What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-15 compared with 2026-02-13 · 95 added, 72 removed, 170 unchanged (50% of the section changed)

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These forward-looking statements are based largely on current expectations and projections about future events and trends affecting the business, are not guarantees of future performance, and involve a number of risks, uncertainties and assumptions that are difficult to predict.

In this report, the words “anticipates,” “believes,” “may,” “will,” “estimates,” “continues,” “anticipates,” “intends,” “forecasts,” “expects,” “plans,” “could,” “should,” “would,” “is likely”,” “ projected,” “might,” “potential,” “preliminary,” “provisionally,” and similar expressions, as they relate to the business or to its management, are intended to identify forward-looking statements, but they are not exclusive means of identifying them.

In this report, the words “anticipates,” “believes,” “may,” “will,” “estimates,” “continues,” “intends,” “forecasts,” “expects,” “plans,” “could,” “should,” “would,” “is likely”,” “ projected,” “might,” “potential,” “preliminary,” “provisionally,” and similar expressions, as they relate to the business or to its management, are intended to identify forward-looking statements, but they are not exclusive means of identifying them.

Unless the context otherwise requires, all references herein to “IA,” the “Registrant,” the “Company,” “we,” “us” or “our” are to Innovative Solutions and Support, Inc.

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The Company’s retrofit projects are generally pursuant to either a direct contract with a customer or a subcontract with a general contractor to a customer (including government agencies).

In June 2023, the Company entered into an agreement with Honeywell (“The June 2023 Honeywell Agreement”) pursuant to which Honeywell sold, assigned or licensed certain assets related to its inertial, communication and navigation product lines, 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 inertial, communication and navigation product lines to

repair, overhaul, manufacture sell, import, export and distribute certain products to the Company for cash consideration of $35.9 million.

In June 2023, the Company entered into an agreement with Honeywell (the “June 2023 Honeywell Agreement”) pursuant to which Honeywell sold, assigned or licensed certain assets related to its inertial, communication and navigation product lines, 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 inertial, communication and navigation product lines to repair, overhaul, manufacture, sell, import, export and distribute certain products to the Company for cash consideration of $35.9 million.

In July 2024, the Company entered into an exclusive license agreement and acquired additional key assets for certain communication and navigation product lines from Honeywell (the “July 2024 Honeywell Asset Acquisition”).

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We anticipate this will lead to a spike in revenues in the short term followed by a temporary dip in revenues before revenues are normalized.

As a result, the Company anticipates revenues related to the September 2024 Honeywell Agreement will continue to fluctuate significantly over the next few quarters.

The transition from Honeywell to Company facilities will involve certain risks that may impact operational performance and reported results.

While the Company cannot assure that the transition will not adversely affect operations and reported results, it is committed to closely monitoring the integration process.

The Company remains confident in the long-term benefits of the Honeywell acquisitions.

On March 27, 2026, the Compan y entered into and closed the transactions contemplated by that certain Asset Purchase and License Agreement (the “Honeywell Autopilot Agreement”) with Honeywell.

Pursuant to the Autopilot Agreement, Honeywell sold, assigned or licensed certain assets related to its general aviation autopilots and nav/com, multifunction display and transponder radios, granted exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its general aviation autopilots and nav/com, multifunction display and transponder radios to repair, overhaul, manufacture, sell, import, export and distribute certain products and granted certain other intellectual property rights to the Company for consideration of $22.0 million in cash.

On March 28, 2026, the Company entered into and closed the transactions contemplated by that certain Asset Purchase and License Agreement (the “Honeywell Generators Agreement”) with Honeywell.

Pursuant to the Generators Agreement, Honeywell sold, assigned or licensed certain assets related to its electronic generator and generator control unit for the F-15 and 767 tanker/freight platforms, 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 electronic generator and generator control unit for the F-15 and 767 tanker/freight platforms to repair, overhaul, manufacture, sell, import, export and distribute certain products to the Company for consideration of $8.0 million in cash.

As a result, the Company anticipates revenues related to the above Honeywell transactions will continue to fluctuate significantly over the next few quarters.

The transition of the business from Honeywell to the Company’s facilities will involve certain risks that may adversely impact operational performance and reported results.

Cost of sales related to product and service sales comprises materials, components and third-party avionics purchased from suppliers, direct labor and overhead costs.

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Cost of sales related to EDC sales comprises engineering labor, consulting services and other costs associated with specific design and development projects.

These costs are incurred pursuant to contractual arrangements and are accounted for typically as contract costs within Cost of sales, with reimbursement accounted for as a sale in accordance with the percentage-of-completion method or completed contract method of accounting.

These costs are incurred pursuant to contractual arrangements and are accounted for typically as contract costs

within cost of sales, with reimbursement accounted for as a sale in accordance with the percentage-of-completion method or completed contract method of accounting.

Company funded R&D expenditures relate to internally funded efforts for the development of new products and the improvement of existing products.

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Selling, general and administrative (“SG&A”) expenses consist of sales, marketing, business development, professional services, salaries and benefits for executive and administrative personnel, facility costs, recruiting, legal, accounting and other general corporate expenses.

The Company sells its products to agencies of the United States and foreign governments, aircraft operators, aircraft modification centers and OEMs.

Customers have been and may continue to be affected by changes in economic conditions both in the United States and abroad.

Such changes may cause customers to curtail or delay their spending on both new and existing aircraft.

Factors that can impact general economic conditions and the level of spending by customers include, but are not limited to, general levels of consumer spending, increases in fuel and energy costs, conditions in the real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence, inflation, public health crises and pandemics and other macroeconomic factors that affect spending

Furthermore, spending by government agencies may be reduced in the future.

If customers curtail or delay their spending or are forced to declare bankruptcy or liquidate their operations because of adverse economic conditions, the Company’s revenues and results of operations would be affected adversely.

For example, in the fiscal year ended September 30, 2025, changes in U.S.

administrative tariff policy, have led to increases in tariffs for imported goods.

Thus far, the impact to Company has been nominal.

Environmental, Social and Governance Considerations

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The Annual Report on Form 10-K for the fiscal year ended September 30, 2025 contains a discussion of these critical accounting policies.

See also Note 1 to the unaudited condensed consolidated financial statements for the three months ended December 31, 2025 included in this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED

DECEMBER 31, 2025 AND 2024

See also Note 1 to the unaudited condensed consolidated financial statements for the three and six months ended March 31, 2026 included in this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED

MARCH 31, 2026 AND 2025

The following table sets forth the statements of operations data expressed as a percentage of total net sales for the periods indicated (some items may not add due to rounding):

Three Months Ended December 31,

Three Months Ended March 31,

Six Months Ended March 31,

Total net sales

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Income tax expense

Three Months Ended December 31, 2025 Compared to the Three Months Ended December 31, 2024

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 fiscal year ended September 30, 2024, the Company has aggregated these items into one category, “Services.” Consequently, Services revenues and cost of sales primarily comprise Customer Service, EDC and Royalties.

Net sales for the three months ended December 31, 2025, increased by 36.5% to $21.8 million, up from net sales of $16.0 million for the three months ended December 31, 2024.

The increase in net sales principally reflects an increase of $5.5 million in commercial aftermarket product sales, partially offset by a decrease of $1.5 million in military product sales, primarily due to the transition of the F-16 production into the Exton facility and a decrease of $0.5 million in business aviation.

Services sales for the three months ended December 31, 2025, increased $2.3 million, or 37.7%, compared to Services sales for the three months ended December 31, 2024, of $6.0 million.

Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025

Net sales for the three months ended March 31, 2026, increased by 2.0% to $22.4 million, up from net sales of $21.9 million for the three months ended March 31, 2025.

The increase in net sales principally reflects an increase of $4.3 million in commercial aftermarket product sales and an increase of $1.1 million in business aviation, partially offset by a decrease of $4.4 million in military product sales, primarily due to the transition of F-16 production into the Exton facility.

Services sales for the three months ended March 31, 2026, decreased $0.7 million, or 8.0%, compared to Services sales for the three months ended March 31, 2025, of $8.8 million.

The decrease in Services sales primarily reflects a decrease in service volumes related to the IRUs and radio product lines acquired in 2023 and 2024 of $0.6 million and a $0.1 million decrease in legacy customer service revenue.

Cost of sales .

Cost of sales was $10.9 million, or 48.9% of net sales, for the three months ended March 31, 2026 compared to $10.7 million, or 48.6% of net sales, for the three months ended March 31, 2025.

The change in cost of sales for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 principally reflects product mix, with net sales growth of $4.3 million in commercial aftermarket sales while OEM and military net sales decreased by $4.4 million and net service sales decreased by $0.7 million.

Gross profit was $11.4 million, or 51.1% of net sales, for the three months ended March 31, 2026 compared to $11.3 million, or 51.4% of net sales, for the three months ended March 31, 2025.

The slight decrease in gross margin principally reflects the higher amortization expense for intangible and other long-term assets, partially offset by improved absorption of fixed costs due to the increase in net sales.

Research and development .

R&D expense increased $0.9 million, or 106.3%, to $1.8 million for three months ended March 31, 2026 from $0.9 million for the three months ended March 31, 2025.

As a percentage of net sales, R&D expenses increased to 8.0% of net sales for the three months ended March 31, 2026 from 4.0% of net sales for the three months ended March 31, 2025.

The increase in R&D expenses as a percentage of revenues in the quarter was primarily the result of additional headcount to support the development of future products.

For the three months ended March 31, 2026 and 2025, $0.4 million of R&D expense was recharacterized as cost of sales related to the EDC sales, which was offset by $0.6 million in additional engineering staffing to support the Company’s development programs.

SG&A expenses increased $1.3 million or 38.7%, to $4.7 million for the three months ended March 31, 2026 from $3.4 million for the three months ended March 31, 2025.

The increase in SG&A expense for the three months ended March 31, 2026 was primarily the result of increases in employee-related costs of $0.7 million, and one-time charges of $0.8 million related to the three acquisitions that closed during the quarter.

As a percentage of net sales, SG&A expenses were 21.0% for the three months ended March 31, 2026 compared to 15.6% for the three months ended March 31, 2025.

Interest expense.

Interest expense was $0.5 million for the three months ended March 31, 2026, an increase of $0.1 million from $0.4 million for the three months ended March 31, 2025.

The change was due to approximately $0.1 million in amortization of deferred financing fees.

Interest income.

Interest income was negligible for the three months ended March 31, 2026 and 2025, respectively.

Other income.

Other income was $0 for the three months ended March 31, 2026 and $0 for the three months ended March 31, 2025.

Income taxes.

Income tax expense was $1.0 million for the three months ended March 31, 2026 compared to income tax expense of $1.3 million for the three months ended March 31, 2025.

The effective tax rate for the three months ended March 31, 2026 was 22.5% as compared to 19.2% for the three months ended March 31, 2025.

The increases in income tax expense and the effective tax rate were primarily due to the unfavorable effects of state income taxes, tax credits, temporary and permanent tax differences related to stock-based compensation and certain non-deductible expenses for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

As a result of the factors described above, the Company’s net income for the three months ended March 31, 2026 was $3.4 million compared to net income of $5.3 million for the three months ended March 31, 2025.

On a fully diluted basis, net income per share was $0.19 for the three months ended March 31, 2026, compared to a net income of $0.30 per share for the three months ended March 31, 2025.

Six Months Ended March 31, 2026 Compared to the Six Months Ended March 31, 2025

Net sales for the six months ended March 31, 2026, increased by 16.5% to $44.2 million, up from net sales of $37.9 million for the six months ended March 31, 2025.

The increase in net sales principally reflects an increase of $9.9 million in commercial aftermarket product sales and an increase of $,0.6 million in business aviation, partially offset by a decrease of $5.9 million in military product sales, primarily due to the transition of F-16 production into the Exton facility.

Services sales for the six months ended March 31, 2026, increased $1.6 million, or 10.6% to $16.3 million, compared to Services sales for the six months ended March 31, 2025, of $14.7 million.

The increase in Services sales primarily reflects growth in service volumes related to the IRUs and radio product lines acquired in 2023 and 2024 of $1.7 million, partially offset by a $0.1 million decrease in legacy customer service revenue.

Cost of sales .

Cost of sales was $9.9 million, or 45.5% of Net sales, for the three months ended December 31, 2025 compared to $9.4 million, or 58.6 % of Net sales, for the three months ended December 31, 2024.

The increase in cost of sales for the three months ended December 31, 2025 compared to the three months ended December 31, 2024, principally reflects the previously mentioned net sales growth of $2.3 million within services product line and $5.5 million in commercial aftermarket sales while OEM and miliary net sales decreased by $2.0 million.

Gross profit was $11.9 million, or 54.5% of Net sales, for the three months ended December 31, 2025 compared to $6.6 million, or 41.4% of Net sales, for the three months ended December 31, 2024.

The increase in gross margin principally reflects the previously mentioned net sales growth, a more favorable product mix within our commercial aftermarket product line, and a higher mix of commercial aftermarket revenue, which by nature has higher gross margins as compared to military and OEM businesses.

Cost of sales was $20.9 million, or 47.2% of net sales, for the six months ended March 31, 2026 compared to $20.0 million, or 52.8% of net sales, for the six months ended March 31, 2025.

The change in cost of sales for the six months ended March 31, 2026 compared to the six months ended March 31, 2025 principally reflects product mix with net sales growth of $9.9 million in commercial aftermarket sales and $0.6 million in business aviation while OEM and military net sales decreased by $5.9 million.

Gross profit was $23.3 million, or 52.8% of net sales, for the six months ended March 31, 2026 compared to $17.9 million, or 47.2% of net sales, for the six months ended March 31, 2025.

The increase in gross margin principally reflects the previously mentioned net sales growth, a more favorable product mix within our commercial aftermarket product line, and a higher proportion of commercial aftermarket revenue, which by nature has higher gross margins as compared to military and OEM business.

Research and development .

R&D expense increased $0.2 million, or 19.9 %, to $1.3 million for the three months ended December 31, 2025 from $1.1 million for the three months ended December 31, 2024.

As a percentage of net sales, R&D expenses decreased to 6.1% of net sales for the three months ended December 31, 2025 from 7.0% of net sales for the three months ended December 31, 2024.

The decrease in R&D expenses as a percentage of revenues in the quarter was primarily the result of additional revenues for the three months ended December 31, 2025 compared to the same period last year.

For the three months ended December 31, 2025 and 2024, $0.5 million of R&D expense was recharacterized as Cost of sales related to the EDC sales, which was offset by $0.3 million in additional engineering staffing to support the Company’s development programs.

SG&A expenses increased $0.1 million or 2.5%, to $4.3 million for the three months ended December 31, 2025 from $4.2 million for the three months ended December 31, 2024.

The increase in SG&A expense for the three months ended December 31, 2025 was primarily the result of increases in employee-related costs of $0.5 million, offset by lower professional services fees and other related fees of $0.4 million.

As a percentage of Net sales, SG&A expenses were 19.5% for the three months ended December 31, 2025 compared to 26.0% for the three months ended December 31, 2024.

R&D expense increased $1.1 million, or 57.8%, to $3.1 million for the six months ended March 31, 2026 from $2.0 million for the six months ended March 31, 2025.

As a percentage of net sales, R&D expenses increased to 7.0% of net sales for the six months ended March 31, 2026 from 5.3% of net sales for the six months ended March 31, 2025.

The increase in R&D expenses as a percentage of revenues in the quarter was primarily the result of additional headcount to support the development of future products.

For the six months ended March 31, 2026 and 2025, $1.0 million of R&D expense was recharacterized as cost of sales related to the EDC sales, which was offset by $0.8 million in additional engineering staffing to support the Company’s development programs.

SG&A expenses increased $1.4 million, or 18.4%, to $9.0 million for the six months ended March 31, 2026 from $7.6 million for the six months ended March 31, 2025.

The increase in SG&A expense for the six months ended March 31, 2026 was primarily the result of increases in employee-related costs of $1.4 million and an increase in one-time charges of $0.5 million related to three acquisitions that closed during the six months ended March 31, 2026.

As a percentage of net sales, SG&A expenses were 20.3% for the six months ended March 31, 2026 compared to 20.0% for the six months ended March 31, 2025.

Interest expense.

Interest expense was $0.5 million for the three months ended December 31, 2025, an increase of $0.1 million from $0.4 million for the three months ended December 31, 2024.

The change was due to a 50 basis point increase in the effective interest rate and approximately $53,000 in amortization of deferred financing fees.

Interest expense was $1.0 million for the six months ended March 31, 2026, an increase of $0.2 million from $0.8 million for the six months ended March 31, 2025.

The change was due to approximately $0.1 million in amortization of deferred financing fees.

Interest income.

Interest income was negligible for the three months ended December 31, 2025 and 2024, respectively.

Interest income was negligible for the six months ended March 31, 2026 and 2025, respectively.

Other income.

Other income was $64,000 for the three months ended December 31, 2025 which was the result of a reduction of a third-party consulting fee compared to $6,000 for the three months ended December 31, 2024.

Other income was negligible for the six months ended March 31, 2026 and 2025, respectively.

Income taxes.

Income tax expense was $1.8 million for the three months ended December 31, 2025 as compared to income tax expense of $0.2 million for the three months ended December 31, 2024.

The effective tax rate for the three months ended December 31, 2025 was 30.8% as compared to 20.1% for the three months ended December 31, 2024.

The increase in income tax expense was primarily due to an increase in income before income taxes as well as the unfavorable effects of state income taxes, tax credits, temporary and permanent tax differences related to stock-based compensation and certain non-deductible expenses for the three months ended December 31, 2025, compared to the three months ended December 31, 2024.

As a result of the factors described above, the Company’s net income for the three months ended December 31, 2025 was $4.1 million compared to net income of $0.7 million for the three months ended December 31, 2024.

On a fully diluted basis, net income per share was $0.22 for the three months ended December 31, 2025, compared to a net income of $0.04 per for the three months ended December 31, 2024.

Income tax expense was $2.8 million for the six months ended March 31, 2026 as compared to income tax expense of $1.5 million for the six months ended March 31, 2025.

The effective tax rate for the six months ended March 31, 2026 was 27.3% as compared to 19.2% for the six months ended March 31, 2025.

The increases in income tax expense and the effective tax rate were primarily due to an increase in income before income taxes as well as the unfavorable effects of state income taxes, tax credits, temporary and permanent tax differences related to stock-based compensation and certain non-deductible expenses for the six months ended March 31, 2026, compared to the six months ended March 31, 2025.

As a result of the factors described above, the Company’s net income for the six months ended March 31, 2026 was $7.5 million compared to net income of $6.1 million for the six months ended March 31, 2025.

On a fully diluted basis, net income per share was $0.42 for the six months ended March 31, 2026, compared to a net income of $0.34 per share for the six months ended March 31, 2025.

Liquidity and Capital Resources

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Current liabilities

Contract liability

Contract liabilities

Other non-current liabilities

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Current ratio (2)

Three Months Ended December 31,

Six Months Ended March 31,

Cash flow activities:

Net cash provided by operating activities

Net cash provided by (used in) investing activities

Net cash (used in) provided by financing activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

(1) Calculated as:

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The Company’s existing cash balances and anticipated cash flows from operations, together with borrowings under our revolving credit facility, are expected to be adequate to satisfy the Company’s liquidity needs for at least the next 12 months.

Apart from what has been disclosed in this Management’s Discussion and Analysis, management is not aware of any trends, events or uncertainties that have had or are likely to have a material impact on our liquidity, financial condition and capital resources.

Apart from what has been disclosed in this Management’s Discussion and Analysis and in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2025, management is not aware of any trends, events or uncertainties that have had or are likely to have a material impact on our liquidity, financial condition and capital resources.

2025 Credit Agreement

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

The JPM Facility replaced the A&R Revolving Line of Credit with PNC described below under the heading “Prior Debt Facility.”

See footnote 9.

Loan Agreement to the unaudited condensed consolidated financial statements for the three months ended December 31, 2025 included in this Quarterly Report on Form 10-Q for additional disclosures related to the 2025 Credit Agreement.

Loan Agreement to the unaudited condensed consolidated financial statements for the three and six months ended March 31, 2026 included in this Quarterly Report on Form 10-Q for additional disclosures related to the 2025 Credit Agreement.

Stifel Sales Agreement

On September 22, 2023, the Company entered into an at-the-market equity offering Sales Agreement (the “ATM Sales Agreement”) with Stifel, Nicolaus & Company, Incorporated (the “Sales Agent”), pursuant to which the Company may offer and sell from time to time through the Sales Agent up to $40 million of shares of its common stock.

The shares are offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (File No.

333-267595), which was declared effective by the SEC on October 14, 2022 and the accompanying prospectus supplement, dated September 22, 2023.

Subject to the terms and conditions of the ATM Sales Agreement, the Sales Agent is required to use commercially reasonable efforts to sell shares of the Company’s common stock from time to time, based upon the Company’s instructions.

Subject to the terms and conditions of the ATM Sales

Agreement, the Sales Agent is required to use commercially reasonable efforts to sell shares of the Company’s common stock from time to time, based upon the Company’s instructions.

The Company is not obligated to sell any shares under the ATM Sales Agreement, and the Company or the Sales Agent may at any time suspend solicitation and offers under the ATM Sales Agreement or terminate the ATM Sales Agreement.

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Sales of the shares of the Company’s common stock, if any, under the ATM Sales Agreement may be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act, including sales made directly on or through Nasdaq or any other existing trading market for the Company’s common stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices and/or any other method permitted by law.

During the fiscal years ended September 30, 2024 and September 30, 2025, and during the fiscal quarter ended December 31, 2025, we did not sell any shares of common stock under the ATM Sales Agreement.

During the fiscal years ended September 30, 2024 and September 30, 2025, and during the three and six months ended March 31, 2026, we did not sell any shares of common stock under the ATM Sales Agreement.

Future Funding Requirements

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Apart from what has been disclosed above, management is not aware of any trends, events or uncertainties that have had or are likely to have a material impact on our liquidity, financial condition and capital resources.

The Company did not pay cash dividends in fiscal years 2024 or 2025, or in the quarter ended December 31, 2025.

The Company intends to retain future earnings, if any, to finance the development and growth of its business and does not anticipate paying any cash dividends in the foreseeable future.

The Company did not pay cash dividends in fiscal years 2024 or 2025, or in the three and six months ended March 31, 2026.

The Company currently intends to retain future earnings, if any, to finance the development and growth of its business and does not anticipate paying any cash dividends in the foreseeable future.

The declaration and payment of any dividend in the future will be at the discretion of the Company’s Board of Directors and will depend on then-existing conditions, including our operating results, financial condition, business prospects and other factors the Board may deem relevant.

Operating activities

Net cash provided by operating activities was $8.2 million for the three months ended December 31, 2025 and consisted primarily of funding from net income of $4.1 million and changes in working capital.

Net cash provided by operating activities was $1.8 million for the three months ended December 31, 2024 and consisted primarily of funding from net income of $0.7 million and changes in working capital.

Net cash provided by operating activities was $10.5 million for the six months ended March 31, 2026 and consisted primarily of funding from net income of $7.5 million and changes in working capital.

Net cash provided by operating activities was $3.1 million for the six months ended March 31, 2025 and consisted primarily of funding from net income of $6.1 million and changes in working capital.

Investing activities

Net cash used in investing activities was $1.1 million for three months ended December 31, 2025 and consisted of expenditures related to additions and improvements in the Company’s facilities and the purchases of equipment.

Net cash used in investing activities was $0.3 million for the three months ended December 31, 2024 and consisted of expenditures related to additions and improvements in the Company’s facilities and purchases of equipment and computer hardware.

Net cash used in investing activities was $35.7 million for six months ended March 31, 2026 and was primarily due to the $22.0 million acquisition for the Honeywell Autopilot Agreement, $8.0 million for the Honeywell Generators Agreement and $3.5 for the S-TEC ® acquisition.

In addition, the Company spent $1.3 million for the purchase of an Eclipse business jet for research and development and $1.4 million for additions and improvements in the Company’s facilities and the purchases of equipment.

Net cash used in investing activities was $1.8 million for the six months ended March 31, 2025 and consisted of expenditures related to additions and improvements in the Company’s facilities and purchases of equipment and computer hardware.

Financing activities

Net cash used in financing activities was $1.5 million for the three months ended December 31, 2025 and consisted of payments against the Company’s line of credit and the tax payments of vested equity award shares withheld for taxes.

Net cash used in financing activities was $1.5 million for the three months ended December 31, 2024 and consisted of payments against the Company’s line of credit.

Net cash provided by financing activities was $29.3 million for the six months ended March 31, 2026 and consisted of proceeds of $32.0 million from the delayed draw term loan to fund acquisitions offset by payments against the Company’s term loan of $1.3 million and $1.4 million for the tax payments of vested equity award shares withheld for taxes.

Net cash used in financing activities was $0.6 million for the six months ended March 31, 2025 and consisted of payments against the Company’s line of credit.

Future capital requirements depend upon numerous factors, including market acceptance of the Company’s products, the timing and rate of expansion of business, acquisitions, joint ventures and other factors.

IA has experienced increases in expenditures since its inception and anticipates that expenditures will continue in the foreseeable future.

IA has experienced increases in expenditures since its inception and anticipates that expenditures will continue to increase in the foreseeable future.

The Company believes that its cash and cash equivalents will provide sufficient capital to fund operations for at least the next twelve months.

However, the Company may need to develop and introduce new or enhanced products, respond to competitive pressures, invest in or acquire businesses or technologies, or respond to unanticipated requirements or developments.

If insufficient funds are available, the Company may not be able to introduce new products or compete effectively.

Three months ended December 31,

Three Months Ended

Six Months Ended

March 31, 2026

Backlog, beginning of period

bookings during period, net

acquired through acquisition

sales recognized during period

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Backlog represents the value of contracts and purchase orders, less the revenue recognized to date on those contracts and purchase orders.

The backlog includes committed purchases and excludes potential future sole-source production orders from products developed under the Company’s engineering development contracts (“EDC”) programs, including the Pilatus PC-24, the KC-46A and the Textron King Air 360 and King Air 260 ThrustSense® Autothrottle programs.

At December 31, 2025, our backlog was $75.3 million compared with $80.8 million at December 31, 2024.

The backlog includes committed purchases and excludes potential future sole-source production orders under our current OEM contracts, including the Pilatus PC-24, the Boeing KC-46A and the Textron King Air 360 and King Air 260 ThrustSense® Autothrottle programs.

At March 31, 2026, our backlog was $87.0 million compared with $77.4 million at September 30, 2025.

Backlog is converted into sales in future periods as work is performed or deliveries are made.

Our backlog does not include additional future orders that may be received under our current OEM contracts.

We expect to recognize approximately 67% of our backlog over the next 12 months and approximately 97% over the next 24 months as revenue, with the remainder recognized thereafter.

2 unchanged sentences

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 2. Management’s Discussion and Analysis