What changed in this filing

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Item 1. Financial Statements

2026-08-13 compared with 2026-05-15 · 154 added, 111 removed, 764 unchanged (26% of the section changed)

26 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 March 31, 2026 and September 30, 2025

No shares issued and outstanding at June 30, 2026 and September 30, 2025

Common stock, $ .001 par value:

75,000,000 shares authorized, 18,168,575 and 17,970,453 issued at March 31, 2026 and September 30, 2025, respectively

75,000,000 shares authorized, 18,237,353 and 17,970,453 issued at June 30, 2026 and September 30, 2025, respectively

Additional paid-in capital

Retained earnings

Treasury stock, at cost, 339,644 shares at March 31, 2026 and at September 30, 2025, respectively

Treasury stock, at cost, 339,644 shares at June 30, 2026 and at September 30, 2025, respectively

( 3,460,972 )

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

Six Months Ended March 31,

Three Months Ended June 30,

Nine Months Ended June 30,

Total net sales

8 unchanged sentences

( 1,017,073 )

( 2,022,004 )

( 1,221,926 )

Interest income

5 unchanged sentences

INNOVATIVE SOLUTIONS AND SUPPORT, INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

shareholders’

9 unchanged sentences

( 3,460,972 )

Share-based compensation

Issuance of common stock, net of shares withheld for taxes

Balance, June 30, 2026

( 3,460,972 )

See accompanying notes to the unaudited condensed consolidated financial statements.

INNOVATIVE SOLUTIONS AND SUPPORT, INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Balance, September 30, 2024

6 unchanged sentences

( 3,460,972 )

Share-based compensation

Balance, June 30, 2025

( 3,460,972 )

See accompanying notes to the unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended March 31,

For the Nine Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

9 unchanged sentences

( 3,646,091 )

( 5,902,159 )

Prepaid expenses and other current assets

8 unchanged sentences

Contract liabilities

( 1,110,020 )

Net cash provided by operating activities

9 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Debt payments

Delayed Draw Term Loan proceeds

Repayments of line of credit note

( 4,768,490 )

Term Loan principal payments

3 unchanged sentences

Net cash provided by (used in) financing activities

( 4,768,490 )

Net increase in cash and cash equivalents

7 unchanged sentences

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

Transfer from other assets to PP&E

Transfer from intangible assets to goodwill

13 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 six months ended March 31, 2026 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.

Operating results for the three and nine months ended June 30, 2026 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.

51 unchanged sentences

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

Cash equivalents at March 31, 2026 and September 30, 2025 consist of cash on deposit and cash invested in money market funds with financial institutions.

Cash equivalents at June 30, 2026 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.

5 unchanged sentences

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 March 31, 2026 and September 30, 2025, respectively.

The Company had no allowance for credit losses as of fiscal periods ended June 30, 2026 and September 30, 2025, respectively.

Property and Equipment

14 unchanged sentences

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

Financial Instruments

The Company utilizes derivative financial instruments to reduce its exposure to market risks from changes in interest rates.

By entering into receive-variable, pay-fixed interest rate swaps, the Company limits its exposure to changes in variable interest rates.

The Company is exposed to credit-related losses in the event of non-performance by the counterparty to the interest rate swaps.

However, the currently existing swap was initiated after the quarter ending June 30, 2026, therefore no credit risk associated with the swap existed as of or prior to that date.

Interest rate differentials paid or received on the swaps are recognized as adjustments to interest expense in the period earned or incurred.

The Company formally documents all hedging relationships, if applicable, and assesses hedge effectiveness both at inception and on an ongoing basis.

Interest rate swaps that qualify for hedge accounting are recorded at fair value in the accompanying consolidated balance sheets as a component of “other liabilities”.

Changes in the fair value of interest rate swaps are recorded in “accumulated other comprehensive income (loss)”, net of tax, in the accompanying condensed consolidated financial statements.

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 March 31, 2026 and September 30, 2025, according to the valuation techniques the Company used to determine their fair values.

Fair Value Measurement on March 31, 2026

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, 2026 and September 30, 2025, according to the valuation techniques the Company used to determine their fair values.

Fair Value Measurement on June 30, 2026

Quoted Price in

11 unchanged sentences

Money market funds

The March 31, 2026 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.

Interest Rate Swaps

The Company utilizes interest rate swaps designated as cash flow hedges to manage exposure to variability in interest payments on its variable-rate debt.

The fair value of these instruments represents the amount at which the swaps could be settled in an orderly transaction.

This value is based on estimates derived from a quantitative regression analysis using Level 2 inputs, and is validated through comparisons with estimates provided by counterparties.

Fair value measurements incorporate credit valuation adjustments to reflect the potential nonperformance or credit risk of both the Company and its counterparties.

Derivative Financial Instruments

On June 30, 2026, we entered into a $ 53.7 million interest rate swap agreement.

This interest rate swap is used to manage the risk associated with interest rate fluctuations on our $ 53.7 million variable rate term loans.

Under this agreement, we pay interest to financial institutions at a fixed rate of 4.057 percent.

In exchange, the financial institutions pay us at a variable rate, which approximates the variable rate on the debt, excluding the credit spread.

These swaps qualify for hedge accounting treatment pursuant to ASC 815, Derivatives and Hedging.

This swap expires in July 2030.

While this interest rate swap is intended to mitigate the impact of rising interest rates on our variable rate indebtedness, it does not fully eliminate interest rate risk.

Additionally, the fair value of the swap is subject to fluctuation based on changes in interest rates and market conditions, and any changes to interest rates and market conditions may adversely impact our results of operations, financial condition, and cash flows.

Revenue Recognition

that measure and display critical flight information, including data relative to aircraft separation, airspeed, altitude and engine and fuel data measurements.

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.

The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

4 unchanged sentences

The Company’s contract with its customers typically is in the form of a purchase order issued to the Company by its customers and, to a lesser degree, in the form of a purchase order issued in connection with a formal contract executed with a customer.

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

In addition, the Company enters into 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 us treating these contracts as day-to-day under ASC 606.

15 unchanged sentences

The Company determines standalone selling price based on the price at which the performance obligation is sold separately.

If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price by taking into

account available information such as market conditions as well as the cost of the goods or services and the Company’s normal margins for similar performance obligations.

If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price by taking into account available information such as market conditions as well as the cost of the goods or services and the Company’s normal margins for similar performance obligations.

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

21 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 six months ended March 31, 2026 and March 31, 2025, respectively.

There were no material contract estimate adjustments to our condensed consolidated financial statements for the three and nine months ended June 30, 2026 and June 30, 2025, respectively.

Contract Balances

9 unchanged sentences

Increases due to invoicing prior to satisfaction of performance obligations

March 31, 2026

June 30, 2026

September 30, 2024

Amount transferred to receivables from contract assets

( 1,285,317 )

Contract asset additions

1 unchanged sentence

Increases due to invoicing prior to satisfaction of performance obligations

March 31, 2025

June 30, 2025

Due to the fact that our fixed price contracts are treated as day-to-day contracts due to the inclusion of termination for convenience clauses, there are no remaining unsatisfied performance obligations at period end to disclose under ASC 606.

The balances for Accounts receivable were $ 13,188,080 and $ 12,956,476 for the fiscal periods ended March 31, 2026 and September 30, 2025, respectively.

The balances for Accounts receivable were $ 13,823,088 and $ 12,612,482 for the fiscal periods ended March 31, 2025 and September 30, 2024, respectively.

The balances for Accounts receivable were $ 15,984,217 and $ 12,956,476 for the fiscal periods ended June 30, 2026 and September 30, 2025, respectively.

The balances for Accounts receivable were $ 11,536,254 and $ 12,612,482 for the fiscal periods ended June 30, 2025 and September 30, 2024, respectively.

Lease Recognition

12 unchanged sentences

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.

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.

23 unchanged sentences

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, which require management to make assumptions and to apply judgment to determine the fair value of its awards.

The Company determines the fair value of its Market Stock Unit Awards (“MSU”) and Market Stock Option Awards (“MSO”) using Monte Carlo Simulation Option pricing models and generally accepted valuation techniques, which 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.

23 unchanged sentences

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

At March 31, 2026 and September 30, 2025, the estimated liability for medical claims incurred but not reported was $ 103,000 and $ 153,000 , respectively.

At June 30, 2026 and September 30, 2025, the estimated liability for medical claims incurred but not reported was $ 103,000 and $ 153,000 , respectively.

The Company has recorded the deficit of funded premiums over estimated claims incurred but not reported of $ 103,000 as a current liability in the accompanying consolidated balance sheet.

4 unchanged sentences

Major Customers and Products

In the three months ended March 31, 2026, four customers accounted for 20 %, 16 %, 5 % and 4 % of net sales, respectively.

In the six months ended March 31, 2026, four customers accounted for 19 %, 10 %, 10 % and 7 % of net sales, respectively.

In the three months ended March 31, 2025, five customers accounted for 48 %, 9 %, 5 %, 5 % and 5 % of net sales, respectively.

In the six months ended March 31, 2025, five customers accounted for 44 %, 7 %, 6 %, 5 %, and 4 % of net sales, respectively.

In the three months ended June 30, 2026, four customers accounted for 21 %, 10 %, 8 % and 6 % of net sales, respectively.

In the nine months ended June 30, 2026, five customers accounted for 20 %, 9 %, 7 %, 6 % and 6 % of net sales, respectively.

In the three months ended June 30, 2025, two customers accounted for 52 % and 8 % of net sales, respectively.

In the nine months ended June 30, 2025, three customers accounted for 47 %, 7 % and 5 % of net sales, respectively.

Major Suppliers

1 unchanged sentence

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 months ended March 31, 2026, the Company had two suppliers that were individually responsible for greater than 10% of the Company’s total inventory-related purchases.

For the six months ended March 31, 2026, the Company had two suppliers that were individually responsible for greater than 10% of the Company’s total inventory-related purchases.

For the three and six months ended March 31, 2025, the Company had one supplier that was individually responsible for greater than 10% of the Company’s total inventory related purchases.

For the three months ended June 30, 2026, the Company had two suppliers that were individually responsible for greater than 10% of the Company’s total inventory-related purchases.

For the nine months ended June 30, 2026, the Company had three suppliers 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, 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.

Concentration of Credit Risk

17 unchanged sentences

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

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

The Company is currently evaluating the impacts of this guidance on the Company’s Consolidated Financial Statements but does not anticipate it having a major impact.

Recently Adopted Accounting Pronouncements

2 unchanged sentences

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.

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.

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.

10 unchanged sentences

Supplier deposits

Prepaid insurance

Prepaid insurance and services

Prepaid income tax

Deferred engineering

Other receivable

Unamortized debt issuance costs

1 unchanged sentence

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

As of March 31, 2026

As of June 30, 2026

Gross Carrying

18 unchanged sentences

(d) The licensing and certification rights are amortized over a defined number of units.

Intangible asset amortization expense is amortized as a component of selling, general and administrative expense and was $ 438,814 and $ 480,407 for the three months ended March 31, 2026 and 2025, respectively.

Intangible asset amortization expense was $ 1,068,565 and $ 1,110,158 for the six months ended March 31, 2026 and 2025, respectively.

Intangible asset amortization expense is amortized as a component of selling, general and administrative expense and was $ 911,678 and $ 552,757 for the three months ended June 30, 2026 and 2025, respectively.

Intangible asset amortization expense was $ 1,980,243 and $ 1,662,915 for the nine months ended June 30, 2026 and 2025, 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, backlog and trade name as of March 31, 2026 is as follows:

The expected future amortization expense related to the customer relationships, backlog and trade name as of June 30, 2026 is as follows:

Amortization Expense

2026 (six months remaining)

2026 (three months remaining)

Goodwill activity

4 unchanged sentences

Business Combination - Other

Balance at March 31, 2026

Balance at June 30, 2026

Property and equipment

9 unchanged sentences

( 13,927,910 )

Depreciation and amortization related to property and equipment was $ 420,927 and $ 272,390 for the three months ended March 31, 2026 and 2025, respectively.

Depreciation and amortization related to property and equipment was $ 816,551 and $ 894,483 for the six months ended March 31, 2026 and 2025, respectively.

Depreciation and amortization related to property and equipment was $ 441,491 and $ 267,653 for the three months ended June 30, 2026 and 2025, respectively.

Depreciation and amortization related to property and equipment was $ 1,258,042 and $ 1,162,136 for the nine months ended June 30, 2026 and 2025, respectively.

Other assets consist of the following:

2 unchanged sentences

Other non-current assets

Other non-current assets as of March 31, 2026 and September 30, 2025 consists primarily of deposits for medical claims required under the Company’s medical plan.

Other non-current assets as of June 30, 2026 and September 30, 2025 consists primarily of deposits for medical claims required under the Company’s medical plan.

Accrued expenses

6 unchanged sentences

Bonus accruals

Warranty cost and accrual information for the three and six months ended March 31, 2026 is highlighted below:

Warranty cost and accrual information for the three and nine months ended June 30, 2026 is highlighted below:

Three Months Ending

Six Months Ending

March 31, 2026

Nine Months Ending

June 30, 2026

Warranty accrual, beginning of period

89 unchanged sentences

Acquisition and related costs

For the three and six months ended March 31, 2026, the Company incurred acquisition costs of approximately $ 0.7 million which were expensed as incurred and included in selling, general and administrative expenses in the consolidated statements of operations.

For the three and nine months ended June 30, 2026, the Company incurred acquisition costs of approximately $ 0.3 million and $ 1.0 million, respectively, which were expensed as incurred and included in selling, general and administrative expenses in the consolidated statements of operations.

Unaudited actual and pro forma information

Since the acquisition date of the transactions, there were insignificant amounts of revenues and net income related to the acquired businesses in the consolidated statements of operations.

For the nine months ended June 30, 2026, there were $ 2.3 million of Net sales attributable to the acquired businesses in the consolidated statements of operations.

The following unaudited pro forma summary presents consolidated information of the Company, including the acquisitions, as if the transaction had occurred on October 1, 2024:

Six Months Ended March 31,

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.

8 unchanged sentences

The OBBB allows an elective deduction for domestic research and development, and a reinstatement of elective 100% first-year bonus depreciation, among other provisions.

The Company is currently evaluating the impact of these provisions and thus far the impact to the Company’s effective tax rate in fiscal year 2025 and forward has not been material.

The Company has evaluated the impact of these provisions on the Company’s effective tax rate in fiscal year 2025 and forward and has determined that it does not have a material impact.

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 March 31, 2026 was 22.6 % 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 six months ended March 31, 2026 was 27.3 % 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 March 31, 2025 was 19.2 % and differs from the statutory tax rate primarily due to the effect of state income taxes, tax credits and certain non-deductible expenses.

The effective tax rate for the six months ended March 31, 2025 was 19.3 % and differs from the statutory tax rate primarily due to the effect of state income taxes, tax credits and certain non-deductible expenses.

The effective tax rate for the three months ended June 30, 2026 was 10.5 % and differs from the statutory tax rate primarily due to the effect of temporary and permanent tax differences related to stock-based compensation and favorable return to provision adjustments.

The effective tax rate for the nine months ended June 30, 2026 was 21.8 % 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 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 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.

Shareholders’ Equity and Share-Based Payments

At March 31, 2026, 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 June 30, 2026, 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 $ 496,294 and $ 405,042 for the three months ended March 31, 2026 and 2025, respectively.

Total share-based compensation expense was approximately $ 1,412,218 and $ 801,703 for the six months ended March 31, 2026 and 2025, respectively.

Total share-based compensation expense was approximately $ 654,471 and $ 832,120 for the three months ended June 30, 2026 and 2025, respectively.

Total share-based compensation expense was approximately $ 2,066,689 and $ 1,633,823 for the nine months ended June 30, 2026 and 2025, 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.

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

Three Months Ended March 31,

Three Months Ended June 30,

Cost of sales

1 unchanged sentence

Selling, general and administrative

Six Months Ended March 31,

Nine Months Ended June 30,

Cost of sales

1 unchanged sentence

Selling, general and administrative

As of March 31, 2026, unrecognized compensation expense of approximately $ 3,821,832 , net of forfeitures, related to non-vested RSU’s, stock options and market based investment instruments under the 2019 Plan, will be recognized in future periods.

As of March 31, 2026, there were 262,264 unvested restricted stock units, 412,085 unvested non-qualified stock options and 145,753 unvested market based instruments outstanding under the 2019 Plan.

As of June 30, 2026, unrecognized compensation expense of approximately $ 3,837,810 , net of forfeitures, related to non-vested RSU’s, stock options, market based MSU’s and MSO’s under the 2019 Plan, will be recognized in future periods.

As of June 30, 2026, there were 217,448 unvested restricted stock units, 412,085 unvested non-qualified stock options and 139,171 unvested market based instruments outstanding under the 2019 Plan.

Amended and Restated 2019 Stock-Based Incentive Compensation Plan

5 unchanged sentences

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

As of March 31, 2026, there were 1,188,674 shares of common stock available for awards under the 2019 Plan.

As of June 30, 2026, there were 1,161,747 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.

18 unchanged sentences

During the fiscal year ended September 30, 2026, the Board approved grants of non-qualified stock options 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.

The compensation expense related to stock options, and restricted stock awards issued to employees under the 2019 Plan was $ 271,709 and $ 207,126 for the three months ended March 31, 2026 and 2025, respectively.

The compensation expense related to stock options, and restricted stock awards issued to employees under the 2019 Plan was $ 574,249 and $ 413,651 for the six months ended March 31, 2026 and 2025, respectively.

The compensation expense under the 2019 Plan related to restricted stock awards issued to non-employee members of the Board was $ 108,294 and $ 71,438 for the three months ended March 31, 2026 and 2025, respectively.

The compensation expense under the 2019 Plan related to restricted stock awards issued to non-employee members of the Board was $ 227,689 and $ 144,464 for the six months ended March 31, 2026 and 2025, respectively.

As of March 31, 2026, unrecognized compensation expense of approximately $ 2,261,940 , net of forfeitures, related to non-vested restricted stock under the 2019 Plan, will be recognized in future periods.

As of March 31, 2026, unrecognized compensation expense of approximately $ 850,853 , net of forfeitures, related to non-vested stock options under the 2019 Plan, will be recognized in future periods.

The compensation expense related to stock options, and restricted stock awards issued to employees under the 2019 Plan was $ 388,613 and $ 355,653 for the three months ended June 30, 2026 and 2025, respectively.

The compensation expense related to stock options, and restricted stock awards issued to employees under the 2019 Plan was $ 962,862 and $ 769,304 for the nine months ended June 30, 2026 and 2025, respectively.

The compensation expense under the 2019 Plan related to restricted stock awards issued to non-employee members of the Board was $ 146,006 and $ 137,577 for the three months ended June 30, 2026 and 2025, respectively.

The compensation expense under the 2019 Plan related to restricted stock awards issued to non-employee members of the Board was $ 373,695 and $ 282,041 for the nine months ended June 30, 2026 and 2025, respectively.

As of June 30, 2026, unrecognized compensation expense of approximately $ 2,470,138 , net of forfeitures, related to non-vested restricted stock under the 2019 Plan, will be recognized in future periods.

As of June 30, 2026, unrecognized compensation expense of approximately $ 778,485 , net of forfeitures, related to non-vested stock options under the 2019 Plan, will be recognized in future periods.

Market-Based Restricted Stock Units

15 unchanged sentences

Contractual Term

Utilizing Monte Carlo simulation, the MSUs grant date fair value was estimated to be $ 587,500 with a $ 8.80 grant date fair value per award and the derived vesting periods were estimated to be 1.5 years.

Utilizing Monte Carlo simulation, the MSUs grant date fair value was estimated to be $ 587,500 with an $ 8.80 grant date fair value per award and the derived vesting periods were estimated to be 1.5 years.

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.

23 unchanged sentences

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.

For the three months ended March 31, 2026 and 2025, the Company recognized $ 48,958 and $ 112,834 , respectively, of compensation expense related to MSU awards.

For the six months ended March 31, 2026 and 2025, the Company recognized $ 474,116 and $ 229,942 , respectively, of compensation expense related to MSU awards.

For the three months ended June 30, 2026 and 2025, the Company recognized $ 97,917 and $ 253,779 , respectively, of compensation expense related to MSU awards.

For the nine months ended June 30, 2026 and 2025, the Company recognized $ 572,033 and $ 483,722 , respectively, of compensation expense related to MSU awards.

As of June 30, 2026, unrecognized compensation expense of approximately $ 440,625 , net of forfeitures, related to non-vested MSU awards under the 2019 Plan, will be recognized in future periods.

Time Based Stock Options with market-based exercisability conditions

4 unchanged sentences

On June 16, 2025, the Company’s closing share price exceeded the $ 9.88 MSOs targeted market threshold condition for 20 consecutive trading days for the MSOs granted February 18, 2025, thus meeting the market condition for exercisability subject to the vesting schedule and terms and conditions set for in the 2019 Plan.

During the three and six months ended March 31, 2026, 26,330 MSOs vested and no MSOs were forfeited.

During the three months ended June 30, 2026, 6,582 MSOs vested and no MSOs were forfeited.

During the nine months ended June 30, 2026, 32,912 MSOs vested and no MSOs were forfeited.

No MSOs are eligible for vesting or exercise 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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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 year and 4 years with a 10 year contractual term.

For the three months ended March 31, 2026 and 2025, the Company recognized $ 67,334 and $ 13,646 , respectively, of compensation expense related to the MSO awards.

For the six months ended March 31, 2026 and 2025, the Company recognized $ 136,165 and $ 13,646 , respectively, of compensation expense related to the MSO awards.

As of March 31, 2026, unrecognized compensation expense of $ 170,499 associated with non-vested MSOs will be recognized in future periods under the 2019 Plan.

For the three months ended June 30, 2026 and 2025, the Company recognized $ 21,935 and $ 85,111 , respectively, of compensation expense related to the MSO awards.

For the nine months ended June 30, 2026 and 2025, the Company recognized $ 158,100 and $ 98,757 , respectively, of compensation expense related to the MSO awards.

As of June 30, 2026, unrecognized compensation expense of $ 148,562 associated with non-vested MSOs will be recognized in future periods under the 2019 Plan.

Earnings Per Share

Three Months Ended March 31,

Six Months Ended March 31,

Three Months Ended June 30,

Nine Months Ended June 30,

Basic weighted average shares

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

As of March 31, 2026 and 2025, 31,897 and 0 weighted average outstanding MSUs were included in the three months ended March 31, 2026 and 2025 weighted-average diluted shares calculation, respectively, using the if converted method.

As of March 31, 2026 and 2025, 125,188 and 0 weighted average outstanding MSUs were included in the six months ended March 31, 2026 and 2025 weighted-average diluted shares calculation, respectively, using the if converted method.

As of March 31, 2026 and 2025, there were 412,085 and 433,655 options to purchase common stock outstanding, respectively, and 66,762 and 201,000 MSUs subject to vesting outstanding, respectively.

As of March 31, 2026 and 2025, there were 262,264 and 194,914 shares of restricted stock units subject to vesting outstanding, respectively.

As of June 30, 2026 and 2025, 66,762 and 67,000 weighted average outstanding MSUs were included in the three months ended June 30, 2026 and 2025 weighted-average diluted shares calculation, respectively, using the if converted method.

As of June 30, 2026 and 2025, 32,886 and 44,421 weighted average outstanding MSUs were included in the nine months ended June 30, 2026 and 2025 weighted-average diluted shares calculation, respectively, using the if converted method.

As of June 30, 2026 and 2025, there were 412,085 and 361,613 options to purchase common stock outstanding, respectively, and 66,762 and 201,000 MSUs subject to vesting outstanding, respectively.

As of June 30, 2026 and 2025, there were 217,448 and 339,782 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 March 31, 2026 and 2025, respectively, 24,114 and 136,613 diluted weighted-average shares outstanding were excluded from the computation of diluted EPS because the effect would be anti-dilutive.

For the six months ended March 31, 2026 and 2025, respectively, 12,057 and 249,113 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 June 30, 2026 and 2025, respectively, 50,472 and 241,934 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, 2026 and 2025, respectively, 24,862 and 246,720 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 $ 33.6 million as of March 31, 2026.

Product Liability

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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.

This retainer was subsequently increased to $ 10,000 per month in October 2025.

For the three months ended March 31, 2026 and 2025, the Company paid PAL $ 30,000 and $ 28,500 , respectively.

For the six months ended March 31, 2026 and 2025, the Company paid PAL $ 60,000 and $ 57,000 , respectively.

The initial term of the agreement was for one year and in consideration for services the Company paid PAL a retainer of $ 9,500 per month.

In October 2025, the term of the agreement was extended for one year and this retainer was increased to $ 10,000 per month.

For the three months ended June 30, 2026 and 2025, the Company paid PAL $ 30,000 and $ 28,500 , respectively.

For the nine months ended June 30, 2026 and 2025, the Company paid PAL $ 90,000 and $ 85,500 , respectively.

Loan Agreement

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

For the three and six months ended March 31, 2026, the Initial Term Loan had an effective interest rate of 6.0 %, and 6.3 %, respectively.

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.

The effective interest rate for the Initial Term Loan was 5.9 % as of June 30, 2026.

Revolving Facility Loan

3 unchanged sentences

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.

There were no borrowings drawn on the Revolving Facility during the three and six months ending March 31, 2026.

There were no borrowings drawn on the Revolving Facility during the three and nine months ending June 30, 2026.

Delayed Draw Term Loan

1 unchanged sentence

In March 2026, the Company borrowed $ 32.0 million of the available Delayed Draw Term Loan facility to finance the Honeywell Autopilot Agreement and the Honeywell Generators Agreement acquisitions.

The effective interest rate for the Delayed Draw Term Loan was 7.7 % as of June 30, 2026.

Debt Issuance Costs

1 unchanged sentence

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 .

The unamortized balance of the Initial Term Loan contra-liabilities as of June 30, 2026 was $ 188,043 .

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-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 March 31, 2026 were $ 253,504 and $ 380,256 , respectively.

The unamortized balances of the Revolving Facility and the Delayed Draw Term Loan included in current and non-current other assets as of June 30, 2026 were $ 238,630 and $ 357,945 , respectively.

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

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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 March 31, 2026.

The Company was in compliance with all debt covenants as of June 30, 2026.

Commitment Fees

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

For the three months ended March 31, 2026, unused line of credit fees of $ 17,541 under the Revolving Facility and $ 24,985 under the Delayed Draw Term Loan were included in interest expense.

For the six months ended March 31, 2026, unused line of credit fees of $ 36,708 under the Revolving Facility and $ 53,735 under the Delayed Draw Term Loan were included in interest expense.

For the three months ended June 30, 2026, unused line of credit fees of $ 16,625 under the Revolving Facility and $ 7,204 under the Delayed Draw Term Loan were included in interest expense.

For the nine months ended June 30, 2026, unused line of credit fees of $ 53,333 under the Revolving Facility and $ 60,939 under the Delayed Draw Term Loan were included in interest expense.

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

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Total Long Term Debt (a)

(a) As of March 31, 2026, Total Long Term Debt comprised $ 23.1 million of Initial Term Loan and $ 32.0 million of Delayed Draw Term Loan, respectively

(b) As of March 31, 2026, Current Maturities of Debt comprised $ 2.5 million of Initial Term Loan and $ 3.2 million of Delayed Draw Term Loan, respectively.

As of March 31, 2026, scheduled annual payments based on the maturities of debt are expected to be as follows:

(a) As of June 30, 2026, Total Long Term Debt comprised $ 22.5 million of Initial Term Loan and $ 32.0 million of Delayed Draw Term Loan, respectively

(b) As of June 30, 2026, Current Maturities of Debt comprised $ 2.5 million of Initial Term Loan and $ 3.2 million of Delayed Draw Term Loan, respectively.

As of June 30, 2026, scheduled annual payments based on the maturities of debt are expected to be as follows:

Annual payments*

2026 (Six months remaining)

2026 (Three months remaining)

* Excludes interest payments payable at each debt reset date

Loan Facilities Availability

As of March 31, 2026, the Company had availability of $ 30,000,000 under the Revolving Facility and $ 13,000,000 under the Delayed Draw Term Loan facility.

As of June 30, 2026, the Company had availability of $ 30,000,000 under the Revolving Facility and $ 13,000,000 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 21, 2026, the Company, entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Sparton Corporation, a Delaware corporation (“Seller”), pursuant to which the Company acquired all of the issued and outstanding membership interests (the “Membership Interests”) of Sparton Aydin, LLC, a Delaware limited liability company doing business as Aydin Displays (“Aydin”).

Founded over 50 years ago, Aydin designs and builds ruggedized displays for demanding defense and commercial applications across ground, sea, and air environments.

Aydin serves the defense, homeland security, law enforcement, aviation and medical markets.

The aggregate purchase price for the Membership Interests was $ 24,500,000 (the “Purchase Price”), subject to customary adjustment based on the Company’s calculation of working capital, indebtedness and transaction expenses as set forth in the Purchase Agreement.

The acquisition was financed through borrowings of approximately $ 24.5 million under the Company’s existing credit facility with J.P.

Morgan Chase Bank, N.A.

The Purchase Agreement includes representations, warranties and covenants of the parties customary for a transaction of this nature.

The Seller has agreed to certain restrictive covenants, including a covenant not to compete with the Business (as defined in the Purchase Agreement) within the United States and Canada for a period of five years following the Closing.

The Purchase Agreement also contains customary indemnification provisions, subject to certain limitations as set forth in the Purchase Agreement.

In connection with the closing of the acquisition, the parties entered into certain ancillary agreements, including a Transition Services Agreement pursuant to which Seller will provide certain transitional services to the Company, and a Supply Agreement between Aydin and Seller.

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