What changed in this filing

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Item 1. Financial Statements

2024-08-14 compared with 2024-05-14 · 133 added, 106 removed, 470 unchanged (34% of the section changed)

27 unchanged sentences

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

No shares issued and outstanding at March 31, 2024 and September 30, 2023

No shares issued and outstanding at June 30, 2024 and September 30, 2023

Common stock, $ .001 par value:

75,000,000 shares authorized, 19,556,434 and 19,543,441 issued at March 31, 2024 and September 30, 2023, respectively

75,000,000 shares authorized, 19,590,156 and 19,543,441 issued at June 30, 2024 and September 30, 2023, respectively

Additional paid-in capital

Retained earnings

Treasury stock, at cost, 2,096,451 shares at March 31, 2024 and at September 30, 2023

Treasury stock, at cost, 2,096,451 shares at June 30, 2024 and at September 30, 2023

( 21,368,537 )

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

Six Months Ended March 31,

Three Months Ended June 30,

Nine Months Ended June 30,

Customer service

28 unchanged sentences

( 21,368,537 )

Share-based compensation

Balance, June 30, 2024

( 21,368,537 )

The accompanying notes are an integral part of these statements.

11 unchanged sentences

( 21,368,537 )

Share-based compensation

Balance, June 30, 2023

( 21,368,537 )

The accompanying notes are an integral part of these statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended March 31,

For the Nine Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

3 unchanged sentences

Stock options

Impairment of long-lived assets

Gain on disposal of property and equipment

2 unchanged sentences

Accounts receivable

( 1,646,558 )

Contract assets

( 3,275,938 )

Prepaid inventories

Prepaid expenses and other current assets

7 unchanged sentences

Purchases of property and equipment

Acquisition of a business

( 35,860,000 )

Proceeds from the sale of property and equipment

Net cash provided by (used in) investing activities

( 36,025,084 )

CASH FLOWS FROM FINANCING ACTIVITIES:

4 unchanged sentences

( 19,185,614 )

Proceeds from term note

Proceeds from exercise of stock options

3 unchanged sentences

( 2,576,152 )

( 14,678,313 )

Cash and cash equivalents, beginning of year

5 unchanged sentences

Transfer from prepaid inventory to inventory

Transfer from prepaid inventory to goodwill

Transfer from prepaid inventory to intangible assets, net

The accompanying notes are an integral part of these statements.

21 unchanged sentences

The condensed consolidated balance sheet as of September 30, 2023 is derived from the audited financial statements of the Company.

Operating results for the three- and six-month periods ended March 31, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2024 which cannot be determined at this time.

Operating results for the three- and nine-month periods ended June 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2024 which cannot be determined at this time.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

61 unchanged sentences

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

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2024 and September 30, 2023, according to the valuation techniques the Company used to determine their fair values.

Fair Value Measurement on March 31, 2024

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2024 and September 30, 2023, according to the valuation techniques the Company used to determine their fair values.

Fair Value Measurement on June 30, 2024

Quoted Price in

11 unchanged sentences

Money market funds

The March 31, 2024 money market funds balance differs from the cash and cash equivalents balance on the condensed consolidated balance sheet due to the timing of sweep transactions within the PNC cash investment accounts.

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

Revenue Recognition

40 unchanged sentences

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 three- and six-month periods ended March 31, 2024 and 2023.

Therefore, no adjustment on any contract was material to our condensed consolidated financial statements for the three- and six-month periods ended March 31, 2024 and 2023.

The aggregate impact of adjustments in contract estimates did not change our revenue and operating earnings (and diluted earnings per share) for the three- and nine-month periods ended June 30, 2024 and 2023.

Therefore, no adjustment on any contract was material to our condensed consolidated financial statements for the three- and nine-month periods ended June 30, 2024 and 2023.

Contract Balances

7 unchanged sentences

Increases due to invoicing prior to satisfaction of performance obligations

March 31, 2024

June 30, 2024

Concentrations

Major Customers and Products

In the three-month period ended March 31, 2024, two customers, Pilatus Aircraft Ltd (“Pilatus”) and Textron Aviation, Inc.

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

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

In the three-month period ended June 30, 2023, three customers, Pilatus, Air Transport Services Group (“ATSG”) and Textron Aviation, Inc.

(“Textron”), accounted for 25 %, 24 % and 10 % of net sales, respectively.

In the six-month period ended Mach 31, 2024, one customer, Pilatus accounted for 29 % of net sales.

In the three-month period ended March 31, 2023, four customers, Pilatus, Challenge Airlines, Air Transport Services Group and Textron, accounted for 21 %, 18 %, 16 % and 10 % of net sales, respectively.

In the six-month period ended March 31, 2023, four customers, Pilatus, Air Transport Services Group, Textron and Challenge Airlines, accounted for 29 %, 15 %, 11 % and 10 % of net sales, respectively.

In the nine-month period ended June 30, 2023, three customers, Pilatus, ATSG and Textron, accounted for 27 %, 18 % and 10 % of net sales, respectively.

Major Suppliers

1 unchanged sentence

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

For the three- and six-month periods ended March 31, 2024, the Company had one and two suppliers, respectively, that were individually responsible for greater than 10% of the Company’s total inventory related purchases.

For the three- and six-month periods ended March 31, 2023, the Company had three and four suppliers, respectively, that were individually responsible for greater than 10% of the Company’s total inventory related purchases.

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

For the three- and nine-month periods ended June 30, 2023, the Company had four suppliers, respectively, that were individually responsible for greater than 10% of the Company’s total inventory related purchases.

Concentration of Credit Risk

5 unchanged sentences

The Company requests advance payments and/or letters of credit from customers that it considers to be credit risks.

Recent Accounting Pronouncements

Change in Accounting Estimate

Effective April 1, 2024, the Company changed its method of computing depreciation from accelerated methods to the straight-line method for the Company’s property and equipment, except for the manufacturing facility which was already depreciating using the straight-line method.

Based on ASC 250, “ Accounting Changes and Error Corrections ”, the Company determined that the change in depreciation method from an accelerated method to a straight-line method is a change in accounting estimate affected by a change in accounting principle.

Per the guidance, a change in accounting estimate affected by a change in accounting principle is to be applied prospectively.

The change is considered preferable because the straight-line method will more accurately reflect the pattern of usage

and the expected benefits of such assets and provide greater consistency with the depreciation methods used by other companies in the Company’s industry.

The net book value of assets acquired with useful lives remaining will be depreciated using the straight-line method prospectively.

As a result of the change to the straight-line method of depreciating the assets, accumulated depreciation and depreciation expense decreased by $ 113,000 for the three- and nine-month periods ended June 30, 2024.

Recently Adopted 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 replaces the incurred loss impairment methodology in current 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.

9 unchanged sentences

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 9, “Loan Agreement” for further details.

The preliminary 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 the fact that, while legal control has been transferred, the Company has not received physical possession of all 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 Asset Purchase and License 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, may be subject to change within the measurement period.

The preliminary allocation of the purchase consideration as of the Acquisition Date is as follows:

The purchase consideration transferred at the Acquisition Date was $ 35.9 million, which was entirely cash.

In the third quarter of 2024 and within one year from the Acquisition Date, the Company finalized its accounting of the Transaction.

The following purchase price allocation table presents the Company's estimates of the fair value of assets acquired and liabilities assumed as of the Acquisition Date, and subsequent measurement period adjustments recorded during the one-year period ended June 30, 2024:

Amounts Recognized as of

6 unchanged sentences

Prepaid inventory (a)

( 3,012,626 )

Construction in progress

1 unchanged sentence

( 3,660,000 )

( 1,050,155 )

Assets acquired

7 unchanged sentences

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

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 agreement related to the license rights to use certain Honeywell intellectual property and customer relationships and are recorded at provisional estimated fair values.

The provisional 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 provisional 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.

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

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

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

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

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

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

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

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

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

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

The goodwill is not expected to be deductible for income tax purposes.

Further, the Company determined that the preliminary goodwill was not impaired as of March 31, 2024 and as such, no impairment charges have been recorded for the three- and six-month periods ended March 31, 2024;

the Company also determined that the preliminary goodwill was not impaired as of September 30, 2023.

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

The measurement period adjustments were due to the refinement of inputs used to calculate the fair value of the prepaid inventory, equipment, license agreement and customer relationships, with the assistance of an independent third-party valuation firm based on facts and circumstances that existed as of the Acquisition Date.

Further, the Company determined that the goodwill was not impaired as of June 30, 2024 and as such, no impairment charges have been recorded for the three- and nine-month periods ended June 30, 2024;

the Company also determined that the goodwill was not impaired as of September 30, 2023.

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

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

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

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

Additionally, the change to the preliminary fair value estimates did not have a material impact to the condensed consolidated statement of operations.

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

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

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

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

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

7 unchanged sentences

Acquisition and related costs

In connection with the Transaction, the Company incurred acquisition costs of $ 408,961 , which were expensed as incurred and included in selling, general and administrative expenses in the condensed consolidated statement of operations for the year ended September 30, 2023;

In connection with the Transaction, the Company incurred no acquisition costs for the three- and nine-month periods ended June 30, 2024.

The Company incurred acquisition costs of $ 408,961 , which were expensed as incurred and included in selling, general and administrative expenses in the condensed consolidated statement of operations for the year ended September 30, 2023;

of that amount, the Company incurred acquisition costs of $ 262,099 , which were expensed as incurred and included in selling, general and administrative expenses in the condensed consolidated statement of operations for the three- and nine-month periods ended June 30, 2023.

The debt issuance costs related to the Term Loan were not material.

For the three- and six-month periods ended March 31, 2024, the Company incurred no acquisition costs.

Unaudited actual and pro forma information

Unaudited pro forma information

The following unaudited pro forma summary presents consolidated information of the Company, including the Product Lines, as if the Transaction had occurred on October 1, 2021:

Three Months Ended

Six Months Ended

March 31, 2023

Nine Months Ended

June 30, 2023

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

10 unchanged sentences

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

As of March 31, 2024

As of June 30, 2024

Gross Carrying

1 unchanged sentence

Customer relationships acquired from the Transaction (a)

( 1,164,000 )

Licensing and certification rights (b)

6 unchanged sentences

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 gross carrying values are preliminary estimates

and may be subject to change within the measurement period – refer to Acquisition within this Note 2, “Supplemental Balance Sheet Disclosures” for further details.

The license agreement has an indefinite life and is not subject to amortization;

the customer relationships have an estimated weighted average life of nine years and three months.

The Company determined that the preliminary intangible assets were not impaired as of March 31, 2024 and September 30, 2023;

no impairment charges have been recorded for the three- and six-month periods ended March 31, 2024.

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

The Company determined that the intangible assets were not impaired as of June 30, 2024 and September 30, 2023;

no impairment charges have been recorded for the three- and nine-month periods ended June 30, 2024.

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

No impairment charges were recorded during the three- and six-month periods ended March 31, 2024 and 2023.

Intangible asset amortization expense was $ 268,500 and $ 0 for the three-month periods ended March 31, 2024 and 2023, respectively.

Intangible asset amortization expense was charged to selling, general and administrative expense.

Intangible asset amortization expense was $ 537,000 and $ 0 for the six-month periods ended March 31, 2024 and 2023, respectively.

Intangible asset amortization expense was charged to selling, general and administrative expense.

No impairment charges were recorded during the three-and nine-month periods ended June 30, 2024.

An impairment charge of $ 44,400 was recorded during the three-and nine-month periods ended June 30, 2023.

Intangible asset amortization expense was $ 358,500 and $ 1,063 for the three-month periods ended June 30, 2024 and 2023, respectively.

Intangible asset amortization expense for the three-month periods ended June 30, 2024 and 2023 was charged to selling, general and administrative expense.

Intangible asset amortization expense was $ 895,500 and $ 1,063 for the nine-month periods ended June 30, 2024 and 2023, respectively.

Intangible asset amortization expense for the nine-month periods ended June 30, 2024 and 2023 was charged to selling, general and administrative expense.

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 March 31, 2024 is as follows:

2024 (six months remaining)

The expected future amortization expense related to the customer relationships as of June 30, 2024 is as follows:

2024 (three months remaining)

Assets Held for Sale

12 unchanged sentences

( 11,923,825 )

Depreciation and amortization related to property and equipment was $ 146,156 and $ 85,981 for the three-month periods ended March 31, 2024 and 2023, respectively.

Depreciation and amortization related to property and equipment was approximately $ 289,077 and $ 171,390 for the six-month periods ended March 31, 2024 and 2023, respectively.

Depreciation and amortization related to property and equipment was $ 252,655 and $ 86,439 for the three-month periods ended June 30, 2024 and 2023, respectively.

Depreciation and amortization related to property and equipment was approximately $ 541,732 and $ 257,829 for the nine-month periods ended June 30, 2024 and 2023, respectively.

Other assets consist of the following:

2 unchanged sentences

Other non-current assets

Other non-current assets as of March 31, 2024 includes deferred ERP implementation costs, a supplier credit from one of our suppliers and a deposit for medical claims required under the Company’s medical plan.

Other non-current assets as of June 30, 2024 includes deferred ERP implementation costs, a supplier credit from one of our suppliers and a deposit for medical claims required under the Company’s medical plan.

Other non-current assets as of September 30, 2023 includes a supplier credit from one of our suppliers, a deposit for medical claims required under the Company’s medical plan and an airplane hanger deposit.

In addition, other non-current assets as of March 31, 2024 and September 30, 2023 includes $ 44,072 and $ 53,585 , respectively, of prepaid software licenses that will be earned upon the shipment of a certain product to a customer.

Other non-current assets amortization expense was $ 4,905 and $ 0 for the three-month periods ended March 31, 2024 and 2023, respectively.

Other non-current assets amortization expense was $ 9,513 and $ 0 for the six-month periods ended March 31, 2024 and 2023, respectively.

In addition, other non-current assets as of June 30, 2024 and September 30, 2023 includes $ 38,795 and $ 53,585 , respectively, of prepaid software licenses that will be earned upon the shipment of a certain product to a customer.

Other non-current assets amortization expense was $ 5,277 and $ 2,601 for the three-month periods ended June 30, 2024 and 2023, respectively.

Other non-current assets amortization expense was $ 14,790 and $ 2,601 for the nine-month periods ended June 30, 2024 and 2023, respectively.

Accrued expenses

5 unchanged sentences

Income tax payable

Warranty cost and accrual information for the three- and six-month periods ended March 31, 2024 is highlighted below:

Warranty cost and accrual information for the three- and nine-month periods ended June 30, 2024 is highlighted below:

Three Months Ending

Six Months Ended

March 31, 2024

Nine Months Ended

June 30, 2024

Warranty accrual, beginning of period

5 unchanged sentences

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

The effective tax rate for the three-month period ended March 31, 2024 was 21.2 % and differs from the statutory tax rate primarily due to higher state taxes due to a taxable gain from the sale of the Company’s King Air aircraft.

The effective tax rate for the three-month period ended March 31, 2023 was 19.6 % and differs from the statutory tax rate primarily due to an increased R&D credit, as well as permanent items and state taxes.

The effective tax rate for the six-month period ended March 31, 2024 was 21.5 % and differs from the statutory tax rate primarily due to higher state taxes due to a taxable gain from the sale of the Company’s King Air aircraft.

The effective tax rate for the six-month period ended March 31, 2023 was 21.4 % and differs from the statutory tax rate primarily due to an increased R&D credit, as well as permanent items and state taxes.

The effective tax rate for the three-month periods ended June 30, 2024 and 2023 were 17.6 % and 19.3 %, respectively.

This effective tax rate differs from the statutory tax rate primarily due to an increased R&D credit, as well as permanent items and state taxes.

The effective tax rate for the nine-month periods ended June 30, 2024 and 2023 were 19.9 % and 20.5 %, respectively.

This effective tax rate differs from the statutory tax rate primarily due to an increased R&D credit, as well as permanent items and state taxes.

Shareholders’ Equity and Share-Based Payments

At March 31, 2024, the Company’s Amended and Restated Articles of Incorporation provides the Company authority to issue 75,000,000 shares of common stock and 10,000,000 shares of preferred stock.

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

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.

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

Amended and Restated 2019 Stock-Based Incentive Compensation Plan

The Company’s Amended and Restated 2019 Stock-Based Incentive Compensation Plan was approved by the Company’s shareholders at the Company’s Annual Meeting of Shareholders held on April 18, 2024, which amended and restated the 2019 Stock-Based Incentive Compensation Plan approved by the Company’s shareholders on April 2, 2019 (as Amended, the “Amended and Restated 2019 Plan”).

The Amended and Restated 2019 Plan authorizes the grant of stock appreciation rights, restricted stock, options and other equity-based awards.

The Amended and Restated 2019 Plan authorizes the grant of stock appreciation rights, restricted stock, options

and other equity-based awards.

Options granted under the Amended and Restated 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.

4 unchanged sentences

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.

The compensation expense related to stock options and awards issued to employees under the Amended and Restated 2019 Plan was $ 219,748 and $ 375,328 for the three- and six-month periods ended March 31, 2024, respectively.

The compensation expense related to stock options and awards issued to employees under the Amended and Restated 2019 Plan was $ 556,673 and $ 789,798 for the three- and six-month periods ended March 31, 2023, respectively.

The compensation expense under the Amended and Restated 2019 Plan related to stock awards issued to non-employee members of the Board was $ 49,590 and $ 99,726 for the three- and six-month periods ended March 31, 2024, respectively.

The compensation expense under the Amended and Restated 2019 Plan related to stock awards issued to non-employee members of the Board was $ 176,703 and $ 226,773 for the three- and six-month periods ended March 31, 2023, respectively.

Total compensation expense associated with the Amended and Restated 2019 Plan was $ 269,338 and $ 733,376 for the three-month periods ended March 31, 2024 and 2023, respectively.

Total compensation expense associated with the Amended and Restated 2019 Plan was $ 475,055 and $ 1,016,571 for the six-month periods ended March 31, 2024 and 2023, respectively.

At March 31, 2024, unrecognized compensation expense of approximately $ 1,425,821 , net of forfeitures, related to non-vested stock options under the Amended and Restated 2019 Plan, will be recognized.

The compensation expense related to stock options and awards issued to employees under the Amended and Restated 2019 Plan was $ 191,623 and $ 566,952 for the three- and nine-month periods ended June 30, 2024, respectively.

The compensation expense related to stock options and awards issued to employees under the Amended and Restated 2019 Plan was $ 164,342 and $ 954,140 for the three- and nine-month periods ended June 30, 2023, respectively.

The compensation expense under the Amended and Restated 2019 Plan related to stock awards issued to non-employee members of the Board was $ 59,278 and $ 159,003 for the three- and nine-month periods ended June 30, 2024, respectively.

The compensation expense under the Amended and Restated 2019 Plan related to stock awards issued to non-employee members of the Board was $ 49,742 and $ 276,515 for the three- and nine-month periods ended June 30, 2023, respectively.

Total compensation expense associated with the Amended and Restated 2019 Plan was $ 250,901 and $ 214,084 for the three-month periods ended June 30, 2024 and 2023, respectively.

Total compensation expense associated with the Amended and Restated 2019 Plan was $ 725,955 and $ 1,230,655 for the nine-month periods ended June 30, 2024 and 2023, respectively.

At June 30, 2024, unrecognized compensation expense of approximately $ 2,165,328 , net of forfeitures, related to non-vested stock options under the Amended and Restated 2019 Plan, will be recognized.

Earnings Per Share

Three Months Ended March 31,

Six Months Ended March 31,

Three Months Ended June 30,

Nine Months Ended June 30,

Basic weighted average shares

2 unchanged sentences

Net income per common share:

Net income per share is calculated pursuant to ASC Topic 260, “ Earnings per Share” (“ASC Topic 260”).

Net income per share is calculated pursuant to ASC Topic 260, “ Earnings per Share” .

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.

1 unchanged sentence

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

As of March 31, 2024 and 2023, there were 297,014 and 25,000 options to purchase common stock outstanding, respectively, and 173,555 and 82,886 shares subject to vesting of restricted stock units outstanding, respectively.

As of June 30, 2024 and 2023, there were 361,613 and 128,815 options to purchase common stock outstanding, respectively, and 250,975 and 76,636 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 the three-month periods ended March 31, 2024 and 2023, respectively, 243,749 and 277,520 diluted weighted-average shares outstanding were excluded from the computation of diluted EPS because the effect would be anti-dilutive.

For the six-month periods ended March 31, 2024 and 2023, respectively, 228,579 and 138,760 diluted weighted-average shares outstanding were excluded from the computation of diluted EPS because the effect would be anti-dilutive.

For the three-month periods ended June 30, 2024 and 2023, respectively, 529,918 and 312,210 diluted weighted-average shares outstanding were excluded from the computation of diluted EPS because the effect would be anti-dilutive.

For the nine-month periods ended June 30, 2024 and 2023, respectively, 329,026 and 196,577 diluted weighted-average shares outstanding were excluded from the computation of diluted EPS because the effect would be anti-dilutive.

Commitments and Contingencies

4 unchanged sentences

Prior balances are disclosed below for comparability.

Sales to Eclipse amounted to approximately $ 9,000 and $ 42,000 for the three-month periods ended March 31, 2024 and 2023, respectively.

Sales to Eclipse amounted to approximately $ 93,000 and $ 76,000 for the six-month periods ended March 31, 2024 and 2023, respectively.

Sales to Eclipse amounted to approximately $ 110,000 and $ 155,000 for the three-month periods ended June 30, 2024 and 2023, respectively.

Sales to Eclipse amounted to approximately $ 203,000 and $ 231,000 for the nine-month periods ended June 30, 2024 and 2023, respectively.

A company in which Parizad Olver (Parchi), a former member of the Board of Directors, is the managing partner and has an ownership interest, received a consulting fee of $ 72,990 in November 2023 for services provided in connection with the sale of the Company’s 2008 Super King Air B200GT SN BY-50.

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.

Consistent with previous accounting guidance, we will recognize payments for leases with a term of less than one year in the statement of operations on a straight-line basis over the lease term.

The Company accounts for leases in accordance with ASU 2016-02, “ Leases ” (“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.

Consistent with

previous accounting guidance, we will recognize payments for leases with a term of less than one year in the statement of operations on a straight-line basis over the lease term.

We lease real estate and equipment under various operating leases.

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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.

The following table presents the lease-related assets and liabilities reported in the Condensed Consolidated Balance Sheet as of March 31, 2024:

Classification on the Consolidated Balance Sheet on March 31, 2024

The following table presents the lease-related assets and liabilities reported in the Condensed Consolidated Balance Sheet as of June 30, 2024:

Classification on the Consolidated Balance Sheet on June 30, 2024

Operating leases

4 unchanged sentences

Total lease liabilities

Rent expense and cash paid for various operating leases in aggregate are $ 7,338 for the six-month period ended March 31, 2024.

The weighted average remaining lease term is 0.7 years and the weighted average discount rate is 5.0 % as of March 31, 2024.

Future minimum lease payments under operating leases are as follows at March 31, 2024:

Rent expense and cash paid for various operating leases in aggregate are $ 11,007 for the nine-month period ended June 30, 2024.

The weighted average remaining lease term is 0.4 years and the weighted average discount rate is 5.0 % as of June 30, 2024.

Future minimum lease payments under operating leases are as follows at June 30, 2024:

Twelve Months

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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.

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 herein by reference.

The Company was in compliance with all applicable covenants throughout the year and at March 31, 2024.

The outstanding balance drawn on the Line of Credit was $ 10,642,885 at March 31, 2024.

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 herein by reference.

The Company was in compliance with all applicable covenants throughout the year and at June 30, 2024.

The outstanding balance drawn on the Line of Credit was $ 9,859,074 at June 30, 2024.

Subsequent Events

On July 22, 2024, the Company entered into that certain Amendment No.

3 to Asset Purchase and License Agreement (the “Amendment”) with Honeywell.

Pursuant to the Amendment, Honeywell sold, assigned or licensed to the Company certain additional assets related to its communication and navigation product lines, including a sale of certain inventory and customer-related documents;

an assignment of certain contracts;

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

This Amendment complements the previously disclosed license and asset acquisition completed in June 2023 from Honeywell.

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

What changed 10-Q

Item 1. Financial Statements