INNOVATIVE SOLUTIONS & SUPPORT INC 10-K

Item 8. Financial Statements and Supplementary Data. The financial statements of the Company listed in the index appearing under Item 8 herein are filed as part of this Annual Report on Form 10-K. ​ 39 Table of Contents Innovative Solutions and Support, Inc. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ Page Report of Independent Registered Public Accounting Firm PCAOB ID Number 248 41 Consolidated Balance Sheets 43 Consolidated Statements of Operations 44 Consolidated Statements of Shareholders’ Equity 45 Consolidated Statements of Cash Flows 46 Notes to Consolidated Financial Statements 47-69 ​ ​ ​ 40 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders Innovative Solutions & Support, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Innovative Solutions & Support, Inc. (a Pennsylvania corporation) and subsidiaries (the “Company”) as of September 30, 2023 and 2022, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended September 30, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2023, in conformity with accounting principles generally accepted in the United States of America. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matters The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Fair Value of Acquired License Agreements and Customer Relationships As described further in Note 4 to the financial statements, on June 30, 2023, the Company entered into an Asset Purchase and License Agreement with Honeywell International, Inc., 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 acquisition was accounted for as a business combination. The Company accounts for acquisitions of entities or asset groups that qualify as businesses using the acquisition method of accounting. Accordingly, the purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date, which are measured in accordance with fair value measurement principles. The allocation of the total purchase consideration to the estimated fair values of the acquired license agreements and customer relationships were $5.7 million and $10.7 million, respectively. Management estimated the fair value of the acquired license agreements using the relief from royalty method, and estimated the fair value of the acquired customer relationships using the multi-period excess earnings method. The significant assumptions include: (i) 41 Table of Contents future expected cash flows from customer contracts and license agreements, (ii) historical and expected customer attrition rates, and (iii) discount rates. We identified the fair value of the acquired license agreements and customer relationships intangible assets as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of these assets. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our valuation specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions. Our audit procedures related to the fair value of the acquired license agreements and customer relationships intangible assets included the following, among others. • Evaluated the design and implementation of key controls relating to the fair valuations performed on the acquired license agreements and customer relationships intangible assets. These procedures included, among others, understanding management’s processes over the development of the fair value estimate and related key inputs and assumptions, and over the evaluation of the competency and objectivity of management's third-party valuation specialist. • Tested the mathematical accuracy of the valuation models utilized by the Company and the completeness, accuracy and relevance of underlying data used in the model. • Assessed the reasonableness of management’s estimated net cash flows by inquiring of management regarding its processes for developing projected financial information and comparing the projections to historical results achieved by Honeywell and evaluating available evidence from after the transaction. • Evaluated the reasonableness of management’s revenue attrition assumptions and tested the source information, including the number of existing customers through inspection of customer contracts. • Utilized valuation specialists to evaluate the reasonableness of the discount rates used in the valuation. • Conducted sensitivity analysis around the discount rate and revenue attrition assumptions utilized by management. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2014. Philadelphia, Pennsylvania January 12, 2024 ​ 42 Table of Contents INNOVATIVE SOLUTIONS AND SUPPORT, INC. ​ CONSOLIDATED BALANCE SHEETS ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, September 30, ​ ​ 2023 ​ 2022 ASSETS ​ ​ ​ ​ ​ ​ Current assets ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 3,097,193 ​ $ 17,250,546 Accounts receivable ​ 9,743,714 ​ 4,297,457 Contract assets ​ 487,139 ​ 162,742 Inventories ​ 6,139,713 ​ 5,349,104 Prepaid inventory ​ ​ 12,069,114 ​ ​ — Prepaid expenses and other current assets ​ 1,073,012 ​ 1,142,470 Assets held for sale ​ 2,063,818 ​ — ​ ​ ​ ​ ​ ​ ​ Total current assets ​ 34,673,703 ​ 28,202,319 ​ ​ ​ ​ ​ ​ ​ Goodwill ​ ​ 3,557,886 ​ ​ — Intangible assets, net ​ ​ 16,185,321 ​ ​ 60,348 Property and equipment, net ​ 7,892,427 ​ 6,292,189 Deferred income taxes ​ ​ 456,392 ​ ​ 46,487 Other assets ​ 191,722 ​ 103,980 ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 62,957,451 ​ $ 34,705,323 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND SHAREHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current liabilities ​ ​ ​ ​ ​ ​ Current portion of long-term debt ​ $ 2,000,000 ​ $ — Accounts payable ​ ​ 1,337,275 ​ ​ 708,845 Accrued expenses ​ 2,918,325 ​ 2,972,275 Contract liabilities ​ 143,359 ​ 259,183 ​ ​ ​ ​ ​ ​ ​ Total current liabilities ​ 6,398,959 ​ 3,940,303 ​ ​ ​ ​ ​ ​ ​ Long-term debt ​ 17,500,000 ​ — Other liabilities ​ ​ 421,508 ​ ​ 15,065 ​ ​ ​ ​ ​ ​ ​ Total liabilities ​ 24,320,467 ​ 3,955,368 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (See Note 16) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shareholders’ equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 September 30, 2023 and 2022 ​ — ​ — ​ ​ ​ ​ ​ ​ ​ Common stock, $ .001 par value: 75,000,000 shares authorized, 19,543,441 and 19,412,664 issued at September 30, 2023 and 2022, respectively ​ 19,543 ​ 19,413 ​ ​ ​ ​ ​ ​ ​ Additional paid-in capital ​ 54,317,265 ​ 52,458,121 Retained earnings (accumulated deficit) ​ 5,668,713 ​ ( 359,042 ) Treasury stock, at cost, 2,096,451 shares at September 30, 2023 and at September 30, 2022 ​ ( 21,368,537 ) ​ ( 21,368,537 ) ​ ​ ​ ​ ​ ​ ​ Total shareholders’ equity ​ 38,636,984 ​ 30,749,955 ​ ​ ​ ​ ​ ​ ​ Total liabilities and shareholders’ equity ​ $ 62,957,451 ​ $ 34,705,323 ​ The accompanying notes are an integral part of these statements. ​ 43 Table of Contents INNOVATIVE SOLUTIONS AND SUPPORT, INC. ​ CONSOLIDATED STATEMENTS OF OPERATIONS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Year Ended September 30, ​ 2023 2022 2021 Net Sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ Product ​ $ 22,589,657 ​ $ 22,400,159 ​ $ 18,725,789 Customer service ​ ​ 11,086,062 ​ 4,879,591 ​ 4,034,294 Engineering development contracts ​ 1,132,794 ​ 460,945 ​ 284,713 Total net sales ​ 34,808,513 ​ 27,740,695 ​ 23,044,796 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ Product ​ 9,715,517 ​ 9,402,900 ​ 8,695,568 Customer service ​ ​ 3,386,122 ​ 1,502,899 ​ 1,489,942 Engineering development contracts ​ 395,803 ​ 160,515 ​ 77,656 Total cost of sales ​ 13,497,442 ​ 11,066,314 ​ 10,263,166 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit ​ 21,311,071 ​ 16,674,381 ​ 12,781,630 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ 3,129,518 ​ 2,705,140 ​ 2,622,919 Selling, general and administrative ​ 10,822,505 ​ 6,753,915 ​ 6,257,732 Total operating expenses ​ 13,952,023 ​ 9,459,055 ​ 8,880,651 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ 7,359,048 ​ 7,215,326 ​ 3,900,979 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ ( 393,281 ) ​ — ​ — Interest income ​ 518,188 ​ 61,051 ​ 1,234 Other income ​ 151,317 ​ 65,232 ​ 74,906 Income before income taxes ​ 7,635,272 ​ 7,341,609 ​ 3,977,119 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income tax expense (benefit) ​ 1,607,517 ​ 1,817,831 ​ ( 1,087,783 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 6,027,755 ​ $ 5,523,778 ​ $ 5,064,902 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income per common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.35 ​ $ 0.32 ​ $ 0.29 Diluted ​ $ 0.35 ​ $ 0.32 ​ $ 0.29 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ 17,411,684 ​ 17,256,750 ​ 17,225,423 Diluted ​ 17,419,185 ​ 17,257,871 ​ 17,226,620 ​ The accompanying notes are an integral part of these statements. ​ ​ 44 Table of Contents INNOVATIVE SOLUTIONS AND SUPPORT, INC. ​ CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Deficit) ​ ​ ​ ​ ​ ​ ​ ​ Common ​ Paid-In ​ Retained ​ Treasury ​ ​ ​ ​ ​ Stock ​ Capital ​ Earnings ​ Stock ​ Total Balance, September 30, 2020 ​ $ 19,311 ​ $ 51,458,787 ​ $ ( 2,340,530 ) ​ $ ( 21,368,537 ) ​ $ 27,769,031 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share-based compensation ​ ​ — ​ ​ 181,350 ​ ​ — ​ ​ — ​ ​ 181,350 Exercise of stock options ​ ​ 5 ​ ​ 17,005 ​ ​ — ​ ​ — ​ ​ 17,010 Issuance of stock to directors ​ 27 ​ 159,953 ​ — ​ — ​ 159,980 Dividends declared ​ ​ — ​ ​ — ​ ​ ( 8,607,192 ) ​ ​ — ​ ​ ( 8,607,192 ) Net income ​ — ​ — ​ 5,064,902 ​ — ​ 5,064,902 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, September 30, 2021 ​ $ 19,343 ​ $ 51,817,095 ​ $ ( 5,882,820 ) ​ $ ( 21,368,537 ) ​ $ 24,585,081 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share-based compensation ​ ​ — ​ ​ 166,617 ​ ​ — ​ ​ — ​ ​ 166,617 Exercise of stock options ​ ​ 43 ​ ​ 301,111 ​ ​ — ​ ​ — ​ ​ 301,154 Issuance of stock to directors ​ ​ 27 ​ ​ 173,298 ​ ​ — ​ ​ — ​ ​ 173,325 Net income ​ ​ — ​ ​ — ​ ​ 5,523,778 ​ ​ — ​ ​ 5,523,778 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, September 30, 2022 ​ $ 19,413 ​ $ 52,458,121 ​ $ ( 359,042 ) ​ $ ( 21,368,537 ) ​ $ 30,749,955 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share-based compensation ​ ​ 39 ​ ​ 1,123,902 ​ ​ — ​ ​ — ​ ​ 1,123,941 Exercise of stock options ​ ​ 58 ​ ​ 408,789 ​ ​ — ​ ​ — ​ ​ 408,847 Issuance of stock to directors ​ ​ 33 ​ ​ 326,453 ​ ​ — ​ ​ — ​ ​ 326,486 Net income ​ ​ — ​ ​ — ​ ​ 6,027,755 ​ ​ — ​ ​ 6,027,755 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, September 30, 2023 ​ $ 19,543 ​ $ 54,317,265 ​ $ 5,668,713 ​ $ ( 21,368,537 ) ​ $ 38,636,984 ​ The accompanying notes are an integral part of these statements. ​ 45 Table of Contents INNOVATIVE SOLUTIONS AND SUPPORT, INC. ​ CONSOLIDATED STATEMENTS OF CASH FLOWS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Year Ended September 30, ​ 2023 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 6,027,755 ​ $ 5,523,778 ​ $ 5,064,902 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 697,943 ​ 368,499 ​ 432,176 Share-based compensation expense ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock options ​ 756,198 ​ 166,617 ​ 181,350 Stock awards ​ 694,230 ​ 173,325 ​ 159,980 Impairment of long-lived assets ​ ​ 44,400 ​ ​ — ​ ​ — Gain on disposal of property and equipment ​ — ​ ( 1,191,743 ) ​ — Excess and obsolete inventory cost (recovery) ​ 44,308 ​ — ​ ( 100,446 ) Deferred income taxes ​ 9,503 ​ 1,017,335 ​ ( 1,193,511 ) (Increase) decrease in: ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts receivable ​ ( 5,446,257 ) ​ ( 251,120 ) ​ 322,774 Contract assets ​ ( 324,397 ) ​ ( 162,742 ) ​ — Inventories ​ ( 834,917 ) ​ ( 708,859 ) ​ ( 153,611 ) Prepaid expenses and other current assets ​ 69,458 ​ ( 309,394 ) ​ ( 157,967 ) Other non-current assets ​ ( 101,356 ) ​ — ​ — Increase (decrease) in: ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts payable ​ 628,430 ​ 85,224 ​ ( 167,272 ) Accrued expenses ​ 203,754 ​ 1,272,826 ​ ( 4,655 ) Income taxes ​ ( 257,055 ) ​ 269,015 ​ 104,640 Contract liabilities ​ ( 115,823 ) ​ ( 158,321 ) ​ 104,139 Net cash provided by operating activities ​ 2,096,174 ​ 6,094,440 ​ 4,592,499 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​ ​ ​ ​ ​ ​ ​ Purchases of property and equipment ​ ( 298,373 ) ​ ( 161,230 ) ​ ( 340,678 ) Proceeds from the sale of property and equipment ​ — ​ 2,750,576 ​ — Acquisition of a business ​ ​ ( 35,860,000 ) ​ ​ — ​ ​ — Net cash (used in) provided by investing activities ​ ( 36,158,373 ) ​ 2,589,346 ​ ( 340,678 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ ​ ​ ​ ​ ​ ​ Proceeds from exercise of stock options ​ 408,846 ​ 301,154 ​ 17,010 Debt payments ​ ​ ( 500,000 ) ​ ​ — ​ ​ — Debt proceeds ​ ​ 20,000,000 ​ ​ — ​ ​ — Dividend paid ​ ​ — ​ ​ — ​ ​ ( 19,788,092 ) Net cash provided by (used in) financing activities ​ 19,908,846 ​ 301,154 ​ ( 19,771,082 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (decrease) increase in cash and cash equivalents and restricted cash ​ ( 14,153,353 ) ​ 8,984,940 ​ ( 15,519,261 ) Cash and cash equivalents and restricted cash, beginning of year ​ 17,250,546 ​ 8,265,606 ​ 23,784,867 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents and restricted cash, end of year ​ $ 3,097,193 ​ $ 17,250,546 ​ $ 8,265,606 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash paid for income taxes ​ $ 1,855,069 ​ $ 531,481 ​ $ 1,089 ​ The accompanying notes are an integral part of these statements. ​ ​ ​ ​ ​ 46 Table of Contents INNOVATIVE SOLUTIONS AND SUPPORT, INC. ​ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ 1. Background ​ Innovative Solutions and Support, Inc. (the “Company,” “IS&S,” “we” or “us”) was incorporated in Pennsylvania on February 12, 1988. The Company operates in one business segment as a systems integrator that designs, develops, manufactures, sells and services air data equipment, engine display systems, standby equipment, primary flight guidance and cockpit display systems for retrofit applications and original equipment manufacturers (“OEMs”). The Company supplies integrated Flight Management Systems (“FMS”), Flat Panel Display Systems (“FPDS”), FPDS with Autothrottle, air data equipment, Integrated Standby Units (“ISU”), ISU with Autothrottle and advanced GPS receivers that enable reduced carbon footprint navigation, communications, navigation and inertial reference products. ​ The Company has continued to position itself as a system integrator, which provides the Company with the capability and potential to generate more substantive orders over a broader product base. This strategy, as both a manufacturer and integrator, is designed to leverage the latest technologies developed for the computer and telecommunications industries into advanced and cost-effective solutions for the general aviation, commercial air transport, DoD/governmental and foreign military markets. This approach, combined with the Company’s industry experience, is designed to enable IS&S to develop high-quality products and systems, to reduce product time to market and to achieve cost advantages over products offered by its competitors. Customers include various OEMs, commercial air transport carriers and corporate/general aviation companies, DoD and its commercial contractors, aircraft operators, aircraft modification centers, government agencies and foreign militaries. ​ On June 30, 2023 (the “Acquisition Date”), the Company entered into an Asset Purchase and License Agreement (the “Honeywell Agreement”) with Honeywell International, Inc. (“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 (the “Product Lines”) to the Company (the “Transaction”). The Transaction involved 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. See Note 4, “Acquisition” for more details. ​ 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 will be 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. The Company filed a prospectus supplement, dated September 22, 2023, with the SEC in connection with the offer and sale of the shares. Subject to the terms and conditions of the ATM Sales Agreement, the Sales Agent will 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. The Company has provided the Sales Agent with customary indemnification rights, and the Sales Agent will be entitled to compensation for its services of up to 3.0 % of the gross sales price per share of the shares of the Company’s common stock sold through the Sales Agent. 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 fiscal 2023, we did not sell any shares of common stock under the ATM Sales Agreement. ​ 2. Concentrations ​ Major Customers and Products ​ In fiscal 2023, 2022 and 2021, the Company derived 54 %, 58 % and 59 %, respectively, of total sales from five customers, although not all the same customers in each year. Accounts receivable and contract assets related to those top five customers was $ 3.5 million, $ 3.3 million and $ 2.1 million as of September 30, 2023, 2022 and 2021, respectively. 47 Table of Contents ​ In fiscal year 2023, the three largest customers, Pilatus, ATSG and Textron accounted for 23 %, 12 % and 10 % of total revenue, respectively. In fiscal year 2022, the three largest customers, Pilatus, ATSG and Textron accounted for 22 %, 11 % and 11 % of total revenue, respectively. In fiscal year 2021, the two largest customers, Pilatus and Textron accounted for 20 % and 17 % of total revenue, respectively. ​ Flat panel product sales were 99 %, 98 % and 88 % of total product sales in the years ended September 30, 2023, 2022 and 2021, respectively. Product sales of air data systems and components were 1 %, 2 % and 12 % of total product sales for the years ended September 30, 2023, 2022 and 2021, respectively. Product sales to government contractors and agencies accounted for approximately 9 %, 14 % and 18 % of total product sales during fiscal years 2023, 2022 and 2021, respectively. The government agency or general contractor typically retains the right to terminate the contract at any time at its convenience. Upon alteration or termination of these contracts, IS&S is typically entitled to an equitable adjustment to the contract price so that it would be compensated for delivered items and allowable costs incurred. Accordingly, because these contracts can be terminated, the Company cannot be assured that its backlog will result in sales. ​ Major Suppliers ​ The Company buys several of its components from sole source suppliers. Although there are a limited number of suppliers of particular components, management believes other suppliers could provide similar components on comparable terms. ​ During fiscal 2023, the Company had four suppliers that accounted for 49.0 % of the Company’s total inventory related purchases. During fiscal 2022, the Company had three suppliers that accounted for 33.7 % of the Company’s total inventory related purchases. During fiscal 2021, the Company had one supplier that accounted for 14.9 % of the Company’s total inventory related purchases. ​ Concentration of Credit Risk ​ Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash balances and accounts receivable. The Company invests its excess cash where preservation of principal is the major consideration. 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. The Company’s customer base consists principally of companies within the aviation industry. The Company requests advance payments and/or letters of credit from customers that it considers to be significant credit risks. ​ 3. Summary of Significant Accounting Policies ​ Principles of Consolidation ​ The Company’s condensed consolidated financial statements include the accounts of its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. ​ Reclassification ​ The Company presented intangible assets, net, separately in the consolidated balance sheet as of September 30, 2023. In order to conform to the presentation of the consolidated balance sheet as of September 30, 2023, the Company reclassified $ 60,348 from other assets to intangible assets, net, in the consolidated balance sheet as of September 30, 2022. This reclassification has no impact on the Company’s net income for the years ended September 30, 2023 and 2022. ​ Use of Estimates ​ 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, engineering and material costs on EDC programs, percentage of completion on EDC contracts, 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 consolidated statements of operations in the period they are determined. 48 Table of Contents ​ Acquisitions ​ 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 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. If this is not the case, the Company then further evaluates whether the acquired set includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. If so, the Company concludes that the acquired set is a business. ​ The Company accounts for business acquisitions using the acquisition method of accounting. Under this method of accounting, assets acquired and liabilities assumed are recorded at their respective fair values at the date of the acquisition. 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 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 consolidated statements of operations. ​ Intangible Assets ​ The Company’s identifiable intangible assets primarily consist of license agreements and customer relationships. 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 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. If the carrying amount exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. If the fair value exceeds its carrying amount, the indefinite-lived intangible asset is not considered impaired. ​ Goodwill ​ 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. Goodwill is assigned to the reporting units that are expected to benefit from the synergies of the business combination that generated the goodwill. The Company’s goodwill impairment test is performed at the reporting unit level. 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 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: 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. ​ 49 Table of Contents 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. In the quantitative evaluation, the fair value of the reporting unit is determined and compared to the carrying value. 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 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 September 30, 2023 and 2022 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. ​ Inventory Valuation ​ 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 consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, September 30, ​ ​ 2023 ​ 2022 Raw materials ​ $ 5,162,177 ​ $ 4,451,045 Work-in-process ​ 966,888 ​ 795,723 Finished goods ​ 10,648 ​ 102,336 ​ ​ $ 6,139,713 ​ $ 5,349,104 ​ Assets Held for Sale ​ Asset to be disposed of by sale (“disposal groups”) are reclassified into “assets held for sale” if their carrying amounts are principally expected to be recovered through a sale transaction rather than through continuing use. The reclassification occurs when the disposal group is available for immediate sale and the sale is probable. These criteria are generally met when an agreement to sell exists, or management has committed to a plan to sell the assets within one year. Disposal groups are measured at the lower of carrying amount or fair value less costs to sell and are not depreciated or amortized. When the net realizable value of a disposal group increases during a period, a gain can be recognized to the extent that it does not increase the value of the disposal group beyond its original carrying value when the disposal group was reclassified as held for sale. The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less costs to sell is reported as an adjustment to the carrying value of the disposal group. ​ Property and Equipment ​ Property and equipment are stated at cost. Depreciation is provided using an accelerated method over the estimated useful lives of the assets (the lesser of three to seven years or over the lease term), except for the manufacturing facility and the corporate airplanes, which are depreciated using the straight-line method over their estimated useful lives of thirty-nine years and ten years , respectively. 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. ​ 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. ​ 50 Table of Contents 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. ​ Revenue from Contracts with Customers The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is that an entity recognizes revenue when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services. To achieve this core principle, the Company applies the following five steps: ​ 1) Identify the contract with a customer ​ 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. 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. 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. ​ 2) Identify the performance obligations in the contract ​ Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. Most of our revenue is derived from purchases under which we provide a specific product or service and, as a result, there is only one performance obligation. In the event that a contract includes multiple promised goods or services, such as an EDC contract which includes both engineering services and a resulting product shipment, the Company must apply judgment to determine whether promised goods or services are capable of being distinct in the context of the contract. In these cases, the Company considers whether the customer could, on its own, or together with other resources that are readily available from third parties, produce the physical product using only the output resulting from the Company’s completion of engineering services. If the customer cannot produce the physical product, then the promised goods or services are accounted for as a combined performance obligation. ​ 3) Determine the transaction price ​ 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. 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) Allocate the transaction price to performance obligations in the contract ​ If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. 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. ​ 51 Table of Contents 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. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or service to a customer. 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. ​ Contract Estimates ​ Accounting for performance obligations in long-term contracts that are satisfied over time involves the use of various techniques to estimate progress towards satisfaction of the performance obligation. The Company typically measures progress based on costs incurred compared to estimated total contract costs. 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. ​ 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. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the quarter it is identified. ​ The impact of adjustments in contract estimates on our operating earnings can be reflected in either operating costs and expenses or revenue. The aggregate impact of adjustments in contract estimates did not change our revenue and operating earnings (and diluted earnings per share) for the fiscal years ended September 30, 2023 and 2022. Therefore, no adjustment on any contract was material to our consolidated financial statements for the fiscal years ended September 30, 2023 and 2022. ​ Contract Balances ​ Contract assets consist of the right to consideration in exchange for product offerings that we have transferred to a customer under the contract. Contract liabilities primarily relate to consideration received in advance of performance under the contract. The following table reflects the Company’s contract assets and liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contract ​ Contract ​ ​ Assets ​ Liabilities September 30, 2022 ​ $ 162,742 ​ $ 259,183 Amount transferred to receivables from contract assets ​ — ​ ​ — Contract asset additions ​ 324,397 ​ ​ — Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period ​ — ​ ​ ( 240,944 ) Increases due to invoicing prior to satisfaction of performance obligations ​ — ​ ​ 125,120 September 30, 2023 ​ $ 487,139 ​ $ 143,359 ​ 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 ​ 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 52 Table of Contents 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. For the year ended September 30, 2021, the valuation allowance was released against all federal and state deferred tax assets with the exception of certain state net operating losses due to positive evidence that the assets are more likely than not to be realized in future years. The Company will continue to assess all available evidence during future periods to evaluate any changes to the realization of its deferred tax assets. 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. ​ 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. ​ In March 2020, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law to provide emergency assistance to affected individuals, families and businesses. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of NOLs. The CARES Act amends the NOL provisions of the Tax Cuts and Jobs Act of 2017, thereby allowing for the carryback of losses arising in tax years beginning before December 31, 2017 to each of the two taxable years preceding the taxable year of loss. Approximately $ 1,500,000 of pre-tax NOL was carried back two years to fully offset taxable income. This carryback freed up previously utilized R&D credits which resulted in an estimated increase in the R&D credit carryforward of $ 196,000 . The carryback created approximately $ 16,000 of AMT tax, which was refunded. The cash impact of this carryback was $ 309,412 . A receivable was setup for this amount as of March 31, 2020, and the cash has since been received. ​ In December 2020, the Consolidations Appropriations Act of 2020 (“CAA”) was enacted as a supplement to the CARES Act legislation and provided additional financial relief to taxpayers adversely impacted by restrictions put into place in response to the COVID-19 pandemic. In addition, the CAA provides funding for public health initiatives in response to the pandemic. This legislation did not have a material impact on the Company’s tax position. ​ In March, 2021, American Rescue Plan Act of 2021 (the “ARPA”), which includes certain business tax provisions, was signed into law. This legislation did not have a material impact on the Company’s tax position. ​ 53 Table of Contents In August 2022, the U.S. government enacted the Inflation Reduction Act (the “IRA”). The IRA makes the following changes to the U.S tax code: imposes a corporate alternative minimum tax of 15% on corporations with an average annual Adjusted Financial Statement Income over a three year period in excess of $1 billion, increases the amount of R&D credit that qualified businesses can apply against payroll taxes to $500,000 and imposes an excise tax equal to one percent of the fair market value of stock of a publicly traded U.S. corporation that is repurchased by the company. These changes predominately apply to tax years beginning after December 31, 2022. It does not appear that this legislation will have a material impact on the Company’s tax position. ​ Engineering Development ​ Total engineering development expense comprises both internally funded R&D, which is expensed in research and development, 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-EDC based on the method of contract accounting (either percentage-of-completion or completed contract) applicable to such contracts. ​ Fair Value of Financial Instruments ​ The net carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate their fair value because of the short-term nature of these instruments. The carrying value of our debt approximates fair value as the interest rate is variable and approximates current market levels. For financial assets and liabilities measured at fair value on a recurring basis, fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value as follows: ​ Level 1 — Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date. ​ Level 2 — Other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including: ​ ● Quoted prices for similar assets or liabilities in active markets; ● Quoted prices for identical or similar assets in non-active markets; ● Inputs other than quoted prices that are observable for the asset or liability; and ● Inputs that are derived principally from or corroborated by other observable market data. ​ Level 3 — Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. 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 September 30, 2023 and 2022, according to the valuation techniques the Company used to determine their fair values. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurement on September 30, 2023 ​ Quoted Price in Significant Other Significant ​ ​ Active Markets for ​ Observable ​ Unobservable ​ ​ Identical Assets ​ Inputs ​ Inputs ​ ​ (Level 1) ​ (Level 2) ​ (Level 3) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents: ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market funds ​ $ 3,665,128 ​ $ — ​ $ — 54 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurement on September 30, 2022 ​ Quoted Price in Significant Other Significant ​ ​ Active Markets for ​ Observable ​ Unobservable ​ ​ Identical Assets ​ Inputs ​ Inputs ​ ​ (Level 1) ​ (Level 2) ​ (Level 3) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents: ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market funds ​ $ 16,083,571 ​ $ — ​ $ — The fiscal 2023 money market funds balance differs from the cash and cash equivalents balance on the consolidated balance sheet due to the timing of sweep transactions within the PNC cash investment accounts. ​ 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. The Company determined the fair value of its stock option awards at the date of grant using the Black-Scholes option pricing model. 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. ​ 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, 2023 and 2022. However, the actual value of such claims could be significantly affected if future occurrences and claims differ from these assumptions. At September 30, 2023 and 2022, the estimated liability for medical claims incurred but not reported was $ 62,300 and $ 51,600 , respectively. The Company has recorded the excess of funded premiums over estimated claims incurred but not reported of $ 382,000 as a current asset in the accompanying consolidated balance sheet. During the year ended September 30, 2023, the Company has used the excess of funded premiums to reduce amounts payable for claims incurred. ​ 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. 55 Table of Contents ​ New Accounting Pronouncements ​ In June 2016, FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instrument (“ASU 2016-13”). ASU 2016-13 replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for SEC small business filers for fiscal years beginning after December 15, 2022. The adoption of this standard is not expected to have a material impact on our condensed consolidated financial statements or related disclosures. ​ As new accounting pronouncements are issued, we will adopt those that are applicable. ​ ​ 4. Acquisition ​ On June 30, 2023, the Company entered into the Honeywell 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”). 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 Transaction allows the Company to diversify its product offerings in the aerospace industry. 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 Note 20, “Loan Agreement” for further details. The purchase consideration transferred at the Acquisition Date was $ 35.9 million, which was entirely 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 fact that while legal control has occurred, the Company has not received physical possession of the prepaid inventory, equipment and construction in progress, and thus these assets will be subject to settlement adjustments upon transfer as outlined in the Honeywell Agreement. The transfer of the prepaid inventory, equipment and construction in progress is expected to occur within the measurement period. As a result, the purchase price amount for the Transaction and the allocation of the preliminary purchase consideration for prepaid inventory, equipment, construction in progress and goodwill are preliminary estimates, which may be subject to change within the measurement period. ​ 56 Table of Contents ​ ​ The allocation of the preliminary purchase consideration as of the Acquisition Date is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amounts Recognized as of ​ ​ ​ ​ ​ Acquisition Date Measurement Purchase Price ​ ​ (as previously reported) ​ Period Adjustments ​ Allocation Cash consideration ​ $ 35,860,000 ​ $ — ​ $ 35,860,000 Total consideration ​ $ 35,860,000 ​ $ — ​ $ 35,860,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ — Prepaid inventory (a) ​ $ 10,036,160 ​ $ 2,032,954 (1) $ 12,069,114 Equipment ​ ​ 2,609,000 ​ ​ ( 54,000 ) (1) ​ 2,555,000 Construction in progress ​ ​ 1,238,000 ​ ​ — ​ ​ 1,238,000 Intangible assets (b) ​ ​ 20,900,000 ​ ​ ( 4,460,000 ) (1) ​ 16,440,000 Goodwill (c) ​ ​ 4,608,041 ​ ​ ( 1,050,155 ) (1)(2) ​ 3,557,886 Assets acquired ​ ​ 39,391,201 ​ ​ ( 3,531,201 ) ​ ​ 35,860,000 Accrued expenses ​ ​ ( 3,531,201 ) ​ ​ 3,531,201 (2) ​ — Liabilities assumed ​ ​ ( 3,531,201 ) ​ ​ 3,531,201 ​ ​ — Net assets acquired ​ $ 35,860,000 ​ $ — ​ $ 35,860,000 ​ (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 step-up in the value of the finished goods. ​ (b) Intangible assets consist of license agreements 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 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 Transaction. Goodwill resulting from the Transaction has been assigned to the Company’s one reporting unit. The goodwill is not expected to be deductible for income tax purposes. Further, the Company determined that the goodwill was not impaired as of September 30, 2023 and as such, no impairment charges have been recorded for the year ended September 30, 2023. ​ (1) During the fiscal fourth quarter of 2023, the Company identified measurement period adjustments related to fair value estimates. The measurement period adjustments resulted from 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. The adjustments resulted in an overall increase to goodwill of $ 2.5 million. Additionally, the change to the fair value estimates did not have a material impact to the consolidated statements of operations for the year ended September 30, 2023. ​ (2) During the fourth quarter of fiscal year 2023, the Company identified measurement period adjustments related to the preliminary fair value estimates for accrued expenses. While the Honeywell 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 as relates 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 consolidated statements of operations for the year ended September 30, 2023. ​ 57 Table of Contents Transition services agreement ​ Concurrent with the Transaction, the Company entered into a transition services agreement (the “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 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 TSA was determined using the with and without method. ​ Acquisition and related costs ​ For the year ended September 30, 2023, the Company incurred acquisition costs of $ 408,961 , which were expensed as incurred and included in selling, general and administrative expenses in the consolidated statements of operations; the debt issuance costs related to the Term Loan were not material. ​ Unaudited actual and pro forma information ​ For the year ended September 30, 2023, the Company recognized $ 5.8 million of revenues and $ 3.0 million of net income related to the Product Lines in the consolidated statements of operations. ​ 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, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, ​ 2023 2022 Net sales ​ $ 43,757,196 ​ $ 49,218,764 Net income ​ $ 8,542,330 ​ $ 9,716,082 ​ 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. ​ 5. Intangible assets ​ The Company’s intangible assets other than goodwill are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of September 30, 2023 ​ ​ Gross Carrying ​ Accumulated ​ Accumulated ​ Net Carrying ​ ​ Value Impairment Amortization Value License agreement acquired from the Transaction (a) ​ $ 5,700,000 ​ $ — ​ $ — ​ $ 5,700,000 Customer relationships acquired from the Transaction (a) ​ ​ 10,740,000 ​ ​ — ​ ​ ( 268,500 ) ​ ​ 10,471,500 Licensing and certification rights (b) ​ ​ 696,506 ​ ​ ( 44,400 ) ​ ​ ( 638,285 ) ​ ​ 13,821 Total ​ $ 17,136,506 ​ $ ( 44,400 ) ​ $ ( 906,785 ) ​ $ 16,185,321 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of September 30, 2022 ​ ​ Gross Carrying ​ Accumulated ​ Accumulated ​ Net Carrying ​ Value Impairment Amortization Value Licensing and certification rights (b) ​ $ 696,506 ​ $ — ​ $ ( 636,158 ) ​ $ 60,348 Total ​ $ 696,506 ​ $ — ​ $ ( 636,158 ) ​ $ 60,348 ​ (a) As part of the Transaction, the Company acquired intangible assets related to the license agreement for the license rights to use certain Honeywell intellectual property and customer relationships. The license agreement has an indefinite life and is not subject to amortization; the customer relationships have an estimated weighted average life of ten years . The Company determined that the intangible assets were not impaired as of September 30, 2023 and, as such, no impairment charges have been recorded for the year ended September 30, 2023. 58 Table of Contents ​ (b) The licensing and certification rights are amortized over a defined number of units. An impairment charge of $ 44,400 was recorded during the year ended September 30, 2023. No impairment charges were recorded during the years ended September 30, 2022 or 2021. ​ Intangible asset amortization expense was $ 270,627 , $ 2,126 and $ 50,377 for the years ended September 30, 2023, 2022 and 2021, 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 as of September 30, 2023 is as follows: ​ ​ ​ ​ ​ 2024 $ 1,074,000 2025 ​ ​ 1,074,000 2026 ​ ​ 1,074,000 2027 ​ ​ 1,074,000 2028 ​ ​ 1,074,000 Thereafter ​ ​ 5,101,500 Total ​ $ 10,471,500 ​ ​ 6. Net Income Per Share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Year Ended September 30, ​ 2023 2022 2021 Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 6,027,755 ​ $ 5,523,778 ​ $ 5,064,902 Denominator: ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic weighted average shares ​ 17,411,684 ​ 17,256,750 ​ 17,225,423 Dilutive effect of share-based awards ​ 7,501 ​ 1,121 ​ 1,197 Diluted weighted average shares ​ 17,419,185 ​ 17,257,871 ​ 17,226,620 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income per common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.35 ​ $ 0.32 ​ $ 0.29 Diluted ​ $ 0.35 ​ $ 0.32 ​ $ 0.29 ​ Net income per share is calculated pursuant to ASC Topic 260, “ Earnings per Share” (“ASC Topic 260”). Basic earnings per share (“EPS”) excludes potentially dilutive securities and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS is computed assuming the conversion or exercise of all dilutive securities such as employee stock options and restricted stock units (“RSUs”). ​ The number of incremental shares from the assumed exercise of stock options and RSUs is calculated by using the treasury stock method. As of September 30, 2023, 2022 and 2021, there were 224,000 , 57,584 and 100,000 options to purchase common stock outstanding, respectively. As of September 30, 2023, 2022 and 2021, there were 101,968 , 7,886 and 0 shares subject to vesting of restricted stock units outstanding, respectively. The average outstanding diluted shares calculation excludes options with an exercise price that exceeds the average market price of shares during the period. For fiscal year 2023 and 2022, 203,000 options and 0 options to purchase common stock were excluded from the computation of diluted earnings per share because the effect would be anti-dilutive. For fiscal year 2021, 100,000 shares were excluded from the calculation of earnings per share as their effect would be anti-dilutive. ​ 59 Table of Contents 7. Prepaid Expenses and Other Current Assets ​ Prepaid expenses and other current assets consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, September 30, ​ ​ 2023 ​ 2022 Prepaid insurance ​ $ 623,186 ​ $ 777,311 Other ​ 449,826 ​ 365,159 ​ ​ $ 1,073,012 ​ $ 1,142,470 ​ ​ 8. Assets Held for Sale ​ The asset classified as held for sale, net consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ September 30, ​ 2023 2022 Corporate airplane ​ ​ 2,406,468 ​ ​ — Less: accumulated depreciation and amortization ​ ​ ( 342,650 ) ​ ​ — ​ ​ $ 2,063,818 ​ $ — ​ As of September 30, 2023, the Company classified $ 2.1 million of net property and equipment as “assets held for sale” on the consolidated balance sheet. During the quarter ended September 30, 2023, management of the Company implemented a plan to sell a Company-owned aircraft and commenced efforts to locate a buyer for the aircraft. On November 20, 2023 the Company-owned aircraft was sold for $ 2.3 million, see Note 21, “Subsequent Events” for further details. ​ 9. Property and Equipment ​ Property and equipment, net consists of the following balances: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, September 30, ​ ​ 2023 ​ 2022 Computer equipment ​ $ 2,343,996 ​ $ 2,307,139 Corporate airplane ​ — ​ 2,406,468 Furniture and office equipment ​ 970,230 ​ 976,993 Manufacturing facility ​ 5,926,584 ​ 5,889,491 Equipment ​ 9,554,197 ​ 5,624,966 Land ​ 1,021,245 ​ 1,021,245 ​ ​ 19,816,252 ​ 18,226,302 Less accumulated depreciation and amortization ​ ( 11,923,825 ) ​ ( 11,934,113 ) ​ ​ $ 7,892,427 ​ $ 6,292,189 ​ Depreciation related to property and equipment was $ 427,317 , $ 358,837 and $ 373,068 in fiscal years 2023, 2022 and 2021, respectively. The Pilatus PC-12 airplane, one of the Company’s two corporate airplanes, was sold during the quarter ended September 30, 2022 and the Company recognized a gain on sale of the aircraft of approximately $ 1,192,000 . The corporate airplanes are utilized primarily in support of product development. Non-cash investing activities involving property, plant and equipment comprise the abandonment of fully depreciated assets with an original cost and accumulated amortization of $ 94,954 , $ 34,656 and $ 416,626 in fiscal years 2023, 2022 and 2021, respectively. ​ 60 Table of Contents 10. Other Assets ​ Other assets consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, September 30, ​ ​ 2023 ​ 2022 Operating lease right-of-use assets ​ $ 15,065 ​ $ 28,680 Other non-current assets ​ 176,657 ​ 75,300 ​ ​ $ 191,722 ​ $ 103,980 ​ Other non-current assets as of September 30, 2023 and September 30, 2022 include the security deposit for an airplane hangar, and a deposit for medical claims required under the Company’s medical plan. In addition, other non-current assets include $ 0 and $ 0 of prepaid software licenses, that will be earned upon the shipment of a certain product to a customer, as of September 30, 2023, and September 30, 2022, respectively. ​ 11. Accrued Expenses ​ Accrued expenses consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, September 30, ​ ​ 2023 ​ 2022 Warranty ​ $ 562,645 ​ $ 607,001 Salary, benefits and payroll taxes ​ 1,181,219 ​ 1,030,628 Professional fees ​ 200,668 ​ 364,794 Operating lease ​ ​ 12,965 ​ ​ 13,615 Other ​ 960,828 ​ 956,237 ​ ​ $ 2,918,325 ​ $ 2,972,275 ​ ​ ​ ​ 12. Warranty ​ The Company provides for the estimated cost of product warranties at the time revenue is recognized. Warranty cost is recorded as cost of sales, and the reserve balance is recorded as an accrued expense in the financial statements. While the Company engages in extensive product quality programs and processes, the Company’s warranty obligation is affected by product failure rates and by the related material, labor and delivery costs incurred in correcting a product failure. If actual product failure rates, material, or labor costs differ from the Company’s estimates, further revisions to the estimated warranty liability would be recorded. ​ Warranty cost and accrual information for fiscal years ended September 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Warranty accrual as of October 1, ​ $ 607,001 ​ $ 589,260 Expense accrual for fiscal year ​ 58,472 ​ 152,419 Warranty cost incurred for fiscal year ​ ( 102,828 ) ​ ( 134,678 ) Warranty accrual as of September 30, ​ $ 562,645 ​ $ 607,001 ​ ​ 13. Income Taxes ​ In March 2020, the CARES Act was signed into law providing numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of NOLs. The CARES Act amends the NOL provisions of the Tax Cuts and Jobs Act of 2017, thereby allowing for the carryback of losses arising in tax years beginning before December 31, 2017, to each of the two taxable years preceding the taxable year of loss. Approximately $ 1,500,000 of pre-tax NOL was carried back two years to fully offset taxable income. This carryback freed up previously utilized R&D credits which resulted in an estimated increase in the R&D credit carryforward of $ 196,000 . The carryback created approximately $ 16,000 of AMT tax, which was refunded. The cash impact of this carryback was $ 309,412 . A receivable was set up for this amount as of March 31, 2020, and the cash has since been received. ​ 61 Table of Contents In December 2020, the CAA was enacted as a supplement to the CARES Act legislation and provided additional financial relief to taxpayers adversely impacted by restrictions put into place in response to the COVID-19 pandemic. In addition, the CAA provides funding for public health initiatives in response to the pandemic. This legislation did not have a material impact on the Company’s tax position. ​ On March 11, 2021, the ARPA, which includes certain business tax provisions, was signed into law. This legislation did not have a material impact on the Company’s tax position. ​ In August 2022, the U.S. government enacted the Inflation Reduction Act (the “IRA”). The IRA makes the following changes to the U.S tax code: imposes a corporate alternative minimum tax of 15% on corporations with an average annual Adjusted Financial Statement Income over a three year period in excess of $1 billion, increases the amount of R&D credit that qualified businesses can apply against payroll taxes to $500,000 and imposes an excise tax equal to one percent of the fair market value of stock of a publicly traded U.S. corporation that is repurchased by the company. These changes predominately apply to tax years beginning after December 31, 2022. It does not appear that this legislation will have a material impact on the Company’s tax position. ​ The components of income taxes are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Year Ended September 30, ​ 2023 2022 2021 Current provision (benefit): ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal ​ $ 1,541,726 ​ $ 522,473 ​ $ 95,818 State ​ 56,288 ​ 277,991 ​ 9,911 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total current provision (benefit) ​ 1,598,014 ​ 800,464 ​ 105,729 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred provision (benefit) ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal ​ 28,994 ​ 998,585 ​ ( 754,995 ) State ​ ( 19,491 ) ​ 18,782 ​ ( 438,517 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total deferred provision (benefit) ​ 9,503 ​ 1,017,367 ​ ( 1,193,511 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total current and deferred provision (benefit) ​ $ 1,607,517 ​ $ 1,817,831 ​ $ ( 1,087,783 ) ​ Following is a reconciliation of the statutory federal rate to the Company’s effective income tax rate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Year Ended September 30, ​ 2023 2022 2021 U.S. Federal statutory tax rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal benefit 0.4 % 11.8 % 0.6 % Permanent items — % 0.1 % 0.2 % Research and development tax credits ( 0.8 ) % ( 0.1 ) % ( 0.6 ) % Valuation allowance ( 0.1 ) % ( 6.4 ) % ( 47.9 ) % Change in unrecognized tax benefits 0.1 % ( 1.5 ) % ( 0.7 ) % 123R cancellations and forfeitures ​ 0.4 % 0.3 % 0.0 % Other ​ 0.1 % ( 0.5 ) % 0.0 % Effective income tax rate 21.1 % 24.7 % ( 27.4 ) % ​ 62 Table of Contents The deferred tax effect of temporary differences giving rise to the Company’s deferred tax assets and liabilities consists of the components below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of September 30, ​ ​ 2023 ​ 2022 ​ 2021 ​ Non Current Non Current Non Current Deferred tax assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ Reserves and accruals ​ $ 778,805 ​ $ 651,321 ​ $ 654,624 Research and development credit ​ ​ — ​ ​ — ​ ​ 1,327,162 NOL carryforwards -fed/state ​ ​ 980,755 ​ ​ 984,004 ​ ​ 1,612,043 Depreciation ​ ​ — ​ ​ — ​ ​ — Stock options ​ ​ 241,598 ​ ​ 45,069 ​ ​ 41,652 Amortization ​ ​ 520,445 ​ ​ — ​ ​ — ​ ​ ​ 2,521,603 ​ ​ 1,680,394 ​ ​ 3,635,481 Less: Valuation allowance ​ ​ ( 977,747 ) ​ ​ ( 981,816 ) ​ ​ ( 1,449,204 ) Total deferred tax assets ​ ​ 1,543,856 ​ ​ 698,578 ​ ​ 2,186,277 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Depreciation ​ ​ ( 1,087,653 ) ​ ​ ( 652,091 ) ​ ​ ( 1,122,455 ) Total deferred tax liabilities ​ ​ ( 1,087,653 ) ​ ​ ( 652,091 ) ​ ​ ( 1,122,455 ) Net deferred tax asset ​ $ 456,203 ​ $ 46,487 ​ $ 1,063,822 ​ At September 30, 2023 and 2022, the Company had state NOL carryforwards of approximately $ 19.5 million and $ 19.7 million, respectively, which begin to expire in varying amounts after the fiscal year ending September 30, 2027. The Company does not have federal R&D Tax Credit carryforwards in fiscal 2023 and 2022. ​ Deferred tax assets are reduced by valuation allowances 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 valuation allowances are required by considering available evidence, including historical and projected taxable income and tax planning strategies which are both prudent and feasible. ASC Topic 740 requires the consideration of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Significant management judgment is required in determining any valuation allowance recorded against net deferred tax assets. ​ For the year ended September 30, 2021, the valuation allowance was released against all federal and state deferred tax assets with the exception of certain state net operating losses due to positive evidence that the assets are more likely than not to be realized in future years. The Company will continue to assess all available evidence during future periods to evaluate any changes to the realization of its deferred tax assets. 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. ​ Following is a reconciliation of beginning and ending balances of total amounts of gross unrecognized tax benefits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Year Ended September 30, ​ 2023 2022 2021 Balance at beginning of year ​ $ 452,000 ​ $ 590,000 ​ $ 615,000 Unrecognized tax benefits related to prior years ​ — ​ — ​ — Unrecognized tax benefits related to current year ​ 8,000 ​ — ​ 7,000 Decrease in unrecognized tax benefits due to the lapse of applicable statute of limitations ​ — ​ ( 138,000 ) ​ ( 32,000 ) Balance at end of year ​ $ 460,000 ​ $ 452,000 ​ $ 590,000 ​ The total liabilities associated with the unrecognized tax benefits that, if recognized, would impact the Company’s effective tax rate were $ 460,000 , $ 452,000 and $ 590,000 at September 30, 2023, 2022 and 2021, respectively. It is not anticipated that the balance of unrecognized tax benefits at September 30, 2023 will change significantly over the next twelve months. The balance of unrecognized tax benefits as reflected in the table above at September 30, 2023 are recorded on the balance sheet as a reduction to deferred tax assets. ​ 63 Table of Contents The Company’s policy is to recognize interest accrued and, if applicable, penalties related to unrecognized tax benefits in income tax expense for all periods presented. At September 30, 2023, the Company currently has no unrecognized tax benefits against which interest has been accrued, and there is no accrual recorded for penalties. ​ For the fiscal years ended September 30, 2023, 2022 and 2021, the Company did not recognize any expense for interest (net of federal impact) within income tax expense. ​ The Company is subject to income taxes in the U.S. federal and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of related tax laws and regulations and require significant judgment to apply. The Company’s federal income tax returns for the fiscal years ended September 30, 2018 and thereafter are open years subject to examination by the Internal Revenue Service. The Company files income tax returns in various state jurisdictions, as appropriate, with varying statutes of limitation. There are no state income tax examinations in process at this time. ​ 14. Savings Plan ​ The Company sponsors a voluntary defined contribution savings plan covering all employees. The Company made contributions of approximately $ 242,000 , $ 126,000 and $ 123,000 for the fiscal years ended September 30, 2023, 2022 and 2021, respectively. ​ 15. Share-Based Compensation ​ The Company accounts for share-based compensation under the provisions of ASC Topic 718 by using the fair value method for expensing stock options and stock awards. ​ Total share-based compensation expense was approximately $ 1,336,000 , $ 345,000 , and $ 341,000 for the fiscal years ended September 30, 2023, 2022 and 2021, respectively. The income tax impact recognized as a credit to additional paid in capital in the statement of shareholders’ equity related to share-based compensation arrangements was $ 756,000 , $ 166,617 and $ 181,350 for the fiscal years ended September 30, 2023, 2022 and 2021, respectively. Compensation expense related to share-based awards is recorded as a component of selling, general and administrative expenses. ​ 2019 Stock-Based Incentive Compensation Plan ​ The 2019 Stock-Based Incentive Compensation Plan (the “2019 Plan”) was approved by the Company’s shareholders at the Company’s Annual Meeting of Shareholders held on April 2, 2019. The 2019 Plan authorizes the grant of stock appreciation rights, restricted stock, options and other equity-based awards. Options granted under the 2019 Plan may be either “incentive stock options” as defined in section 422 of the Code or nonqualified stock options, as determined by the Compensation Committee. ​ Subject to an adjustment necessary upon a stock dividend, recapitalization, forward split or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase or share exchange, extraordinary or unusual cash distribution, or similar corporate transaction or event, the maximum number of shares of common stock available for awards under the 2019 Plan is 750,000 , plus 139,691 shares of common stock that were authorized but unissued under the 2009 Plan as of the effective date of the 2019 Plan (i.e., April 2, 2019), all of which may be issued pursuant to awards of incentive stock options. As of September 30, 2023, there were 262,000 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. Any shares tendered by a participant in payment of the exercise price of an option or the tax liability with respect to an award (including, in any case, shares withheld from any such award) will not be available for future grant under the 2019 Plan. 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. ​ 64 Table of Contents Following is a summary of option activity under the 2019 Plan for the fiscal year ended September 30, 2023, and changes during the periods then ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ Average ​ Aggregate ​ ​ ​ ​ Exercise ​ Intrinsic ​ ​ Options ​ Price ​ Value Outstanding at September 30, 2021 100,000 ​ $ 7.10 ​ $ — Granted — ​ ​ — ​ — Exercised ( 42,416 ) ​ ​ 8.26 ​ 64,896 Cancelled — ​ ​ — ​ — Outstanding at September 30, 2022 57,584 ​ $ 7.10 ​ $ 88,104 Granted 224,374 ​ ​ 8.19 ​ — Exercised ( 57,584 ) ​ ​ 7.10 ​ 28,792 Cancelled — ​ ​ — ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding at September 30, 2023 224,374 ​ $ 8.19 ​ $ — Vested and expected to vest 69,796 ​ $ 8.20 ​ $ — Options exercisable at September 30, 2023 154,578 ​ $ 8.19 ​ $ — ​ The following table summarizes information about stock options under the 2019 Plan at September 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options Outstanding ​ Options Exercisable ​ ​ Outstanding ​ Weighted- ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ Average ​ Weighted- ​ As of ​ Weighted- Range of Exercise ​ September 30, ​ Remaining ​ Average ​ September 30, ​ Average Prices 2023 Contractual Life Exercise Price 2023 Exercise Price $ 0.00 - $ 9.00 224,374 9.4 ​ $ 8.20 154,578 ​ $ 8.19 ​ Fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. Options are exercisable over a maximum term of ten years from date of grant and vest typically over periods of three to five years from the grant date. The expected term of options represents the period of time that options granted are expected to be outstanding and is based on historical experience and the expected turnover rate of the employees receiving the options. Expected volatility is based on historical volatility of the Company’s stock. The risk free interest rate is based on U.S. Treasuries with maturities consistent with the expected life of the options in effect at the time of grant. Compensation expense for employee stock options includes an estimate for forfeitures and is recognized ratably over the vesting term. ​ Below are the fair value assumptions used to record stock option compensation expense, related to the 2019 Plan, for the following periods identified: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended September 30, ​ 2023 2022 (1) 2021 (1) Expected dividend rate ​ — — — ​ Expected volatility ​ 55.1 % — % — % Weighted average risk-free interest rate ​ 3.7 % — % — % Expected lives (years) ​ 5.3 — — ​ (1) The Company did not grant any options in fiscal 2022 and 2021. ​ Total compensation expense associated with stock option awards to employees under the 2019 Plan was approximately $ 756,000 , $ 164,000 and $ 181,000 for fiscal years ended September 30, 2023, 2022 and 2021, respectively. ​ At September 30, 2023, unrecognized compensation expense of $ 205,000 , net of forfeitures, related to non-vested stock options under the 2019 Plan, will be recognized. ​ 65 Table of Contents Restricted Stock Units ​ During fiscal 2023, the Company’s Board of Directors (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 2023 to vest on the date of the Company’s 2023 Annual Meeting of Shareholders. After the 2023Annual 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. 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 fiscal 2023, the Board approved grants of RSUs to both the Chief Executive Officer and the former Chief Financial Officer. Certain RSUs to the Chief Executive Officer vested immediately, and the remainder will vest quarterly over a three-year period. The approved grants of the RSUs to the former Chief Financial Officer will vest over a four-year period. On November 8, 2023, Michael Linacre, Chief Financial Officer of Innovative Solutions and Support, Inc., notified the Company of his resignation from all of his positions with the Company, effective immediately, which resulted in the forfeiture of 11,503 RSUs. ​ ​ As of September 30, 2023, there were 101,968 unvested restricted stock units outstanding under the 2019 Plan. As of September 30, 2022, and September 30, 2021 there were 32,897 and 25,396 respectively, unvested restricted stock units outstanding under the 2019 Plan. ​ ​ ​ ​ ​ ​ ​ ​ Non-vested Weighted Average ​ ​ Stock Awards ​ Share Price Balance at September 30, 2021 25,396 ​ $ 6.30 Granted 38,986 ​ 6.52 Issued ( 27,425 ) ​ 6.32 Cancelled ( 4,059 ) ​ 6.57 Balance at September 30, 2022 32,897 ​ $ 6.51 Granted 133,554 ​ 8.00 Issued ( 64,483 ) ​ 7.51 Cancelled — ​ — Balance at September 30, 2023 101,968 ​ $ 7.84 ​ Total share-based compensation expense associated with the annual grant of stock awards to non-employee directors under the 2019 Plan was approximately $ 212,000 , $ 178,000 and $ 160,000 for the fiscal years ended September 30, 2023, 2022 and 2021, respectively. ​ Total share-based compensation expense associated with the annual grant of stock awards to employees under the 2019 Plan was approximately $ 368,000 , $ 3,000 and $ 0 for the fiscal years ended September 30, 2023, 2022 and 2021, respectively. ​ At September 30, 2023, unrecognized compensation expense of $ 659,000 , net of forfeitures, related to non-vested stock awards under the 2019 Plan, will be recognized. ​ 16. 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 of 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 $ 2.4 million, $ 2.6 million and $ 2.1 million as of September 30, 2023, 2022 and 2021, respectively. ​ Product Liability ​ The Company has product liability insurance of $ 50,000,000 . The Company has not experienced any material product liability claims. 66 Table of Contents ​ Legal Proceedings ​ In the ordinary course of business, the Company is at times subject to various legal proceedings and claims. The Company does not believe any such matters that are currently pending will, individually or in the aggregate, have a material effect on the results of operations or financial position. ​ 17. 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. Eclipse is a new related party for fiscal year 2023 due to their president acquiring more than 10 % in shares on the company. Prior balances are disclosed below for comparability. ​ Sales to Eclipse amounted to $ 0.3 million, $ 0.6 million and $ 1.6 million for the years ended September 30, 2023, 2022 and 2021, respectively. As of September 30, 2023 and 2022, contract liability to Eclipse was approximately $ 0.0 million and $ 0.1 million, respectively. ​ 18. Business Segments ​ The Company operates in one business segment which designs, manufactures and sells flat panel displays, flight information computers and advanced monitoring systems to the DoD, the Department of Interior, other government agencies, commercial air transport carriers and corporate/general aviation markets. The Company currently derives virtually all of its revenues from the sale of this equipment and related EDC. ​ Geographic Data ​ Most of the Company’s sales, operating results and identifiable assets are generated in the United States. In fiscal years 2023, 2022 and 2021, net sales outside the United States amounted to $ 15.5 million, $ 11.1 million and $ 8.4 million, respectively. ​ Product Data ​ The Company’s current product line includes FPDS, flight management systems and air data systems and components. During fiscal years 2023, 2022 and 2021, the Company derived 99 %, 98 % and 88 %, respectively, of its total product sales of FPDS. The remaining product sales for each of the fiscal years was from sales of air data systems and components. ​ 19. Lease Recognition ​ The Company accounts for leases in accordance with ASU 2016-02 and records “right-of-use” assets and corresponding lease liabilities on the balance sheet for most leases with an initial term of greater than one year. We recognize payments for leases with a term of less than one year in the statements of operations on a straight-line basis over the lease term. ​ We lease real estate and equipment under various operating leases. A lease exists when a contract or part of a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In determining whether a lease exists, we consider whether a contract provides us with both: (a) the right to obtain substantially all of the economic benefits from the use of the identified asset and (b) the right to direct the use of the identified asset. ​ Some of our leases include base rental periods coupled with options to renew or terminate the lease, generally at our discretion. In evaluating the lease term, we consider whether we are reasonably certain to exercise such options. To the extent a significant economic incentive exists to exercise an option, that option is included within the lease term. However, based on the nature of our lease arrangements, options generally do not provide us with a significant economic incentive and are therefore excluded from the lease term for the majority of our arrangements. ​ Our leases typically include a combination of fixed and variable payments. Fixed payments are generally included when measuring the right-of-use asset and lease liability. Variable payments, which primarily represent payments based on usage of the underlying asset, are generally excluded from such measurement and expensed as incurred. In addition, certain of our lease arrangements may contain a lease coupled with an arrangement to provide other services, such as maintenance, or may require us to make other payments on behalf of the lessor related to the leased asset, such as payments for taxes or insurance. As permitted by ASU 2016-02, we have 67 Table of Contents elected to account for these non-lease components together with the associated lease component if included in the lease payments. This election has been made for each of our asset classes. ​ The measurement of “right-of-use” assets and lease liabilities requires us to estimate appropriate discount rates. To the extent the rate implicit in the lease is readily determinable, such rate is utilized. However, based on information available at lease commencement for our leases, the rate implicit in the lease is not known. In these instances, we utilize an incremental borrowing rate, which represents the rate of interest that we would pay to borrow on a collateralized basis over a similar term. ​ Rent expense and cash paid for various operating leases in aggregate are approximately $ 73,000 for the period ended September 30, 2023. The weighted average remaining lease term is 1.2 years, and the weighted average discount rate is 5.0 % as of September 30, 2023. Related assets and liabilities resulting from lease obligations are deemed to be immaterial. ​ Future minimum lease payments under operating leases are as follows at September 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months ​ ​ ​ ​ Ending ​ Operating ​ September 30, Leases ​ ​ 2024 ​ $ 14,676 ​ ​ 2025 ​ ​ 2,446 Total minimum lease payments ​ $ 17,122 Amount representing interest ​ ( 2,057 ) Present value of minimum lease payments ​ 15,065 Current portion ​ ( 12,965 ) Long-term portion of lease obligations ​ $ 2,100 ​ ​ ​ ​ 20. 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 Transaction. 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. ​ Future interest payments on the Term Loan, based on current interest rates, are expected to approximate $ 1.5 million in fiscal 2024, $ 1.3 million in fiscal 2025, $ 1.2 million in fiscal 2026, $ 1.0 million in fiscal 2027, and $ 0.7 million thereafter. 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, as defined in the Amended Loan Agreement. Commencing on June 30, 2023, the Term Loan will consist 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 (“Line of Credit Note”), provides 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”). ​ The interest rate applicable to loans outstanding under the Revolving Line of Credit is a rate per annum equal to the sum of (A) Daily SOFR (as defined in the Line of Credit Note) plus (B) an unadjusted spread of 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. The Company will pay an annual commitment fee of 0.15 % on the amount available for borrowing under the revolving credit facility. ​ The Company was in compliance with all applicable covenants throughout and at September 30, 2023. As of September 30, 2023, the term loan balance amounted to $ 19,500,000 . There was no balance drawn on the Revolving Line of Credit as of September 30, 2023. ​ 68 Table of Contents Fixed mandatory principal repayments due on the outstanding Term Loan are as follows: $ 2.0 million in fiscal 2024, $ 2.0 million in fiscal 2025, $ 2.0 million in fiscal 2026, $ 2.0 million in fiscal 2027, and $ 11.5 million in fiscal 2028. ​ On December 19, 2023, the Company and PNC entered into an Amendment to Loan Documents and a corresponding Amended and Restated Revolving Line of Credit Note and Amended and Restated Line of Credit and Investment Sweep Rider. See Note 21, “Subsequent Events”. ​ ​ 21. Subsequent Events ​ On December 19, 2023, the Company and PNC entered into an Amendment to Loan Documents (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. The proceeds of the Restated Line of Credit Note will be used for working capital and other general corporate purposes, for acquisitions as permitted under the Restated Loan Amendment, and to pay off and close the loan evidenced by that certain Term Note executed in favor of PNC, dated June 28, 2023, which provides for a senior secured term loan in an aggregate principal amount of $ 20,000,000 , with a maturity date of June 28, 2023. ​ The interest rate applicable to loans outstanding under the Restated Line of Credit is a rate per annum equal to the sum of (A) Daily SOFR (as defined in the Restated Line of Credit Note) plus (B) an unadjusted spread of Applicable SOFR Margin (as defined in the Restated Line of Credit Note) 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 Restated Line of Credit Note. ​ The foregoing descriptions of the Restated Loan Amendment, Restated Line of Credit Note and Restated Rider do not purport to be complete and are qualified in their entirety by reference to the full text of the Restated Loan Amendment, Restated Line of Credit Note and Restated Rider, which are filed as Exhibit 10.1, Exhibit 10.2 and Exhibit 10.3, respectively, to the Current Report on Form 8-K filed December 22, 2023 and are incorporated therein by reference . ​ On November 20, 2023, the Company sold its assets held for sale, the King Air aircraft, for $ 2.3 million. The resultant gain on sale will be a reduction to selling, general and administrative expense in the quarter ended December 31, 2023. ​ ​ ​ ​ 69 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.