Draw Term Loan”).

The New Credit Facilities replaced the Company’s existing $ 35 million Amended and Restated Revolving Line of Credit Note in favor of PNC.

The New Credit Facilities provide expanded liquidity and improved flexibility, better enabling the Company to execute on its long-term growth strategy and capital allocation priorities, consistent with the Company’s focus on driving long-term value creation for its shareholders.

Loans under the New Credit Facilities bear interest at the Borrower's option at either:

(i) the Alternate Base Rate plus an applicable margin, or

(ii) the Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin.

The Alternate Base Rate is defined as the highest of (a) the Prime Rate, (b) the Federal Reserve Bank of New York rate for overnight funds plus 0.50 %, and (c) the Adjusted Term SOFR Rate for a one-month period plus 1.00 %, with a minimum rate of 1.00 % per annum.

The Adjusted Term SOFR Rate is the Term SOFR Rate plus 0.10 %.

An applicable margin is determined based on the Company's Total Net Leverage Ratio and ranges from 0.75 % to 1.75 % for Alternate Base Rate loans and from 1.75 % to 2.75 % for Adjusted Term SOFR Rate loans.

The New Credit Facilities mature five years following the date of the initial advance, or July 18, 2030 (the “Maturity Date”).

All outstanding balances are due on the Maturity Date.

For the fiscal quarter ended December 31, 2025, the Initial Term Loan had an effective interest rate of 6.8 % and no borrowings were drawn on the Revolving Facility and the Delayed Draw Term Loan.

Initial Term Loan

The Initial Term Loan requires quarterly principal payments of $ 625,000 commencing September 30, 2025, with the remaining balance due on the Maturity Date.

Revolving Facility Loan

The Revolving Facility matures five years (i.e.

July 18, 2030) following the date of the initial advance (the “Maturity Date”) with all outstanding balances due on the Maturity Date.

The Revolving Facility principal is due on the Maturity Date.

All amounts outstanding under the Credit Facilities will be due and payable upon the earlier of the Maturity Date, or the acceleration of the Credit Facilities upon an event of default.

On August 18 , 2025, the balance of $ 2,000,000 on the Revolving Facility was paid off.

There were no additional borrowings on the Revolving facility as of December 31, 2025.

Delayed Draw Term Loan

The Delayed Draw Term Loan requires quarterly principal payments equal to 2.50 % of the original aggregate principal amount commencing with the first scheduled payment date after January 18, 2026, with the remaining balance due on the Maturity Date.

Under the New Term Loan and Revolving Facility, $ 25,000,000 and $ 2,000,000 , respectively, were immediately drawn and used to pay $ 25,342,529 as payoff for the A&R Revolving Line of Credit and to pay $ 631,700 in transaction fees and expenses.

The remaining $ 1,026,237.50 balance was deposited by the Company to the PNC Checking account.

Debt Issuance Costs

For the Initial Term loan, debt issuance costs of $ 246,148 were capitalized as contra-liabilities and are amortized as interest expense on a basis that approximates the effective interest method over the term of the Initial Term Loan debt.

Contra-liabilities are netted against and presented as a direct deduction from the carrying amount of debt.

The unamortized balance of the Initial Term loan contra-liabilities as of December 31, 2025 was $ 220,143 .

For the Revolving Facility and the Delayed Draw Term Loan, debt issuance costs of $ 295,378 and $ 443,066 , respectively were capitalized as assets and are amortized using straight straight-line amortization to interest expense over the terms of the respective debt.

The current and non-current capitalized assets related to the Revolving Facility and the Delayed Draw Term Loan are aggregated to Current Other Assets and Non-Current Other Assets on the Consolidated Balance Sheet.

The unamortized balances of the Revolving Facility and the Delayed Draw Term Loan included in current and non-current other assets as of December 31, 2025 were $ 268,378 and $ 402,567 , respectively.

Future borrowings under the Initial Term Loan and Revolving Facility may be used for working capital and general corporate purposes, including permitted acquisitions.

The Delayed Draw Term Loan may only be used for permitted acquisitions

Debt Collateral and Covenants

The Company’s obligations under the 2025 Credit Agreement are secured by substantially all of the assets of the Company and certain of its subsidiaries, including a first priority lien on the Company's Exton facility.

The Company’s Initial Term Loan Facility, Revolving Facility and Delayed Term Loan facility contain affirmative and negative covenants that, among other things, may limit or restrict the Company’s ability to:

create liens and encumbrances;

merge, dissolve, liquidate or consolidate;

make acquisitions and investments;

dispose of or transfer assets;

change the nature of our business;

engage in certain transactions with affiliates;

and enter into hedging transactions, in each case, subject to certain qualifications and exceptions.

In addition, we are required to maintain a maximum net leverage ratio and a minimum fixed charge coverage ratio.

The Company was in compliance with all debt covenants as of December 31, 2025.

Commitment Fees

The 2025 Credit Agreement terms include Revolving Facility and Delayed Draw Term Loan Facility commitment fees.

For the three months ended December 31, 2025, unused line of credit fees of $ 19,167 under the Revolving Facility and $ 28,750 under the Delayed Draw Term Loan were included in interest expense.

For the fiscal year ended September 30, 2025, unused line of credit fees of $ 15,194 under the Revolving Facility and $ 23,438 under the Delayed Draw Term Loan were included in interest expense.

Long-term debt, excluding contra-liabilities, consisted of the following:

September 30,

Initial Term Loan

Less current maturities

Total Long Term Debt

As of December 31, 2025, scheduled annual payments based on the maturities of debt are expected to be as follows:

Annual payments

2026 (Nine months remaining)

* Excludes interest payments payable at each debt reset date

Loan Facilities Availability

As of December 31, 2025, the Company had availability of $ 30,000,000 under the Revolving Facility and $ 45,000,000 under the Delayed Draw Term Loan facility.

The Company has the right to request up to $ 25,000,000 in additional revolving commitments or incremental term loans, subject to lender approval and satisfaction of certain conditions.

Subsequent Events

On July 10, 2025, the market performance condition for 67,000 units of MSUs granted to the Company’s Chief Executive Officer was met.

These shares will vest according to the Company’s Amended and Restated 2019 Stock-Based Incentive Compensation Plan.

On July 18, 2025, the Company entered a new five-year , $ 100 million committed credit agreement (the "Credit Agreement") with a lending syndicate led and arranged by JPMorgan Chase Bank, N.A.

The Credit Agreement replaces the Company's existing $ 35 million line of credit.

Under the terms of the Credit Agreement, the new credit facilities bear interest at Term SOFR plus 175 to 275 basis points, with the applicable margin determined by the Company’s total net leverage ratio, as calculated in accordance with the Credit Agreement.

The Credit Agreement provides for a $ 30 million secured revolving loan facility, a $ 25 million secured term loan, a $ 45 million secured delayed draw term facility, and an option, subject to certain conditions, to request up to $ 25 million in additional loan commitments under an accordion feature in the Credit Agreement.

The initial outstanding borrowing under the new Credit Agreement, as of the closing date, replaced the outstanding borrowings under the existing line of credit.

The new facility provides expanded liquidity and improved flexibility, better enabling the Company to execute on the its long-term growth strategy and capital allocation priorities, consistent with the Company’s focus on driving long-term value creation for its shareholders.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements