INNOVATIVE SOLUTIONS & SUPPORT INC 10-Q

Item 1 - Financial Statements INNOVATIVE SOLUTIONS AND SUPPORT, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ June 30, September 30, ​ ​ 2024 ​ 2023 ​ ​ ​ ​ ​ ​ ASSETS ​ ​ ​ ​ ​ ​ Current assets ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 521,041 ​ $ 3,097,193 Accounts receivable ​ 7,329,662 ​ 9,743,714 Contract assets ​ 1,098,301 ​ 487,139 Inventories ​ ​ 14,540,172 ​ 6,139,713 Prepaid inventory ​ ​ 1,899,013 ​ ​ 12,069,114 Prepaid expenses and other current assets ​ 984,684 ​ 1,073,012 Assets held for sale ​ — ​ 2,063,818 ​ ​ ​ ​ ​ ​ ​ Total current assets ​ ​ 26,372,873 ​ ​ 34,673,703 ​ ​ ​ ​ ​ ​ ​ Goodwill ​ ​ 4,074,466 ​ ​ 3,557,886 Intangible assets, net ​ ​ 16,089,821 ​ ​ 16,185,321 Property and equipment, net ​ 11,590,207 ​ 7,892,427 Deferred income taxes ​ ​ 1,109,598 ​ ​ 456,392 Other assets ​ 545,980 ​ 191,722 ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 59,782,945 ​ $ 62,957,451 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND SHAREHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current liabilities ​ ​ ​ ​ ​ ​ Current portion of long-term debt ​ $ 9,859,074 ​ $ 2,000,000 Accounts payable ​ ​ 3,343,876 ​ ​ 1,337,275 Accrued expenses ​ 2,818,405 ​ 2,918,325 Contract liability ​ ​ 131,534 ​ ​ 143,359 ​ ​ ​ ​ ​ ​ ​ Total current liabilities ​ ​ 16,152,889 ​ ​ 6,398,959 ​ ​ ​ ​ ​ ​ ​ Long-term debt ​ ​ — ​ ​ 17,500,000 Other liabilities ​ ​ 448,931 ​ ​ 421,508 ​ ​ ​ ​ ​ ​ ​ Total liabilities ​ ​ 16,601,820 ​ ​ 24,320,467 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (See Note 6) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 June 30, 2024 and September 30, 2023 ​ — ​ — ​ ​ ​ ​ ​ ​ ​ Common stock, $ .001 par value: 75,000,000 shares authorized, 19,590,156 and 19,543,441 issued at June 30, 2024 and September 30, 2023, respectively ​ ​ 19,589 ​ ​ 19,543 ​ ​ ​ ​ ​ ​ ​ Additional paid-in capital ​ 55,043,174 ​ 54,317,265 Retained earnings ​ 9,486,899 ​ 5,668,713 Treasury stock, at cost, 2,096,451 shares at June 30, 2024 and at September 30, 2023 ​ ( 21,368,537 ) ​ ( 21,368,537 ) ​ ​ ​ ​ ​ ​ ​ Total shareholders’ equity ​ ​ 43,181,125 ​ ​ 38,636,984 ​ ​ ​ ​ ​ ​ ​ Total liabilities and shareholders’ equity ​ $ 59,782,945 ​ $ 62,957,451 ​ The accompanying notes are an integral part of these statements. ​ 1 Table of Contents INNOVATIVE SOLUTIONS AND SUPPORT, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended June 30, ​ Nine Months Ended June 30, ​ ​ 2024 2023 2024 2023 Net Sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product ​ $ 5,127,056 ​ $ 6,575,411 ​ $ 14,446,753 ​ $ 17,608,769 ​ Customer service ​ ​ 6,408,961 ​ ​ 1,318,214 ​ ​ 15,734,430 ​ ​ 3,774,666 ​ Engineering development contracts ​ 229,618 ​ 65,583 ​ 1,632,031 ​ 432,482 ​ Total net sales ​ 11,765,635 ​ 7,959,208 ​ 31,813,214 ​ 21,815,917 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product ​ 2,106,629 ​ 2,831,511 ​ 6,235,668 ​ 7,450,205 ​ Customer service ​ ​ 3,101,875 ​ ​ 371,359 ​ ​ 7,291,096 ​ ​ 1,088,014 ​ Engineering development contracts ​ 277,310 ​ 21,692 ​ 901,104 ​ 79,098 ​ Total cost of sales ​ 5,485,814 ​ 3,224,562 ​ 14,427,868 ​ 8,617,317 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit ​ 6,279,821 ​ 4,734,646 ​ 17,385,346 ​ 13,198,600 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ 1,099,367 ​ 851,296 ​ 3,031,630 ​ 2,387,939 ​ Selling, general and administrative ​ 3,143,334 ​ 2,395,714 ​ 9,058,347 ​ 7,104,212 ​ Total operating expenses ​ 4,242,701 ​ 3,247,010 ​ 12,089,977 ​ 9,492,151 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ 2,037,120 ​ 1,487,636 ​ 5,295,369 ​ 3,706,449 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ ( 172,784 ) ​ — ​ ( 704,267 ) ​ — ​ Interest income ​ 5,826 ​ 185,652 ​ 121,505 ​ 432,495 ​ Other income ​ 12,869 ​ 90,049 ​ 57,040 ​ 131,504 ​ Income before income taxes ​ 1,883,031 ​ 1,763,337 ​ 4,769,647 ​ 4,270,448 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income tax expense ​ 330,511 ​ 339,958 ​ 951,461 ​ 877,315 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 1,552,520 ​ $ 1,423,379 ​ $ 3,818,186 ​ $ 3,393,133 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income per common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.09 ​ $ 0.08 ​ $ 0.22 ​ $ 0.19 ​ Diluted ​ $ 0.09 ​ $ 0.08 ​ $ 0.22 ​ $ 0.19 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ 17,461,652 ​ 17,576,969 ​ 17,455,903 ​ 17,415,358 ​ Diluted ​ 17,467,259 ​ 17,577,588 ​ 17,476,089 ​ 17,419,265 ​ ​ The accompanying notes are an integral part of these statements. ​ 2 Table of Contents INNOVATIVE SOLUTIONS AND SUPPORT, INC. CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ Total ​ ​ Common ​ Paid-In ​ Retained ​ Treasury ​ shareholders’ ​ Stock Capital Earnings Stock equity Balance, September 30, 2023 ​ $ 19,543 ​ $ 54,317,265 ​ $ 5,668,713 ​ $ ( 21,368,537 ) ​ $ 38,636,984 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share-based compensation ​ ​ 6 ​ ​ 205,710 ​ ​ — ​ ​ — ​ ​ 205,716 Net income ​ ​ — ​ ​ — ​ ​ 1,057,350 ​ ​ — ​ ​ 1,057,350 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2023 ​ $ 19,549 ​ $ 54,522,975 ​ $ 6,726,063 ​ $ ( 21,368,537 ) ​ $ 39,900,050 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share-based compensation ​ ​ 7 ​ ​ 269,332 ​ ​ — ​ ​ — ​ ​ 269,339 Net income ​ ​ — ​ ​ — ​ ​ 1,208,316 ​ ​ — ​ ​ 1,208,316 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, March 31, 2024 ​ $ 19,556 ​ $ 54,792,307 ​ $ 7,934,379 ​ $ ( 21,368,537 ) ​ $ 41,377,705 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share-based compensation ​ ​ 33 ​ ​ 250,867 ​ ​ — ​ ​ — ​ ​ 250,900 Net income ​ ​ — ​ ​ — ​ ​ 1,552,520 ​ ​ — ​ ​ 1,552,520 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, June 30, 2024 ​ $ 19,589 ​ $ 55,043,174 ​ $ 9,486,899 ​ $ ( 21,368,537 ) ​ $ 43,181,125 ​ The accompanying notes are an integral part of these statements. ​ 3 Table of Contents INNOVATIVE SOLUTIONS AND SUPPORT, INC. CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Deficit) ​ ​ ​ ​ Total ​ ​ Common ​ Paid-In ​ Retained ​ Treasury ​ shareholders’ ​ Stock Capital Earnings Stock equity Balance, September 30, 2022 ​ $ 19,413 ​ $ 52,458,121 ​ ​ ( 359,042 ) ​ $ ( 21,368,537 ) ​ $ 30,749,955 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share-based compensation ​ ​ — ​ ​ 233,125 ​ ​ — ​ ​ — ​ ​ 233,125 Exercise of stock options ​ ​ 57 ​ ​ 408,789 ​ ​ — ​ ​ — ​ ​ 408,846 Net income ​ ​ — ​ ​ — ​ ​ 698,651 ​ ​ — ​ ​ 698,651 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2022 ​ $ 19,470 ​ $ 53,100,035 ​ $ 339,609 ​ $ ( 21,368,537 ) ​ $ 32,090,577 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share-based compensation ​ ​ 48 ​ ​ 783,398 ​ ​ — ​ ​ — ​ ​ 783,446 Net income ​ ​ — ​ ​ — ​ ​ 1,271,103 ​ ​ — ​ ​ 1,271,103 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, March 31, 2023 ​ $ 19,518 ​ $ 53,883,433 ​ $ 1,610,712 ​ $ ( 21,368,537 ) ​ $ 34,145,126 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share-based compensation ​ ​ 15 ​ ​ 214,069 ​ ​ — ​ ​ — ​ ​ 214,084 Net income ​ ​ — ​ ​ — ​ ​ 1,423,379 ​ ​ — ​ ​ 1,423,379 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, June 30, 2023 ​ $ 19,533 ​ $ 54,097,502 ​ $ 3,034,091 ​ $ ( 21,368,537 ) ​ $ 35,782,589 ​ The accompanying notes are an integral part of these statements. ​ ​ 4 Table of Contents INNOVATIVE SOLUTIONS AND SUPPORT, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended June 30, ​ ​ 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 3,818,186 ​ $ 3,393,133 ​ Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 1,437,232 ​ 258,892 ​ Share-based compensation expense ​ ​ ​ ​ ​ ​ ​ Stock options ​ 265,024 ​ 646,172 ​ Stock awards ​ 460,931 ​ 584,483 ​ Impairment of long-lived assets ​ ​ — ​ ​ 44,400 ​ Gain on disposal of property and equipment ​ ( 160,577 ) ​ — ​ Deferred income taxes ​ ( 623,683 ) ​ ( 597,221 ) ​ (Increase) decrease in: ​ ​ ​ ​ ​ ​ ​ Accounts receivable ​ 2,414,052 ​ ( 1,646,558 ) ​ Contract assets ​ ( 611,162 ) ​ ( 89,420 ) ​ Inventories ​ ( 3,275,938 ) ​ ( 393,509 ) ​ Prepaid expenses and other current assets ​ 309,943 ​ ( 71,679 ) ​ Other non-current assets ​ ( 364,041 ) ​ ( 104,626 ) ​ Increase (decrease) in: ​ ​ ​ ​ ​ ​ ​ Accounts payable ​ 2,006,601 ​ 58,251 ​ Accrued expenses ​ ( 92,237 ) ​ ( 854,793 ) ​ Income taxes ​ ( 221,615 ) ​ ( 133,370 ) ​ Contract liabilities ​ ( 11,825 ) ​ ( 156,230 ) ​ Net cash provided by operating activities ​ 5,350,891 ​ 937,925 ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​ ​ ​ ​ ​ Purchases of property and equipment ​ ( 511,927 ) ​ ( 165,084 ) ​ Acquisition of a business ​ — ​ ( 35,860,000 ) ​ Proceeds from the sale of property and equipment ​ ​ 2,225,810 ​ ​ — ​ Net cash provided by (used in) investing activities ​ 1,713,883 ​ ( 36,025,084 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ ​ ​ ​ ​ Repayments of term note ​ ​ ( 19,500,000 ) ​ ​ — ​ Proceeds from line of credit note ​ ​ 29,044,688 ​ ​ — ​ Repayments of line of credit note ​ ​ ( 19,185,614 ) ​ ​ — ​ Proceeds from term note ​ — ​ 20,000,000 ​ Proceeds from exercise of stock options ​ ​ — ​ 408,846 ​ Net cash (used in) provided by financing activities ​ ( 9,640,926 ) ​ 20,408,846 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (decrease) increase in cash and cash equivalents ​ ( 2,576,152 ) ​ ( 14,678,313 ) ​ Cash and cash equivalents, beginning of year ​ 3,097,193 ​ 17,250,546 ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents, end of year ​ $ 521,041 ​ $ 2,572,233 ​ ​ ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION ​ ​ ​ ​ ​ ​ ​ Cash paid for income taxes ​ $ 1,913,456 ​ $ 1,608,506 ​ ​ ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION ​ ​ ​ ​ ​ ​ ​ Transfer from prepaid inventory to purchases of property and equipment ​ $ 3,729,000 ​ $ — ​ Transfer from prepaid inventory to inventory ​ $ 5,124,521 ​ $ — ​ Transfer from prepaid inventory to goodwill ​ $ 516,580 ​ $ — ​ Transfer from prepaid inventory to intangible assets, net ​ $ 800,000 ​ $ — ​ ​ The accompanying notes are an integral part of these statements. ​ 5 Table of Contents INNOVATIVE SOLUTIONS AND SUPPORT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ​ 1. Summary of Significant Accounting Policies Certain of Innovative Solutions and Support, Inc.’s (the “Company,” “IS&S,” “we” or “us”) significant accounting policies are described below. All of the Company’s significant accounting policies are disclosed in the notes to the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023. Description of the Company The Company 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, autothrottles 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, integrated standby units with autothrottle and advanced Global Positioning System (“GPS”) receivers that enable reduced carbon footprint navigation, communication and navigation products and inertial reference units. The Company has continued to position itself as a system integrator, which capability provides the Company with the 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 and, United States Department of Defense (“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. On June 30, 2023 (the “Acquisition Date”), the Company entered into an Asset Purchase and License 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 Acquisition within Note 2, “Supplemental Balance Sheet Disclosures” below for more details. Basis of Presentation The accompanying unaudited condensed consolidated financial statements are presented pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) in accordance with the disclosure requirements for the quarterly report on Form 10-Q and, therefore, do not include all of the information and footnotes required by generally accepted accounting principles in the United States (“GAAP”) for complete annual financial statements. In the opinion of Company management, the unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary to state fairly the results for the interim periods presented. 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 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. 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. 6 Table of Contents Use of Estimates The financial statements of the Company have been prepared in accordance with GAAP, which require management to make estimates and assumptions that affect the amounts reported in the financial statements. 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 Engineering Development Contract (“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 condensed consolidated statements of operations in the period they are determined. Principles of 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 screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. 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 are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any excess of the purchase price over the fair value of the net assets acquired is recognized as goodwill. During the measurement period, which may be up to one year from the acquisition date, the Company adjusts the provisional amounts of assets acquired and liabilities assumed with the corresponding offset to goodwill to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded within the Company’s condensed consolidated statements of operations. Intangible Assets The Company’s identifiable intangible assets primarily consist of license agreement 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 in the notes of the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023. 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 7 Table of Contents 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 at fiscal year-end September 30 or in an interim period if certain changes in circumstances indicate a possibility that an impairment may exist. Factors to consider that may indicate an impairment may exist are: ● macroeconomic conditions; ● industry and market considerations, such as a significant adverse change in the business climate; ● cost factors; ● overall financial performance, such as current-period operating results or cash flow declines combined with a history of operating results or cash flow declines; ● a projection or forecast that demonstrates continuing declines in the cash flow or the inability to improve the operations to forecasted levels; and ● any entity-specific events. If the Company determines that it is more likely than not that the fair value of the reporting unit is below the carrying amount as part of its qualitative assessment, a quantitative assessment of goodwill is required. 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 condensed consolidated statements of operations. 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. 8 Table of Contents 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 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 ​ $ 499,787 ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ $ — ​ $ — ​ 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 The Company enters into sales arrangements with customers that, in general, provide for the Company to design, develop, manufacture, deliver and service 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 9 Table of Contents 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. If the contract contains multiple performance obligation, the Company determines standalone selling price based on the price at which each 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. 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. 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 in which 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 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. 10 Table of Contents 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 contract liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contract ​ Contract ​ ​ Assets ​ Liabilities September 30, 2023 ​ $ 487,139 ​ $ 143,359 Amount transferred to receivables from contract assets ​ ( 363,719 ) ​ ​ — Contract asset additions ​ 974,881 ​ ​ — Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period ​ — ​ ​ ( 99,045 ) Increases due to invoicing prior to satisfaction of performance obligations ​ — ​ ​ 87,220 June 30, 2024 ​ $ 1,098,301 ​ $ 131,534 ​ Concentrations Major Customers and Products 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 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 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. 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 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 credit risks. 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 11 Table of Contents 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 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 did not have a material impact on our condensed consolidated financial statements or related disclosures. ​ 2. Supplemental Balance Sheet Disclosures Acquisition On June 30, 2023, the Company entered into an Asset Purchase and License Agreement with Honeywell whereby Honeywell sold certain assets and granted perpetual license rights to manufacture and sell licensed products related to its inertial, communication and navigation product lines to the Company. The Transaction involves a sale of certain inventory, equipment and customer-related documents; an assignment of certain customer contracts; and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its inertial, communication and navigation product lines to repair, overhaul, manufacture sell, import, export and distribute certain products to the Company. The 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 9, “Loan Agreement” for further details. The purchase consideration transferred at the Acquisition Date was $ 35.9 million, which was entirely cash. In the third quarter of 2024 and within one year from the Acquisition Date, the Company finalized its accounting of the Transaction. 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 ​ ​ ​ ​ ​ 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 ​ $ ( 3,012,626 ) (d) $ 7,023,534 Equipment ​ ​ 2,609,000 ​ ​ 3,675,000 (d) ​ 6,284,000 Construction in progress ​ ​ 1,238,000 ​ ​ — ​ ​ 1,238,000 Intangible assets (b) ​ ​ 20,900,000 ​ ​ ( 3,660,000 ) (d) ​ 17,240,000 Goodwill (c) ​ ​ 4,608,041 ​ ​ ( 533,575 ) (d)(e) ​ 4,074,466 Assets acquired ​ ​ 39,391,201 ​ ​ ( 3,531,201 ) ​ ​ 35,860,000 Accrued expenses ​ ​ ( 3,531,201 ) ​ ​ 3,531,201 (e) ​ — 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 12 Table of Contents value of finished goods was determined based on the estimated selling price, net of selling costs and a margin on the selling activities, which resulted in a change in the value of the finished goods. (b) Intangible assets consist of license agreement related to the license rights to use certain Honeywell intellectual property and customer relationships and are recorded at estimated fair values. The estimated fair value of the license agreement is based on a variation of the income valuation approach and is determined using the relief from royalty method. The estimated fair value of the customer relationships is based on a variation of the income valuation approach known as the multi-period excess earnings method. Refer to Intangible assets within Note 2, “Supplemental Balance Sheet Disclosures” for further details. (c) Goodwill represents the excess of the purchase consideration over the estimated fair value of the assets acquired and liabilities assumed. The goodwill recognized is primarily attributable to the expected synergies from the Transaction. Goodwill resulting from the Transaction has been assigned to the Company’s one operating segment and one reporting unit. The goodwill is not expected to be deductible for income tax purposes. 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. (d) In the third quarter of 2024 and within one year from the Acquisition Date, the Company identified measurement period adjustments related to fair value estimates. The measurement period adjustments were due to the refinement of inputs used to calculate the fair value of the prepaid inventory, equipment, license agreement and customer relationships based on facts and circumstances that existed as of the Acquisition Date. One of the refinements of inputs used was a change in classification of prepaid inventory to equipment of $ 3.7 million. The adjustments resulted in an overall increase to goodwill of $ 3.0 million. As a result of the measurement period adjustments to the estimated fair values of equipment and customer relationships, during the third quarter of 2024, the Company recognized $ 218,623 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. (e) During the fourth quarter of 2023, the Company identified measurement period adjustments related to the fair value estimates for accrued expenses. While the Asset Purchase and License Agreement indicated an amount of liabilities related to open supplier purchase orders to be assumed by the Company as of the Acquisition Date, it was determined that there were no actual liabilities outstanding related to these open supplier purchase orders as of the Acquisition Date; therefore, the $ 3.5 million assumed liabilities preliminarily recorded were reversed. The adjustments resulted in an overall decrease to goodwill of $ 3.5 million; the adjustments have no impact to the condensed consolidated statement of operations. Transition services agreement Concurrent with the Transaction, the Company entered into a transition services agreement (the “TSA”) with Honeywell, at no additional costs, to receive certain transitional services and technical support during the transition service period. The Company accounted for the TSA separate from business combination and have recognized $ 140,000 in prepaid expenses and other current assets at September 30, 2023 within the condensed consolidated balance sheets 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. 13 Table of Contents Acquisition and related costs 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. 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 ​ Nine Months Ended ​ June 30, 2023 Net sales ​ $ 12,035,209 ​ $ 36,846,252 Net income ​ $ 2,859,238 ​ $ 7,760,831 ​ 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 unaudited pro forma results do not include any incremental cost savings that may result from the integration. Inventories Inventories are stated at the lower of cost (first-in, first-out) or net realizable value, net of write-downs for excess and obsolete inventory and consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, September 30, ​ ​ 2024 ​ 2023 Raw materials ​ $ 12,277,086 ​ $ 5,162,177 Work-in-process ​ 1,242,259 ​ 966,888 Finished goods ​ 1,020,827 ​ 10,648 ​ ​ $ 14,540,172 ​ $ 6,139,713 ​ Prepaid expenses and other current assets Prepaid expenses and other current assets consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ June 30, September 30, ​ ​ 2024 ​ 2023 Prepaid insurance ​ $ 157,771 ​ $ 623,186 Other ​ 826,913 ​ 449,826 ​ ​ $ 984,684 ​ $ 1,073,012 ​ 14 Table of Contents Intangible assets ​ The Company’s intangible assets other than goodwill are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of June 30, 2024 ​ Gross Carrying Accumulated Accumulated Net Carrying ​ ​ Value Impairment Amortization Value License agreement acquired from the Transaction (a) ​ $ 5,600,000 ​ $ — ​ $ — ​ $ 5,600,000 Customer relationships acquired from the Transaction (a) ​ 11,640,000 ​ — ​ ( 1,164,000 ) ​ 10,476,000 Licensing and certification rights (b) ​ 696,506 ​ ( 44,400 ) ​ ( 638,285 ) ​ 13,821 Total ​ $ 17,936,506 ​ $ ( 44,400 ) ​ $ ( 1,802,285 ) ​ $ 16,089,821 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ (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 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. (b) The licensing and certification rights are amortized over a defined number of units. 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 June 30, 2024 is as follows: ​ ​ ​ ​ 2024 (three months remaining) $ 291,000 2025 ​ ​ 1,164,000 2026 ​ ​ 1,164,000 2027 ​ 1,164,000 2028 ​ 1,164,000 Thereafter ​ 5,529,000 Total ​ $ 10,476,000 ​ 15 Table of Contents Assets Held for Sale ​ As of September 30, 2023, the Company classified $ 2.1 million of net property and equipment as “assets held for sale” on the condensed consolidated balance sheet. During the fourth quarter 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 sold its assets held for sale, the King Air aircraft, for $ 2.3 million. The resultant gain on the sale of $ 162,000 is a reduction to selling, general and administrative expense in the quarter ended December 31, 2023. ​ Property and equipment Property and equipment, net consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, September 30, ​ ​ 2024 ​ 2023 Computer equipment ​ $ 2,405,850 ​ $ 2,343,996 Furniture and office equipment ​ 984,206 ​ 970,230 Manufacturing facility ​ 6,198,690 ​ 5,926,584 Equipment ​ 13,025,229 ​ 9,554,197 Land ​ 1,021,245 ​ 1,021,245 ​ ​ 23,635,220 ​ 19,816,252 Less accumulated depreciation and amortization ​ ( 12,045,013 ) ​ ( 11,923,825 ) ​ ​ $ 11,590,207 ​ $ 7,892,427 ​ 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 Other assets consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, September 30, ​ ​ 2024 ​ 2023 Operating lease right-of-use assets ​ $ 5,282 ​ $ 15,065 Other non-current assets ​ 540,698 ​ 176,657 ​ ​ $ 545,980 ​ $ 191,722 ​ 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 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. 16 Table of Contents Accrued expenses Accrued expenses consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, September 30, ​ ​ 2024 ​ 2023 Warranty ​ $ 550,081 ​ $ 562,645 Salary, benefits and payroll taxes ​ 1,173,868 ​ 1,181,219 Professional fees ​ 419,082 ​ 200,668 Operating lease ​ ​ 5,282 ​ ​ 12,965 Income tax payable ​ ​ — ​ ​ 116,697 Other ​ 670,092 ​ 844,131 ​ ​ $ 2,818,405 ​ $ 2,918,325 ​ Warranty cost and accrual information for the three- and nine-month periods ended June 30, 2024 is highlighted below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ending ​ Nine Months Ended ​ ​ June 30, 2024 June 30, 2024 ​ Warranty accrual, beginning of period ​ $ 574,971 ​ $ 562,645 ​ Accrued expense ​ 8,477 ​ 81,688 ​ Warranty cost ​ ( 33,367 ) ​ ( 94,252 ) ​ Warranty accrual, end of period ​ $ 550,081 ​ $ 550,081 ​ ​ ​ 3. Income Taxes 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. 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 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. ​ 4. Shareholders’ Equity and Share-Based Payments At June 30, 2024, the Company’s Amended and Restated Articles of Incorporation provides the Company authority to issue 75,000,000 shares of common stock and 10,000,000 shares of preferred stock. Share-Based Compensation The Company accounts for share-based compensation under the provisions of ASC Topic 718, “ Compensation – Stock Compensation” , by using the fair value method for expensing stock options 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 17 Table of Contents 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. 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 Amended and Restated 2019 Plan is 1,950,000 , plus the shares that were authorized to be granted but have not been issued under the Company’s 2009 Stock-Based Incentive Compensation Plan as of the effective date of the Amended and Restated 2019 Plan (i.e., April 18, 2024). 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 Amended and Restated 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 Amended and Restated 2019 Plan, the aggregate number and kind of shares of common stock available under the Amended and Restated 2019 Plan, any applicable individual limits on the number of shares of common stock available for awards under the Amended and Restated 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. 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. 18 Table of Contents 5. Earnings Per Share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended June 30, ​ Nine Months Ended June 30, ​ ​ 2024 2023 2024 2023 Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 1,552,520 ​ $ 1,423,379 ​ $ 3,818,186 ​ $ 3,393,133 ​ Denominator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic weighted average shares ​ 17,461,652 ​ 17,576,969 ​ 17,455,903 ​ 17,415,358 ​ Dilutive effect of share-based awards ​ 5,607 ​ 619 ​ 20,186 ​ 3,907 ​ Diluted weighted average shares ​ 17,467,259 ​ 17,577,588 ​ 17,476,089 ​ 17,419,265 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income per common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.09 ​ $ 0.08 ​ $ 0.22 ​ $ 0.19 ​ Diluted ​ $ 0.09 ​ $ 0.08 ​ $ 0.22 ​ $ 0.19 ​ ​ 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. 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 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 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. 6. Commitments and Contingencies 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 aggregate, have a material effect on the results of operations or financial position. ​ 7. Related Party Transactions ​ In recent years, the Company has had sales to AML Global Eclipse, LLC (“Eclipse”), whose principal shareholder is also a principal shareholder in the Company. Prior balances are disclosed below for comparability. ​ Sales to Eclipse amounted to approximately $ 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. ​ 8. Leases 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 19 Table of Contents 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. 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 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 a 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. 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 Assets ​ ​ Operating leases Other assets ​ $ 5,282 ​ ​ ​ ​ ​ ​ Liabilities ​ Operating leases - current Accrued expenses ​ $ 5,282 Operating leases - noncurrent Other liabilities ​ $ — Total lease liabilities ​ $ 5,282 ​ 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 ​ ​ ​ ​ Ending ​ Operating ​ June 30, Leases ​ ​ 2025 ​ ​ 6,115 Total minimum lease payments ​ $ 6,115 Amount representing interest ​ ( 833 ) Present value of minimum lease payments ​ $ 5,282 Current portion ​ 5,282 Long-term portion of lease obligations ​ $ — ​ ​ 20 Table of Contents 9. 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 (“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. ​ The interest rate applicable to loans outstanding under the Term Loan is a floating interest rate equal to the sum of (A) the Term SOFR Rate (as defined in the Term Note) plus (B) an unadjusted spread of the Applicable SOFR Margin plus (C) a SOFR adjustment of ten basis points. The Applicable SOFR Margin ranges from 1.5 % to 2.5 % depending on the Company’s funded debt to EBITDA ratio. Commencing on June 30, 2023, the Term Loan 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 was 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. ​ On December 19, 2023, the Company and PNC entered into an Amendment to the Loan (the “Restated Loan Amendment”) and a corresponding Amended and Restated Revolving Line of Credit Note (“Restated Line of Credit Note”) and Amended and Restated Line of Credit and Investment Sweep Rider (the “Restated Rider”), to increase the aggregate principal amount available under the Company’s senior secured revolving line of credit from $ 10,000,000 to $ 30,000,000 and extend the maturity date until December 19, 2028. Under the terms of the Restated Rider, at the end of each business day any cash balance will be applied by PNC to the outstanding principal balance under the terms of the Restated Line of Credit Note. 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 the Term Note. ​ 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 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. ​ 10. 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. ​ 21 Table of Contents