What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-12-30 compared with 2024-01-12 · 303 added, 234 removed, 661 unchanged (45% of the section changed)

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We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Fair Value of Acquired License Agreements and Customer Relationships

As described further in Note 4 to the financial statements, on June 30, 2023, the Company entered into an Asset Purchase and License Agreement with Honeywell International, Inc., whereby Honeywell sold certain assets and granted perpetual license rights to manufacture and sell licensed products related to its inertial, communication and navigation product lines to the Company.

Fair Value of Acquired Intangible Assets

As described further in Note 4 to the financial statements, on September 27, 2024, the Company entered into and closed the transaction contemplated by the Asset Purchase and License Agreement (the “September 2024 Honeywell Agreement”) with Honeywell International Inc.

(“Honeywell”).

Pursuant to the September 2024 Honeywell Agreement, Honeywell sold, assigned or licensed certain assets related to its various generations of military display generators and flight control computers, including a sale of certain inventory, equipment and customer-related documents; an assignment of certain contracts; and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its various generations of military display generators and flight control computers to repair, overhaul, manufacture sell, import, export and distribute certain products to the Company.

The acquisition was accounted for as a business combination.

The Company accounts for acquisitions of entities or asset groups that qualify as businesses using the acquisition method of accounting.

Accordingly, the purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date, which are measured in accordance with fair value measurement principles.

The allocation of the total purchase consideration to the estimated fair values of the acquired license agreements and customer relationships were $5.7 million and $10.7 million, respectively.

Management estimated the fair value of the acquired license agreements using the relief from royalty method, and estimated the fair value of the acquired customer relationships using the multi-period excess earnings method.

Accordingly, the purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date, which are

measured in accordance with fair value measurement principles.

The Company’s allocation of the total purchase consideration to the estimated fair values of acquired assets included a fair value of $2,300,000 ascribed to the acquired license agreements.

Management estimated the fair value of the acquired license agreements using the relief from royalty method.

The significant assumptions include:

future expected cash flows from customer contracts and license agreements, (ii) historical and expected customer attrition rates, and (iii) discount rates.

We identified the fair value of the acquired license agreements and customer relationships intangible assets as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of these assets.

(i) future expected revenues from customer contracts and license agreements, (ii) royalty rates, and (iii) discount rates.

We identified the fair value of the acquired license agreement intangible assets acquired as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of the asset.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our valuation specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions.

Our audit procedures related to the fair value of the acquired license agreements and customer relationships intangible assets included the following, among others.

• Evaluated the design and implementation of key controls relating to the fair valuations performed on the acquired license agreements and customer relationships intangible assets.

Our audit procedures related to the fair value of the acquired license agreements included the following, among others.

● Evaluated the design and implementation of key controls relating to the fair valuations performed on the acquired license agreement intangible assets.

These procedures included, among others, understanding management’s processes over the development of the fair value estimate and related key inputs and assumptions, and over the evaluation of the competency and objectivity of management's third-party valuation specialist.

● Tested the mathematical accuracy of the valuation models utilized by the Company and the completeness, accuracy and relevance of underlying data used in the model.

• Assessed the reasonableness of management’s estimated net cash flows by inquiring of management regarding its processes for developing projected financial information and comparing the projections to historical results achieved by Honeywell and evaluating available evidence from after the transaction.

Evaluated the reasonableness of management’s revenue attrition assumptions and tested the source information, including the number of existing customers through inspection of customer contracts.

• Utilized valuation specialists to evaluate the reasonableness of the discount rates used in the valuation.

• Conducted sensitivity analysis around the discount rate and revenue attrition assumptions utilized by management.

● Assessed the reasonableness of management’s estimated revenue cash flows by obtaining an understanding of management’s processes for developing projected financial information and comparing the projections to historical results achieved by Honeywell.

● Evaluated the reasonableness of management’s revenue assumptions and tested the source information, including the number of existing customers, through inspection of customer contracts.

● Utilized valuation specialists to evaluate the reasonableness of the royalty rates and discount rates used in the valuation.

● Conducted sensitivity analysis around the royalty rates and discount rate assumptions utilized by management.

/s/ GRANT THORNTON LLP

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Philadelphia, Pennsylvania

January 12, 2024

December 30, 2024

INNOVATIVE SOLUTIONS AND SUPPORT, INC.

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Accrued expenses

Contract liabilities

Contract liability

Total current liabilities

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

No shares issued and outstanding at September 30, 2023 and 2022

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

Common stock, $ .001 par value:

75,000,000 shares authorized, 19,543,441 and 19,412,664 issued at September 30, 2023 and 2022, respectively

75,000,000 shares authorized, 19,599,052 and 19,543,441 issued at September 30, 2024 and September 30, 2023, respectively

Additional paid-in capital

Retained earnings (accumulated deficit)

Retained earnings

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

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Total liabilities and shareholders’ equity

The accompanying notes are an integral part of these statements.

The accompanying notes are an integral part of these consolidated financial statements.

INNOVATIVE SOLUTIONS AND SUPPORT, INC.

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For the Fiscal Year Ended September 30,

Customer service

Engineering development contracts

Total net sales

Cost of sales:

Customer service

Engineering development contracts

Total cost of sales

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Income before income taxes

Income tax expense (benefit)

( 1,087,783 )

Income tax expense

Net income per common share:

Weighted average shares outstanding:

The accompanying notes are an integral part of these statements.

The accompanying notes are an integral part of these consolidated financial statements.

INNOVATIVE SOLUTIONS AND SUPPORT, INC.

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Exercise of stock options

Issuance of stock to directors

Dividends declared

( 8,607,192 )

Issuance of restricted stock awards

Balance, September 30, 2022

( 21,368,537 )

Share-based compensation

Exercise of stock options

Issuance of stock to directors

Issuance of restricted stock awards

Balance, September 30, 2023

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Share-based compensation

Exercise of stock options

Issuance of stock to directors

Balance, September 30, 2024

( 21,368,537 )

The accompanying notes are an integral part of these statements.

The accompanying notes are an integral part of these consolidated financial statements.

INNOVATIVE SOLUTIONS AND SUPPORT, INC.

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Stock options

Restricted stock awards

Impairment of long-lived assets

1 unchanged sentence

( 1,191,743 )

Excess and obsolete inventory cost (recovery)

Excess and obsolete inventory cost

Deferred income taxes

3 unchanged sentences

( 2,868,768 )

( 5,446,257 )

Contract assets

( 1,192,921 )

( 2,338,176 )

Prepaid expenses and other current assets

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Accrued expenses

Income taxes payable

Contract liabilities

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Purchases of property and equipment

Proceeds from the sale of property and equipment

Acquisition of assets

( 4,249,460 )

Acquisition of a business

( 14,200,000 )

( 35,860,000 )

Proceeds from the sale of property and equipment

Net cash (used in) provided by investing activities

( 16,881,440 )

( 36,158,373 )

CASH FLOWS FROM FINANCING ACTIVITIES:

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Debt payments

Debt proceeds

Dividend paid

( 43,825,825 )

Net cash provided by (used in) financing activities

( 19,771,082 )

Net (decrease) increase in cash and cash equivalents and restricted cash

Debt proceeds

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

( 2,558,216 )

( 14,153,353 )

Cash and cash equivalents and restricted cash, beginning of year

Cash and cash equivalents and restricted cash, end of year

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for income taxes

The accompanying notes are an integral part of these statements.

Cash paid for interest

SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION

Transfer from prepaid inventory to purchases of property and equipment

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 consolidated financial statements.

INNOVATIVE SOLUTIONS AND SUPPORT, INC.

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(the “Company,” “IS&S,” “we” or “us”) was incorporated in Pennsylvania on February 12, 1988.

The Company operates in one business segment as a systems integrator that designs, develops, manufactures, sells and services air data equipment, engine display systems, standby equipment, primary flight guidance and cockpit display systems for retrofit applications and original equipment manufacturers (“OEMs”).

The Company supplies integrated Flight Management Systems (“FMS”), Flat Panel Display Systems (“FPDS”), FPDS with Autothrottle, air data equipment, Integrated Standby Units (“ISU”), ISU with Autothrottle and advanced GPS receivers that enable reduced carbon footprint navigation, communications, navigation and inertial reference products.

The Company operates in one business segment as a systems integrator that designs, develops, manufactures, sells and services avionics products and systems for retrofit applications and original equipment manufacturers (“OEMs”).

The Company has continued to position itself as a system integrator, which provides the Company with the capability and potential to generate more substantive orders over a broader product base.

This strategy, as both a manufacturer and integrator, is designed to leverage the latest technologies developed for the computer and telecommunications industries into advanced and cost-effective solutions for the general aviation, commercial air transport, DoD/governmental and foreign military markets.

This approach, combined with the Company’s industry experience, is designed to enable IS&S to develop high-quality products and systems, to reduce product time to market and to achieve cost advantages over products offered by its competitors.

Customers include various OEMs, commercial air transport carriers and corporate/general aviation companies, DoD and its commercial contractors, aircraft operators, aircraft modification centers, government agencies and foreign militaries.

On June 30, 2023 (the “Acquisition Date”), the Company entered into an Asset Purchase and License Agreement (the “Honeywell Agreement”) with Honeywell International, Inc.

(“Honeywell”) whereby Honeywell sold certain assets and granted perpetual license rights to manufacture and sell licensed products related to its inertial, communication and navigation product lines (the “Product Lines”) to the Company (the “Transaction”).

On September 27, 2024, the Company entered into and closed the transactions contemplated by that certain Asset Purchase and License Agreement (the “September 2024 Honeywell Agreement”) with Honeywell International Inc.

(“Honeywell”).

Pursuant to the Agreement, Honeywell sold, assigned or licensed certain assets related to its various generations of military display generators and flight control computers, including a sale of certain inventory, equipment and customer-related documents; an assignment of certain contracts; and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its various generations of military display generators and flight control computers to repair, overhaul, manufacture sell, import, export and distribute certain products to the Company.

The September 2024 Honeywell Agreement allows the Company to diversify its product offerings in the aerospace industry.

The Company determined that the September 2024 Honeywell Agreement 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.

See Footnote 4.

Acquisition, for additional information.

On July 22, 2024, the Company completed the acquisition of 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 (the “July 2024 Honeywell Asset Acquisition”) related to its communication and navigation product lines to manufacture, upgrade and repair certain additional products for consideration of $ 4.2 million in cash.

The Company accounted for the transaction as an asset acquisition .

See Footnote 4.

Acquisition, for additional information.

On June 30, 2023, the Company entered into an Asset Purchase and License Agreement with Honeywell International, Inc.

( the “June 2023 Honeywell Agreement”) 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 involved a sale of certain inventory, equipment and customer-related documents;

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See Note 4, “Acquisition” for more details.

See Footnote 4.

Acquisition, for additional information.

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 acquisitition method of accounting.

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

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

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

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

solicitation and offers under the ATM Sales Agreement or terminate the ATM Sales Agreement.

The Company has provided the Sales Agent with customary indemnification rights, and the Sales Agent will be entitled to compensation for its services of up to 3.0 % of the gross sales price per share of the shares of the Company’s common stock sold through the Sales Agent.

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

During fiscal 2023, we did not sell any shares of common stock under the ATM Sales Agreement.

During fiscal years 2024 and 2023, we did not sell any shares of common stock under the ATM Sales Agreement.

Concentrations

Major Customers and Products

In fiscal 2023, 2022 and 2021, the Company derived 54 %, 58 % and 59 %, respectively, of total sales from five customers, although not all the same customers in each year.

Accounts receivable and contract assets related to those top five customers was $ 3.5 million, $ 3.3 million and $ 2.1 million as of September 30, 2023, 2022 and 2021, respectively.

In fiscal year 2023, the three largest customers, Pilatus, ATSG and Textron accounted for 23 %, 12 % and 10 % of total revenue, respectively.

In fiscal year 2022, the three largest customers, Pilatus, ATSG and Textron accounted for 22 %, 11 % and 11 % of total revenue, respectively.

In fiscal year 2021, the two largest customers, Pilatus and Textron accounted for 20 % and 17 % of total revenue, respectively.

Flat panel product sales were 99 %, 98 % and 88 % of total product sales in the years ended September 30, 2023, 2022 and 2021, respectively.

Product sales of air data systems and components were 1 %, 2 % and 12 % of total product sales for the years ended September 30, 2023, 2022 and 2021, respectively.

Product sales to government contractors and agencies accounted for approximately 9 %, 14 % and 18 % of total product sales during fiscal years 2023, 2022 and 2021, respectively.

The government agency or general contractor typically retains the right to terminate the contract at any time at its convenience.

Upon alteration or termination of these contracts, IS&S is typically entitled to an equitable adjustment to the contract price so that it would be compensated for delivered items and allowable costs incurred.

Accordingly, because these contracts can be terminated, the Company cannot be assured that its backlog will result in sales.

Major Customers

In fiscal years 2024, 2023 and 2022, the Company derived 42 %, 54 % and 58 %, respectively, of total sales from five customers, although not all the same customers in each year.

Accounts receivable and contract assets related to those top five customers were $ 7.6 million, $ 3.5 million and $ 3.3 million as of fiscal years ended September 30, 2024, 2023 and 2022, respectively.

Major Suppliers

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

During fiscal 2023, the Company had four suppliers that accounted for 49.0 % of the Company’s total inventory related purchases.

During fiscal 2022, the Company had three suppliers that accounted for 33.7 % of the Company’s total inventory related purchases.

During fiscal 2021, the Company had one supplier that accounted for 14.9 % of the Company’s total inventory related purchases.

During fiscal year 2024, the Company had four suppliers that accounted for 63.1 % of the Company’s total inventory related purchases.

During fiscal year 2023, the Company had four suppliers that accounted for 49.0 % of the Company’s total inventory related purchases.

During fiscal year 2022, the Company had three suppliers that accounted for 33.7 % of the Company’s total inventory related purchases.

Concentration of Credit Risk

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Principles of Consolidation

The Company’s condensed consolidated financial statements include the accounts of its wholly-owned subsidiaries.

The Company’s consolidated financial statements include the accounts of its wholly-owned subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

Reclassification

The Company presented intangible assets, net, separately in the consolidated balance sheet as of September 30, 2023.

In order to conform to the presentation of the consolidated balance sheet as of September 30, 2023, the Company reclassified $ 60,348 from other assets to intangible assets, net, in the consolidated balance sheet as of September 30, 2022.

This reclassification has no impact on the Company’s net income for the years ended September 30, 2023 and 2022.

Historically, the Company presented Customer service and Engineering and development contracts Net Sales and Cost of sales separately on the Consolidated Statements of Operations.

For the fiscal year ended September 30, 2024, the Company has aggregated these items into one category, “Services” and reclassified all Customer service and Engineering and development contracts revenues as well as Cost of sales in order to conform the presentation of the consolidated Statements of Operations for Fiscal years ended September 30, 2023 and 2022.

Customer service sales of $ 11.1 million and Engineering and development contracts Net Sales of $ 1.1 million were aggregated into Services sales, for the Fiscal year ended September 30, 2023.

Customer service sales of $ 4.9 million and Engineering and development contracts Net Sales of $ 0.4 million were aggregated into Services sales, for the Fiscal year ended September 30, 2022.

Customer service Cost of sales of $ 3.4 million and Engineering and development contracts Cost of sales of $ 0.4 million were aggregated into Services Cost of sales, for the Fiscal year ended September 30, 2023.

Customer service Cost of sales of $ 1.5 million and Engineering and development contracts Cost of sales of $ 0.2 million were aggregated into Services Cost of sales for the Fiscal year ended September 30, 2022.

Use of Estimates

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Actual results could differ from those estimates.

Estimates are used in accounting for, among other items, valuation of tangible and intangible assets acquired, long term contracts, evaluation of allowances for doubtful accounts, inventory obsolescence, product warranty cost liabilities, income taxes, engineering and material costs on EDC programs, percentage of completion on EDC contracts, the useful lives of long-lived assets for depreciation and amortization, the recoverability of long-lived assets, evaluation of goodwill impairment and contingencies.

Estimates are used in accounting for, among other items, valuation of tangible and intangible assets acquired, long term contracts, evaluation of allowances for credit losses accounts, inventory obsolescence, product warranty cost liabilities, income taxes, engineering and material costs on engineering development contracts (“EDC”) programs, percentage of completion on EDC programs, the useful lives of long-lived assets for depreciation and amortization, the recoverability of long-lived assets, evaluation of goodwill impairment and contingencies.

Estimates and assumptions are reviewed periodically, and the effects of changes, if any, are reflected in the consolidated statements of operations in the period they are determined.

Business Combinations

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.

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Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded within the Company’s consolidated statements of operations.

We allocate the purchase price of acquired entities to the underlying tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values, with any excess recorded as goodwill.

The valuations of the acquired assets and liabilities will impact the determination of future operating results.

Determining the fair value of assets we acquire and liabilities we assume requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items.

We determine the fair values of intangible assets acquired generally in consultation with third-party valuation advisors.

Fair value adjustments to the assets and liabilities are recognized and the results of operations of the acquired business are included in our consolidated financial statements from the effective date of the acquisition.

Asset Acquisitions

Acquisitions that do not meet the definition of a business are accounted for as asset acquisitions.

The Company allocates the cost of the acquisition, including direct and incremental transaction costs, to the individual assets acquired and liabilities assumed on a relative fair value basis.

Goodwill is not recognized in an asset acquisition.

Intangible Assets

The Company’s identifiable intangible assets primarily consist of license agreements and customer relationships.

The Company’s identifiable intangible assets primarily consist of license agreements, customer relationships and backlog.

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.

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The quantitative assessment consists of a comparison of the fair value of the indefinite-lived intangible asset with its carrying amount.

The Company initially does a qualitative assessment for impairment of intangible assets and will utilize quantitative testing based on results from the qualitative assessment, if deemed necessary.

If the carrying amount exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

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Due to the short maturity of these instruments, the carrying values on our consolidated balance sheets approximate fair value.

Accounts Receivable

We record receivables derived from contracts with customers at net realizable value and they generally do not bear interest.

An allowance for estimated uncollectible accounts is established if uncollectability is considered probable.

This value may include an allowance for estimated uncollectible accounts to reflect any losses anticipated on the accounts receivable balances which is charged to the provision for doubtful accounts.

When determining uncollectibility, we consider historical write-offs by customer, level of past due accounts and economic status of the customers.

Write-offs are recorded at the time a customer receivable is deemed uncollectible.

The Company had no Allowance for doubtful accounts as of the fiscal years ended September 30, 2024 and 2023, respectively.

Inventory Valuation

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Property and Equipment

Property and equipment are stated at cost.

Depreciation is provided using an accelerated method over the estimated useful lives of the assets (the lesser of three to seven years or over the lease term), except for the manufacturing facility and the corporate airplanes, which are depreciated using the straight-line method over their estimated useful lives of thirty-nine years and ten years , respectively.

Property, plant and equipment is recorded at cost.

Depreciation and amortization is generally provided on the straight-line method over the estimated useful lives of the various assets.

Major additions and improvements are capitalized, while maintenance and repairs that do not improve or extend the life of assets are charged to expense as incurred.

The Company’s property, plant and equipment is generally depreciated over the following estimated useful lives:

● Buildings and improvements are depreciated over estimated lives of ten to thirty-nine years.

● Furniture and office equipment is depreciated over estimated lives of five to seven years .

● Computer equipment is depreciated over an estimated life of five years .

● Equipment other is depreciated over estimated lives of one to nineteen years .

Long-Lived Assets

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

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

The contractual terms of the fixed price contracts are usually long-term, however they often contain a termination for convenience clause that results in us treating these contracts as short-term under ASC 606.

To the extent our actual costs vary from the estimates upon which the price was negotiated, the Company will generate more or less profit or could incur a loss.

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.

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The impact of adjustments in contract estimates on our operating earnings can be reflected in either operating costs and expenses or revenue.

The aggregate impact of adjustments in contract estimates did not change our revenue and operating earnings (and diluted earnings per share) for the fiscal years ended September 30, 2023 and 2022.

Therefore, no adjustment on any contract was material to our consolidated financial statements for the fiscal years ended September 30, 2024 and 2023.

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September 30, 2023

Amount transferred to receivables from contract assets

Contract asset additions

Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period

Increases due to invoicing prior to satisfaction of performance obligations

September 30, 2024

Lease Recognition

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Income taxes are recorded in accordance with ASC Topic 740, “ Income Taxes ” (“ASC Topic 740”), which utilizes a balance sheet approach to provide for income taxes.

Under this method, the Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company’s assets, liabilities and expected benefits of utilizing net operating losses (“NOL”) and tax credit carry-forwards.

The impact on deferred taxes of changes in tax rates and laws, if

any, are applied to the years during which temporary differences are expected to be settled and are reflected in the consolidated financial statements in the period of enactment.

utilizing net operating losses (“NOL”) and tax credit carry-forwards.

The impact on deferred taxes of changes in tax rates and laws, if any, are applied to the years during which temporary differences are expected to be settled and are reflected in the consolidated financial statements in the period of enactment.

At the end of each interim reporting period, the Company prepares an estimate of the annual effective income tax rate and applies that annual effective income tax rate to ordinary year-to-date pre-tax income for the interim period.

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The sources of taxable income that may be available to realize the benefit of deferred tax assets are future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and credit carryforwards, taxable income in carry-back years and tax planning strategies which are both prudent and feasible.

For the year ended September 30, 2021, the valuation allowance was released against all federal and state deferred tax assets with the exception of certain state net operating losses due to positive evidence that the assets are more likely than not to be realized in future years.

For the fiscal year ended September 30, 2021, the valuation allowance was released against all federal and state deferred tax assets with the exception of certain state net operating losses due to positive evidence that the assets are more likely than not to be realized in future years.

The Company will continue to assess all available evidence during future periods to evaluate any changes to the realization of its deferred tax assets.

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Differences between estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material effect on the Company’s consolidated financial position but could possibly be material to its consolidated results of operations or cash flow of any one period.

In March 2020, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law to provide emergency assistance to affected individuals, families and businesses.

The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of NOLs.

The CARES Act amends the NOL provisions of the Tax Cuts and Jobs Act of 2017, thereby allowing for the carryback of losses arising in tax years beginning before December 31, 2017 to each of the two taxable years preceding the taxable year of loss.

Approximately $ 1,500,000 of pre-tax NOL was carried back two years to fully offset taxable income.

This carryback freed up previously utilized R&D credits which resulted in an estimated increase in the R&D credit carryforward of $ 196,000 .

The carryback created approximately $ 16,000 of AMT tax, which was refunded.

The cash impact of this carryback was $ 309,412 .

A receivable was setup for this amount as of March 31, 2020, and the cash has since been received.

In December 2020, the Consolidations Appropriations Act of 2020 (“CAA”) was enacted as a supplement to the CARES Act legislation and provided additional financial relief to taxpayers adversely impacted by restrictions put into place in response to the COVID-19 pandemic.

In addition, the CAA provides funding for public health initiatives in response to the pandemic.

This legislation did not have a material impact on the Company’s tax position.

In March, 2021, American Rescue Plan Act of 2021 (the “ARPA”), which includes certain business tax provisions, was signed into law.

This legislation did not have a material impact on the Company’s tax position.

In August 2022, the U.S.

government enacted the Inflation Reduction Act (the “IRA”).

The IRA makes the following changes to the U.S tax code:

imposes a corporate alternative minimum tax of 15% on corporations with an average annual Adjusted Financial Statement Income over a three year period in excess of $1 billion, increases the amount of R&D credit that qualified businesses can apply against payroll taxes to $500,000 and imposes an excise tax equal to one percent of the fair market value of stock of a publicly traded U.S.

corporation that is repurchased by the company.

These changes predominately apply to tax years beginning after December 31, 2022.

It does not appear that this legislation will have a material impact on the Company’s tax position.

Engineering Development

Total engineering development expense comprises both internally funded R&D, which is expensed in research and development, and product development and design charges related to specific customer contracts.

Total engineering development expense comprises both internally funded research and development (“R&D”), which is expensed in research and development in the consolidated statements of operations, and product development and design charges related to specific customer contracts.

Engineering development expense consists primarily of payroll-related expenses of employees engaged in EDC projects, engineering related product materials and equipment, and subcontracting costs.

R&D charges incurred for product design, product enhancements and future product development are expensed as incurred.

Product development and design charges related to specific customer contracts are charged to cost of sales-EDC based on the method of contract accounting (either percentage-of-completion or completed contract) applicable to such contracts.

Product development and design charges related to specific customer contracts are charged to Cost of sales - Services based on the method of contract accounting (either percentage-of-completion or completed contract) applicable to such contracts.

Fair Value of Financial Instruments

1 unchanged sentence

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.

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:

22 unchanged sentences

Money market funds

The fiscal 2023 money market funds balance differs from the cash and cash equivalents balance on the consolidated balance sheet due to the timing of sweep transactions within the PNC cash investment accounts.

The fiscal years ended September 30, 2024 and 2023 money market funds balance differs from the cash and cash equivalents balance on the consolidated balance sheet due to the timing of sweep transactions within the PNC cash investment accounts.

Share-Based Compensation

25 unchanged sentences

The Company has recorded the excess of funded premiums over estimated claims incurred but not reported of $ 36,400 as a current asset in the accompanying consolidated balance sheet.

During the year ended September 30, 2023, the Company has used the excess of funded premiums to reduce amounts payable for claims incurred.

During the fiscal year ended September 30, 2024, the Company has used the excess of funded premiums to reduce amounts payable for claims incurred.

Treasury Stock

2 unchanged sentences

New Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB).

ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company's Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Taxes Disclosures, which requires greater disaggregation of income tax disclosures.

The new standard requires additional information to be disclosed with respect to the income tax rate reconciliation and income taxes paid disaggregated by jurisdiction.

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

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

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires companies to enhance the disclosures about segment expenses.

The new standard requires the disclosure of the Company’s Chief Operating Decision Maker (CODM), expanded incremental line-item disclosures of significant segment expenses used by the CODM for decision-making, and the inclusion of previous annual only segment disclosure requirements on a quarterly basis.

This ASU should be applied retrospectively for fiscal years beginning after December 15, 2023, and interim periods

within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

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

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.

The adoption of this standard is not expected to have a material impact on our condensed consolidated financial statements or related disclosures.

As new accounting pronouncements are issued, we will adopt those that are applicable.

On June 30, 2023, the Company entered into the Honeywell Agreement with Honeywell whereby Honeywell sold certain assets and granted perpetual license rights to manufacture and sell licensed products related to its inertial, communication and navigation product lines to the Company (the “Transaction”).

The Transaction involves a sale of certain inventory, equipment and customer-related documents;

an assignment of certain customer contracts;

and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its inertial, communication and navigation product lines to repair, overhaul, manufacture sell, import, export and distribute certain products to the Company.

The Transaction allows the Company to diversify its product offerings in the aerospace industry.

The adoption of this standard did not have a material impact on our condensed consolidated financial statements or related disclosures.

On September 27, 2024, the Company entered into and closed the transaction contemplated by the September 2024 Honeywell Agreement.

The September 2024 Honeywell Agreement allows the Company to diversify its product offerings in the aerospace industry.

The Company determined that the transaction met the definition of a business under ASC 805;

therefore, the Company accounted for the transaction as a business combination and applied the acquisition method of accounting.

In connection with the Transaction, the Company entered into a term loan with PNC Bank, National Association for $ 20.0 million to fund a portion of the Transaction (the “Term Loan”) – refer to Note 20, “Loan Agreement” for further details.

The Company financed the September 2024 Honeywell Agreement with borrowings against the Company’s revolving line of credit.

(See Note 20, “Loan Agreement” for more details).

The purchase consideration transferred at the acquisition date was $ 14.2 million, which was entirely cash.

The allocation of the purchase price is based upon certain preliminary valuations and other analyses.

The allocation of the purchase price has not been finalized as of the date of this filing due to fact that while legal control has occurred, the Company has not received physical possession of the prepaid inventory, equipment and construction in progress, and thus these assets will be subject to settlement adjustments upon transfer as outlined in the Honeywell Agreement.

The transfer of the prepaid inventory, equipment and construction in progress is expected to occur within the measurement period.

As a result, the purchase price amount for the Transaction and the allocation of the preliminary purchase consideration for prepaid inventory, equipment, construction in progress and goodwill are preliminary estimates, which may be subject to change within the measurement period.

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

The allocation of the purchase price has not been finalized as of the date of this filing due to the timing of the transaction and due to the fact that, while legal control has been transferred, the Company has not received physical possession of certain of the acquired assets and thus these assets will be subject to settlement adjustments upon transfer as outlined in the September 2024 Honeywell Agreement.

As a result, the purchase price amount for the transaction and the allocation of the preliminary purchase consideration are preliminary estimates, and may be subject to change within the measurement period.

The preliminary allocation of the purchase consideration as of the acquisition date is as follows:

Amounts Recognized as of

Acquisition Date

(as previously reported)

Total consideration

Prepaid inventory (a)

Prepaid equipment and other current assets

Intangible assets (b)

Net assets acquired

(a) Prepaid inventory consists primarily of raw materials 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.

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

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

The estimated fair value of the backlog and customer relationships are based on a

variation of the income valuation approach known as the multi-period excess earnings method.

Refer to Note 5, “Intangible assets” for further details.

(c) Goodwill represents the excess of the purchase consideration over the preliminary fair value of the net assets acquired.

The goodwill recognized is primarily attributable to the expected synergies from the September 2024 Honeywell Agreement.

Goodwill resulting from the September 2024 Honeywell Agreement has been assigned to the Company’s one reporting unit.

Transition services agreement

Concurrent with the September 2024 Honeywell Agreement, the Company entered into a transition services agreement (the “2024 TSA”) with Honeywell, at no additional cost, to receive certain transitional services and technical support during the transition service period.

The Company accounted for the 2024 TSA separate from business combination and has recognized $ 140,000 in prepaid expenses and other current assets within the consolidated balance sheets for the services to be received in the future from Honeywell.

The prepaid expense related to the 2024 TSA was determined using the with and without method.

Acquisition and related costs

For the fiscal year ended September 30, 2024, the Company incurred acquisition costs of $ 244,543 which were expensed as incurred and included in selling, general and administrative expenses in the consolidated statements of operations.

Unaudited actual and pro forma information

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, 2022:

Year Ended September 30,

These pro forma results are for illustrative purposes and are not indicative of the actual results of operations that would have been achieved, nor are they indicative of future results of operations.

The unaudited pro forma information for all periods presented was adjusted to give effect to pro forma events that are directly attributable to the transaction and are factually supportable.

The adjustments are based on information available to the Company at this time.

Accordingly, the adjustments are subject to change, and the impact of such changes may be material.

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

On June 30, 2023, the Company entered into the June 2023 Honeywell Agreement.

The June 2023 Honeywell Agreement involves a sale of certain inventory, equipment and customer-related documents;

an assignment of certain customer contracts;

The June 2023 Honeywell Agreement allows the Company to diversify its product offerings in the aerospace industry.

determined that the June 2023 Honeywell Agreement 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 June 2023 Honeywell Agreement, the Company entered into a term loan with PNC Bank, National Association for $ 20.0 million to fund a portion of the June 2023 Honeywell Agreement.

Refer to Note 20, “Loan Agreement” for further details.

The purchase consideration transferred at the acquisition date was $ 35.9 million, which was entirely cash.

In the third quarter of fiscal year 2024, the Company finalized its accounting of the June 2023 Honeywell Agreement.

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

Purchase Price

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Prepaid inventory (a)

( 3,012,626 )

Construction in progress

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( 3,660,000 )

( 1,050,155 )

Assets acquired

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Net assets acquired

(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.

(a) Prepaid inventory consists of primarily raw materials 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.

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(c) Goodwill represents the excess of the purchase consideration over the preliminary fair value of the net assets acquired.

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

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

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

Further, the Company determined that the goodwill was not impaired as of September 30, 2023 and as such, no impairment charges have been recorded for the year ended September 30, 2023.

(1) During the fiscal fourth quarter of 2023, the Company identified measurement period adjustments related to fair value estimates.

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

The goodwill recognized is primarily attributable to the expected synergies from the June 2023 Honeywell Agreement.

Goodwill resulting from the June 2023 Honeywell Agreement has been assigned to the Company’s one reporting unit.

(d) In the third quarter of fiscal year 2024, 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 fair value estimates did not have a material impact to the consolidated statements of operations for the year ended September 30, 2023.

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

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

As a result of the measurement period adjustments to the estimated fair values of equipment and customer relationships, during the third quarter of fiscal year 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 consolidated statement of operations.

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

While the June 2023 Honeywell Agreement indicated an amount of liabilities related to open supplier purchase orders to be assumed by the Company as of the acquisition date, it was determined that there were no actual liabilities outstanding 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 consolidated statements of operations for the year ended September 30, 2023.

the adjustments have no impact to the 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 cost, to receive certain transitional services and technical support during the transition service period.

Concurrent with the June 2023 Honeywell Agreement, the Company entered into a transition services agreement (the “2023 TSA”) with Honeywell, at no additional cost, to receive certain transitional services and technical support during the transition service period.

The Company accounted for the 2023 TSA separate from the business combination and has recognized $ 140,000 in prepaid expenses and other current assets within the consolidated balance sheet as of the acquisition date for the services to be received in the future from Honeywell.

1 unchanged sentence

Acquisition and related costs

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

For the fiscal year ended September 30, 2024, the Company incurred $ 589,000 of acquisition costs in connection with the June 2023 Honeywell Agreement.

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

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

Unaudited actual and pro forma information

For the year ended September 30, 2023, the Company recognized $ 5.8 million of revenues and $ 3.0 million of net income related to the Product Lines in the consolidated statements of operations.

For the fiscal year ended September 30, 2023, the Company recognized $ 5.8 million of revenues and $ 3.0 million of net income related to the product lines in the consolidated statements of operations.

The following unaudited pro forma summary presents consolidated information of the Company, including the product lines, as if the transaction had occurred on October 1, 2021:

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

On July 22, 2024, the Company completed the July 2024 Honeywell Asset Acquisition of 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.

The Company accounted for the transaction as an asset acquisition and allocated the cost of the acquisition, including direct and incremental transaction costs, to the tangible and intangible assets based on their relative fair value as detailed under ASC 805 – Business Combinations (“ASC 805”).

Definite lived assets were recorded to the relative fair value of $ 2,601,000 to property and

equipment and $ 430,000 to customer relationships and backlog.

Since license agreements are indefinite lived assets, they were recorded at fair value in the amount of $ 1,240,000 in accordance with ASC 805.

Intangible assets

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Gross Carrying

License agreement acquired from the Transaction (a)

Customer relationships acquired from the Transaction (a)

Licensing and certification rights (b)

License agreement (a)

Customer relationships (a)

( 1,459,861 )

Licensing and certification rights (c)

( 2,098,146 )

As of September 30, 2023

Gross Carrying

Licensing and certification rights (b)

(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;

License agreement (a)

Customer relationships (a)

Licensing and certification rights (c)

(a) As part of the September 2024 Honeywell Agreement, the July 2024 Honeywell Asset Acquisition, and the June 2023 Honeywell Agreement transactions, the Company acquired intangible assets related to the license agreements for the license rights to use certain Honeywell intellectual property, backlog and customer relationships.

The license agreements have an indefinite life and is not subject to amortization;

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

The Company determined that the intangible assets were not impaired as of September 30, 2023 and, as such, no impairment charges have been recorded for the year ended September 30, 2023.

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

An impairment charge of $ 44,400 was recorded during the year ended September 30, 2023.

No impairment charges were recorded during the years ended September 30, 2022 or 2021.

Intangible asset amortization expense was $ 270,627 , $ 2,126 and $ 50,377 for the years ended September 30, 2023, 2022 and 2021, respectively.

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

As such, no impairment charges have been recorded for the fiscal years ended September 30, 2024 and 2023.

(b) As part of the September 2024 Honeywell Agreement, the Company acquired intangible assets related to backlog with a useful life between four to six years .

An impairment charge of $ 44,400 was recorded during the fiscal year ended September 30, 2023 .

No impairment charges were recorded during the fiscal years ended September 30, 2024 or 2022.

For the fiscal year ended September 30, 2024, license agreement intangible assets included $ 3.5 million related to the July 2024 Honeywell Asset Acquisition and the September 2024 Honeywell Agreement as well as $ 0.1 million related to the June 2023 Honeywell Agreement post acquisition adjustments.

For the fiscal year ended September 30, 2024, Customer relationships intangible assets included $ 1.4 million related to the July 2024 Honeywell Asset Acquisition and the September 2024 Honeywell Agreement as well as $ 0.9 million related to the June 2023 Honeywell Agreement post acquisition adjustments.

For the fiscal year ended September 30, 2024, Backlog intangible assets included $ 6.3 million related to the September 2024 Honeywell Agreement.

Intangible asset amortization expense was $ 1,191,361 , $ 270,627 and $ 2,126 for the fiscal years ended September 30, 2024, 2023 and 2022, respectively.

The timing of future amortization expense is not determinable for the licensing and certification rights because they are amortized over a defined number of units.

The expected future amortization expense related to the customer relationships as of September 30, 2023 is as follows:

As of fiscal year ended September 30, 2024, the weighted average amortization period for amortized intangibles is 5.8 years.

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

Amortization Expense

Net Income Per Share

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The average outstanding diluted shares calculation excludes options with an exercise price that exceeds the average market price of shares during the period.

For fiscal year 2023 and 2022, 203,000 options and 0 options to purchase common stock were excluded from the computation of diluted earnings per share because the effect would be anti-dilutive.

For fiscal years 2024 and 2023, 362,000 options and 203,000 options to purchase common stock were excluded from the computation of diluted earnings per share because the effect would be anti-dilutive.

For fiscal year 2022, 0 shares were excluded from the calculation of earnings per share as their effect would be anti-dilutive.

4 unchanged sentences

Prepaid insurance

Honeywell TSA Agreement

Assets Held for Sale

1 unchanged sentence

September 30,

Corporate airplane

1 unchanged sentence

As of September 30, 2023, the Company classified $ 2.1 million of net property and equipment as “assets held for sale” on the consolidated balance sheet.

During the quarter ended September 30, 2023, management of the Company implemented a plan to sell a Company-owned aircraft and commenced efforts to locate a buyer for the aircraft.

On November 20, 2023 the Company-owned aircraft was sold for $ 2.3 million, see Note 21, “Subsequent Events” for further details.

During the year ended September 30, 2023, management of the Company implemented a plan to sell a Company-owned aircraft and commenced efforts to locate a buyer for the aircraft.

On November 20, 2023 the Company-owned aircraft was sold for $ 2.3 million and the Company recorded a gain on disposal of $ 160,577 .

As of September 30 2024, the Company had no assets held for sale.

Property and Equipment

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Computer equipment

Corporate airplane

Furniture and office equipment

Manufacturing facility

Buildings and improvements

Equipment other

Less accumulated depreciation and amortization

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Depreciation related to property and equipment was $ 906,581 , $ 427,317 and $ 358,837 in fiscal years 2024, 2023 and 2022, respectively.

The Pilatus PC-12 airplane, one of the Company’s two corporate airplanes, was sold during the quarter ended September 30, 2022 and the Company recognized a gain on sale of the aircraft of approximately $ 1,192,000 .

The corporate airplanes are utilized primarily in support of product development.

During the fiscal year ended September 30, 2024, the Company sold its King Air aircraft and recorded a gain on the sale of approximately $ 161 thousand.

During the fiscal year ended September 30, 2022, the Company sold its Pilatus PC-12 airplane and recognized a gain on the sale of approximately $ 1.2 million.

Non-cash investing activities involving property, plant and equipment comprise the abandonment of fully depreciated assets with an original cost and accumulated amortization of $ 420,544 , $ 94,954 and $ 34,656 in fiscal years 2024, 2023 and 2022, respectively.

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 being depreciated 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 fiscal year ended September 30, 2024.

Other assets consist of the following:

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Other non-current assets

Other non-current assets as of September 30, 2023 and September 30, 2022 include the security deposit for an airplane hangar, and a deposit for medical claims required under the Company’s medical plan.

In addition, other non-current assets include $ 0 and $ 0 of prepaid software licenses, that will be earned upon the shipment of a certain product to a customer, as of September 30, 2023, and September 30, 2022, respectively.

Other non-current assets as of fiscal years ended September 30, 2024 and 2023 include a deposit for medical claims required under the Company’s medical plan.

Other non-current assets as of fiscal year ended September 30, 2023 include a security deposit for an airplane hangar.

Accrued Expenses

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Operating lease

Income tax payable

The Company provides for the estimated cost of product warranties at the time revenue is recognized.

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Warranty accrual as of September 30,

In March 2020, the CARES Act was signed into law providing numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of NOLs.

The CARES Act amends the NOL provisions of the Tax Cuts and Jobs Act of 2017, thereby allowing for the carryback of losses arising in tax years beginning before December 31, 2017, to each of the two taxable years preceding the taxable year of loss.

Approximately $ 1,500,000 of pre-tax NOL was carried back two years to fully offset taxable income.

This carryback freed up previously utilized R&D credits which resulted in an estimated increase in the R&D credit carryforward of $ 196,000 .

The carryback created approximately $ 16,000 of AMT tax, which was refunded.

The cash impact of this carryback was $ 309,412 .

A receivable was set up for this amount as of March 31, 2020, and the cash has since been received.

In December 2020, the CAA was enacted as a supplement to the CARES Act legislation and provided additional financial relief to taxpayers adversely impacted by restrictions put into place in response to the COVID-19 pandemic.

In addition, the CAA provides funding for public health initiatives in response to the pandemic.

This legislation did not have a material impact on the Company’s tax position.

On March 11, 2021, the ARPA, which includes certain business tax provisions, was signed into law.

This legislation did not have a

material impact on the Company’s tax position.

In August 2022, the U.S.

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These changes predominately apply to tax years beginning after December 31, 2022.

It does not appear that this legislation will have a material impact on the Company’s tax position.

This legislation will not have a material impact on the Company’s tax position.

The components of income taxes are as follows:

6 unchanged sentences

Total current and deferred provision (benefit)

( 1,087,783 )

Following is a reconciliation of the statutory federal rate to the Company’s effective income tax rate:

16 unchanged sentences

Valuation allowance

( 1,449,204 )

Total deferred tax assets

7 unchanged sentences

At September 30, 2024 and 2023, the Company had state NOL carryforwards of approximately $ 19.2 million and $ 19.5 million, respectively, which begin to expire in varying amounts after the fiscal year ending September 30, 2026.

The Company does not have federal R&D Tax Credit carryforwards in fiscal 2023 and 2022.

The Company does not have federal R&D Tax Credit carryforwards in fiscal year 2024 and 2023.

Deferred tax assets are reduced by valuation allowances if, based on the consideration of all available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized.

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Significant management judgment is required in determining any valuation allowance recorded against net deferred tax assets.

As a result of positive evidence that the Company’s deferred tax assets are more likely than not to be realized in future years, the Company reduced its valuation allowance of deferred tax assets by $ 7,963 , $ 4,069 and $ 467,388 for fiscal years ended September 30, 2024, 2023 and 2022, respectively reducing the Company’s provision for income taxes in each fiscal year.

The Company will continue to assess all available evidence during future periods to evaluate any changes to the realization of its deferred tax assets.

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Balance at end of year

The total liabilities associated with the unrecognized tax benefits that, if recognized, would impact the Company’s effective tax rate were $ 460,000 , $ 452,000 and $ 590,000 at September 30, 2023, 2022 and 2021, respectively.

It is not anticipated that the balance of unrecognized tax benefits at September 30, 2023 will change significantly over the next twelve months.

The balance of unrecognized tax benefits as reflected in the table above at September 30, 2023 are recorded on the balance sheet as a reduction to deferred tax assets.

It is anticipated that the balance of unrecognized tax benefits at September 30, 2024 will change significantly over the next twelve months as the majority of the positions will have statue lapses in September 30, 2025 and 2026.

The balance of unrecognized tax benefits are recorded within the valuation allowance in the table above at fiscal years ended September 30, 2024 and 2023.

The Company’s policy is to recognize interest accrued and, if applicable, penalties related to unrecognized tax benefits in income tax expense for all periods presented.

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Tax regulations within each jurisdiction are subject to the interpretation of related tax laws and regulations and require significant judgment to apply.

The Company’s federal income tax returns for the fiscal years ended September 30, 2018 and thereafter are open years subject to examination by the Internal Revenue Service.

The Company files income tax returns in various state jurisdictions, as appropriate, with varying statutes of limitation.

The Company’s federal income tax returns for the fiscal years ended September 30, 2021 and thereafter are open years subject to examination by the Internal Revenue Service.The Company files income tax returns in various state jurisdictions, as appropriate, with varying statutes of limitation.

There are no state income tax examinations in process at this time.

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Total share-based compensation expense was approximately $ 1,003,292 , $ 1,336,000 , and $ 345,000 for the fiscal years ended September 30, 2024, 2023 and 2022, respectively.

The income tax impact recognized as a credit to additional paid in capital in the statement of shareholders’ equity related to share-based compensation arrangements was $ 756,000 , $ 166,617 and $ 181,350 for the fiscal years ended September 30, 2023, 2022 and 2021, respectively.

Compensation expense related to share-based awards is recorded as a component of selling, general and administrative expenses.

Compensation expense related to share-based awards is recorded as a component of Cost of sales and selling, general and administrative expenses.

2019 Stock-Based Incentive Compensation Plan

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Subject to an adjustment necessary upon a stock dividend, recapitalization, forward split or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase or share exchange, extraordinary or unusual cash distribution, or similar corporate transaction or event, the maximum number of shares of common stock available for awards under the 2019 Plan is 750,000 , plus 139,691 shares of common stock that were authorized but unissued under the 2009 Plan as of the effective date of the 2019 Plan (i.e., April 2, 2019), all of which may be issued pursuant to awards of incentive stock options.

As of September 30, 2023, there were 262,000 shares of common stock available for awards under the 2019 Plan.

If any award is forfeited, terminates or otherwise is settled for any reason without an actual distribution of shares to the participant, the related shares of common stock subject to such award will again be available for future grant.

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Outstanding at September 30, 2024

Vested and expected to vest

Options exercisable at September 30, 2024

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The expected term of options represents the period of time that options granted are expected to be outstanding and is based on historical experience and the expected turnover rate of the employees receiving the options.

Expected volatility is based on historical volatility of the Company’s stock.

Expected volatility is based on historical volatility

of the Company’s stock.

The risk free interest rate is based on U.S.

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Expected lives (years)

(1) The Company did not grant any options in fiscal 2022 and 2021.

The Company granted 161,613 , 224,374 and 0 options in fiscal years ended 2024, 2023 and 2022, respectively.

Total compensation expense associated with stock option awards to employees under the 2019 Plan was approximately $ 301,000 , $ 756,000 and $ 167,000 for fiscal years ended September 30, 2024, 2023 and 2022, respectively.

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Restricted Stock Units

During fiscal 2023, the Company’s Board of Directors (the “Board”) approved grants of RSUs to the non-employee directors on the Board as compensation for their services from the beginning of calendar year 2023 to vest on the date of the Company’s 2023 Annual Meeting of Shareholders.

During fiscal year 2024, the Company’s Board of Directors (the “Board”) approved grants of RSUs to the non-employee directors on the Board as compensation for their services from the beginning of calendar year 2024 to vest on the date of the Company’s 2024 Annual Meeting of Shareholders.

After the 2024 Annual Meeting of Shareholders, the Board approved grants of RSUs to the non-employee directors on the Board as compensation for their services.

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At the time of vesting, the RSUs will be settled in shares of the Company’s common stock at a rate of one share of stock for each unit, provided that, if a director resigns from the Board prior to the vesting date, such director shall only receive a pro rata portion of such award for time served.

During fiscal 2023, the Board approved grants of RSUs to both the Chief Executive Officer and the former Chief Financial Officer.

During fiscal year 2024, the Board approved grants of RSUs to both the Chief Executive Officer, Chief Financial Officer and the former Chief Financial Officer.

Certain RSUs to the Chief Executive Officer vested immediately, and the remainder will vest quarterly over a three-year period.

The approved grants of the RSUs to the former Chief Financial Officer will vest over a four-year period.

The approved grants of the RSUs to the Chief Financial Officer will vest over a four-year period.

The approved grants of the RSUs to the former Chief Financial Officer would have vested over a four-year period.

On November 8, 2023, Michael Linacre, Chief Financial Officer of Innovative Solutions and Support, Inc., notified the Company of his resignation from all of his positions with the Company, effective immediately, which resulted in the forfeiture of 11,503 RSUs.

As of September 30, 2023, there were 101,968 unvested restricted stock units outstanding under the 2019 Plan.

As of September 30, 2024, there were 242,080 restricted stock units outstanding under the 2019 Plan.

As of September 30, 2023, and September 30, 2022 there were 101,968 and 32,897 respectively, unvested restricted stock units outstanding under the 2019 Plan.

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Balance at September 30, 2024

Total share-based compensation expense associated with the annual grant of stock awards to non-employee directors under the 2019 Plan was approximately $ 212,000 , $ 178,000 and $ 160,000 for the fiscal years ended September 30, 2023, 2022 and 2021, respectively.

Total share-based compensation expense associated with the annual grant of stock awards to employees under the 2019 Plan was approximately $ 368,000 , $ 3,000 and $ 0 for the fiscal years ended September 30, 2023, 2022 and 2021, respectively.

Total share-based compensation expense associated with the annual grant of restricted stock awards under the 2019 Plan was approximately $ 702,000 , $ 694,000 and $ 173,000 for the fiscal years ended September 30, 2024, 2023 and 2022, respectively.

At September 30, 2024, unrecognized compensation expense of $ 1,384,896 , net of forfeitures, related to non-vested stock awards under the 2019 Plan, will be recognized.

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A “purchase obligation” is defined as an agreement to purchase goods or services that is enforceable and legally binding on the Company and that specifies all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions, and the approximate timing of the transaction.

These amounts primarily comprise of open purchase order commitments entered in the ordinary course of business with vendors and subcontractors pertaining to fulfillment of the Company’s current order backlog.

These amounts primarily comprise open purchase order commitments entered in the ordinary course of business with vendors and subcontractors pertaining to fulfillment of the Company’s current order backlog.

The purchase obligations on open purchase orders were $ 9.8 million, $ 2.4 million and $ 2.6 million as of September 30, 2024, 2023 and 2022, respectively.

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In recent years, the Company has had sales to AML Global Eclipse, LLC, (“Eclipse”), whose principal shareholder is also a principal shareholder in the Company.

Eclipse is a new related party for fiscal year 2023 due to their president acquiring more than 10 % in shares on the company.

Eclipse became a new related party for fiscal year 2023 due to their president acquiring more than 10 % in shares on the company.

Prior balances are disclosed below for comparability.

Sales to Eclipse amounted to $ 0.3 million, $ 0.6 million and $ 1.6 million for the years ended September 30, 2023, 2022 and 2021, respectively.

As of September 30, 2023 and 2022, contract liability to Eclipse was approximately $ 0.0 million and $ 0.1 million, respectively.

Sales to Eclipse amounted to $ 0.2 million, $ 0.3 million and $ 0.6 million for the fiscal years ended September 30, 2024, 2023 and 2022, 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.

Business Segments

The Company operates in one business segment which designs, manufactures and sells flat panel displays, flight information computers and advanced monitoring systems to the DoD, the Department of Interior, other government agencies, commercial air transport carriers and corporate/general aviation markets.

The Company currently derives virtually all of its revenues from the sale of this equipment and related EDC.

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 to OEMs, the DoD, the Department of Interior, other government agencies, commercial air transport carriers and corporate/general aviation markets.

Geographic Data

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In fiscal years 2024, 2023 and 2022, net sales outside the United States amounted to $ 22.8 million, $ 15.5 million and $ 11.1 million, respectively.

The Company’s current product line includes FPDS, flight management systems and air data systems and components.

During fiscal years 2023, 2022 and 2021, the Company derived 99 %, 98 % and 88 %, respectively, of its total product sales of FPDS.

The remaining product sales for each of the fiscal years was from sales of air data systems and components.

Lease Recognition

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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.

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.

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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.

Rent expense and cash paid for various operating leases in aggregate are approximately $ 73,000 for the period ended September 30, 2023.

The weighted average remaining lease term is 1.2 years, and the weighted average discount rate is 5.0 % as of September 30, 2023.

Related assets and liabilities resulting from lease obligations are deemed to be immaterial.

Future minimum lease payments under operating leases are as follows at September 30, 2023:

Twelve Months

September 30,

Total minimum lease payments

Amount representing interest

Present value of minimum lease payments

Current portion

Long-term portion of lease obligations

Loan Agreement

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subject to payment of any break funding indemnification amounts.

Future interest payments on the Term Loan, based on current interest rates, are expected to approximate $ 1.5 million in fiscal 2024, $ 1.3 million in fiscal 2025, $ 1.2 million in fiscal 2026, $ 1.0 million in fiscal 2027, and $ 0.7 million thereafter.

The interest rate applicable to loans outstanding under the Term Loan is a floating interest rate equal to the sum of (A) the Term SOFR Rate (as defined in the Term Note) plus (B) an unadjusted spread of the Applicable SOFR Margin plus (C) a SOFR adjustment of ten basis points.

The Applicable SOFR Margin ranges from 1.5 % to 2.5 % depending on the Company’s funded debt to EBITDA ratio, as defined in the Amended Loan Agreement.

Commencing on June 30, 2023, the Term Loan will consist of sixty equal monthly principal installments, over a period of ten years , with the balance payable on the maturity date of the Term Loan.

In addition to providing for the Term Loan, the Loan Agreement, together with a corresponding Revolving Line of Credit Note in favor of PNC, executed May 11, 2023 (“Line of Credit Note”), provides for a senior secured revolving line of credit in an aggregate principal amount of $ 10,000,000 , with an expiration date of May 11, 2028 (the “Revolving Line of Credit”).

The interest rate applicable to loans outstanding under the Revolving Line of Credit is a rate per annum equal to the sum of (A) Daily SOFR (as defined in the Line of Credit Note) plus (B) an unadjusted spread of Applicable SOFR Margin plus (C) a SOFR adjustment of ten basis points.

The Applicable SOFR Margin ranges from 1.5 % to 2.5 % depending on the Company’s funded debt to EBITDA ratio.

The Company will pay an annual commitment fee of 0.15 % on the amount available for borrowing under the revolving credit facility.

Commencing on June 30, 2023, the Term Loan consists 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, provided 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”).

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.

On September 30, 2024, the Company and one of its subsidiaries, Innovative Solutions and Support, LLC (“ISSL,” entered into an Amendment to Loan Documents (the “Loan 2024 Amendment”) with PNC, which amends certain terms of the Loan Agreement to increase the line of credit with PNC.

Concurrently with the Loan 2024 Amendment, the Company entered into (i) an Amended and

Restated Revolving Line of Credit in favor of PNC (the “A&R Revolving Line of Credit”), and (ii) an Amended and Restated Line of Credit and Investment Sweep Rider with PNC (the “A&R Rider”).

The A&R Revolving Line of Credit Note provides for a senior secured revolving line of credit in an aggregate principal amount of $ 35,000,000 , with an expiration date of December 19, 2028.

The interest rate applicable to loans outstanding under the A&R Revolving Line of Credit is a rate per annum equal to the sum of (A) Daily SOFR (as defined in the A&R Revolving Line of Credit Note) plus (B) an unadjusted spread of the Applicable SOFR Margin plus (C) a SOFR adjustment of ten basis points.

The applicable SOFR Margin ranges from 1.5 % to 2.5 % depending on the Company’s funded debt to EBITDA ratio as defined in the A&R Revolving Line of Credit Note.

The A&R Rider provides for how PNC will make advances to the Company under the AR Revolving Line of Credit.

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

As of September 30, 2023, the term loan balance amounted to $ 19,500,000 .

There was no balance drawn on the Revolving Line of Credit as of September 30, 2023.

Fixed mandatory principal repayments due on the outstanding Term Loan are as follows:

$ 2.0 million in fiscal 2024, $ 2.0 million in fiscal 2025, $ 2.0 million in fiscal 2026, $ 2.0 million in fiscal 2027, and $ 11.5 million in fiscal 2028.

On December 19, 2023, the Company and PNC entered into an Amendment to Loan Documents and a corresponding Amended and Restated Revolving Line of Credit Note and Amended and Restated Line of Credit and Investment Sweep Rider.

See Note 21, “Subsequent Events”.

As of fiscal year ended September 30, 2024, The outstanding balance drawn on the A&R Revolving Line of Credit was $ 28,027,002 with an effective interest rate of 6.4 percent.

As of September 30, 2024, the Company had availability of $ 6,972,998 under the A&R Revolving Line of Credit.

Subsequent Events

On December 19, 2023, the Company and PNC entered into an Amendment to Loan Documents (the “Restated Loan Amendment”) and a corresponding Amended and Restated Revolving Line of Credit Note (“Restated Line of Credit Note”) and Amended and Restated Line of Credit and Investment Sweep Rider (the “Restated Rider”), to increase the aggregate principal amount available under the Company’s senior secured revolving line of credit from $ 10,000,000 to $ 30,000,000 and extend the maturity date until December 19, 2028.

The proceeds of the Restated Line of Credit Note will be used for working capital and other general corporate purposes, for acquisitions as permitted under the Restated Loan Amendment, and to pay off and close the loan evidenced by that certain Term Note executed in favor of PNC, dated June 28, 2023, which provides for a senior secured term loan in an aggregate principal amount of $ 20,000,000 , with a maturity date of June 28, 2023.

The interest rate applicable to loans outstanding under the Restated Line of Credit is a rate per annum equal to the sum of (A) Daily SOFR (as defined in the Restated Line of Credit Note) plus (B) an unadjusted spread of Applicable SOFR Margin (as defined in the Restated Line of Credit Note) plus (C) a SOFR adjustment of ten basis points.

The Applicable SOFR Margin ranges from 1.5 % to 2.5 % depending on the Company’s funded debt to EBITDA ratio, as defined in the Restated Line of Credit Note.

The foregoing descriptions of the Restated Loan Amendment, Restated Line of Credit Note and Restated Rider do not purport to be complete and are qualified in their entirety by reference to the full text of the Restated Loan Amendment, Restated Line of Credit Note and Restated Rider, which are filed as Exhibit 10.1, Exhibit 10.2 and Exhibit 10.3, respectively, to the Current Report on Form 8-K filed December 22, 2023 and are incorporated therein by reference .

On November 20, 2023, the Company sold its assets held for sale, the King Air aircraft, for $ 2.3 million.

The resultant gain on sale will be a reduction to selling, general and administrative expense in the quarter ended December 31, 2023.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

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-K

Item 8. Financial Statements and Supplementary Data