INNOVATIVE SOLUTIONS & SUPPORT INC 10-K

Item 8. Financial Statements and Supplementary Data. The financial statements of the Company listed in the index appearing under Item 8 herein are filed as part of this Annual Report on Form 10-K. ​ 40 Table of Contents Innovative Solutions and Support, Inc. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ Page Report of Independent Registered Public Accounting Firm PCAOB ID Number 248 42 Consolidated Balance Sheets 44 Consolidated Statements of Operations 45 Consolidated Statements of Shareholders’ Equity 46 Consolidated Statements of Cash Flows 47 Notes to Consolidated Financial Statements 48-72 ​ ​ ​ 41 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders Innovative Solutions & Support, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Innovative Solutions & Support, Inc. (a Pennsylvania corporation) and subsidiaries (the “Company”) as of September 30, 2024 and 2023, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended September 30, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit 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 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 42 Table of Contents 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: (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 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 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 We have served as the Company’s auditor since 2014. Philadelphia, Pennsylvania December 30, 2024 ​ ​ 43 Table of Contents INNOVATIVE SOLUTIONS AND SUPPORT, INC. ​ CONSOLIDATED BALANCE SHEETS ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, September 30, ​ ​ 2024 ​ 2023 ​ ​ ​ ​ ​ ​ ASSETS ​ ​ ​ ​ ​ ​ Current assets ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 538,977 ​ $ 3,097,193 Accounts receivable ​ 12,612,482 ​ 9,743,714 Contract assets ​ 1,680,060 ​ 487,139 Inventories ​ ​ 12,732,381 ​ 6,139,713 Prepaid inventory ​ ​ 5,960,404 ​ ​ 12,069,114 Prepaid expenses and other current assets ​ 1,161,394 ​ 1,073,012 Assets held for sale ​ — ​ 2,063,818 ​ ​ ​ ​ ​ ​ ​ Total current assets ​ ​ 34,685,698 ​ ​ 34,673,703 ​ ​ ​ ​ ​ ​ ​ Goodwill ​ ​ 5,213,104 ​ ​ 3,557,886 Intangible assets, net ​ ​ 27,012,292 ​ ​ 16,185,321 Property and equipment, net ​ 13,372,298 ​ 7,892,427 Deferred income taxes ​ ​ 1,625,144 ​ ​ 456,392 Other assets ​ 473,725 ​ 191,722 ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 82,382,261 ​ $ 62,957,451 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND SHAREHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current liabilities ​ ​ ​ ​ ​ ​ Current portion of long-term debt ​ $ — ​ $ 2,000,000 Accounts payable ​ ​ 2,315,479 ​ ​ 1,337,275 Accrued expenses ​ 4,609,294 ​ 2,918,325 Contract liability ​ ​ 340,481 ​ ​ 143,359 ​ ​ ​ ​ ​ ​ ​ Total current liabilities ​ ​ 7,265,254 ​ ​ 6,398,959 ​ ​ ​ ​ ​ ​ ​ Long-term debt ​ ​ 28,027,002 ​ ​ 17,500,000 Other liabilities ​ ​ 451,350 ​ ​ 421,508 ​ ​ ​ ​ ​ ​ ​ Total liabilities ​ ​ 35,743,606 ​ ​ 24,320,467 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (See Note 16) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shareholders’ equity ​ ​ ​ ​ ​ ​ Preferred stock, 10,000,000 shares authorized, $ .001 par value, of which 200,000 shares are authorized as Class A Convertible stock. No shares issued and outstanding at September 30, 2024 and September 30, 2023 ​ — ​ — Common stock, $ .001 par value: 75,000,000 shares authorized, 19,599,052 and 19,543,441 issued at September 30, 2024 and September 30, 2023, respectively ​ ​ 19,599 ​ ​ 19,543 Additional paid-in capital ​ 55,320,500 ​ 54,317,265 Retained earnings ​ 12,667,093 ​ 5,668,713 Treasury stock, at cost, 2,096,451 shares at September 30, 2024 and at September 30, 2023 ​ ( 21,368,537 ) ​ ( 21,368,537 ) ​ ​ ​ ​ ​ ​ ​ Total shareholders’ equity ​ ​ 46,638,655 ​ ​ 38,636,984 ​ ​ ​ ​ ​ ​ ​ Total liabilities and shareholders’ equity ​ $ 82,382,261 ​ $ 62,957,451 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 44 Table of Contents INNOVATIVE SOLUTIONS AND SUPPORT, INC. ​ CONSOLIDATED STATEMENTS OF OPERATIONS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Year Ended September 30, ​ 2024 2023 2022 Net Sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ Product ​ $ 24,279,918 ​ $ 22,589,657 ​ $ 22,400,159 Services ​ ​ 22,918,102 ​ 12,218,856 ​ 5,340,536 Total net sales ​ 47,198,020 ​ 34,808,513 ​ 27,740,695 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ Product ​ 10,570,521 ​ 9,715,517 ​ 9,402,900 Services ​ ​ 10,713,908 ​ 3,781,925 ​ 1,663,414 Total cost of sales ​ 21,284,429 ​ 13,497,442 ​ 11,066,314 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit ​ 25,913,591 ​ 21,311,071 ​ 16,674,381 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ 4,137,985 ​ 3,129,518 ​ 2,705,140 Selling, general and administrative ​ 12,114,069 ​ 10,822,505 ​ 6,753,915 Total operating expenses ​ 16,252,054 ​ 13,952,023 ​ 9,459,055 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ 9,661,537 ​ 7,359,048 ​ 7,215,326 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ ( 937,309 ) ​ ( 393,281 ) ​ — Interest income ​ 127,332 ​ 518,188 ​ 61,051 Other income ​ — ​ 151,317 ​ 65,232 Income before income taxes ​ 8,851,560 ​ 7,635,272 ​ 7,341,609 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income tax expense ​ 1,853,180 ​ 1,607,517 ​ 1,817,831 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 6,998,380 ​ $ 6,027,755 ​ $ 5,523,778 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income per common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.40 ​ $ 0.35 ​ $ 0.32 Diluted ​ $ 0.40 ​ $ 0.35 ​ $ 0.32 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ 17,459,823 ​ 17,411,684 ​ 17,256,750 Diluted ​ 17,480,247 ​ 17,419,185 ​ 17,257,871 ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 45 Table of Contents INNOVATIVE SOLUTIONS AND SUPPORT, INC. ​ CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Deficit) ​ ​ ​ ​ ​ ​ ​ ​ Common ​ Paid-In ​ Retained ​ Treasury ​ ​ ​ ​ ​ Stock ​ Capital ​ Earnings ​ Stock ​ Total Balance, September 30, 2021 ​ $ 19,343 ​ $ 51,817,095 ​ $ ( 5,882,820 ) ​ $ ( 21,368,537 ) ​ $ 24,585,081 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share-based compensation ​ ​ — ​ ​ 166,617 ​ ​ — ​ ​ — ​ ​ 166,617 Exercise of stock options ​ ​ 43 ​ ​ 301,111 ​ ​ — ​ ​ — ​ ​ 301,154 Issuance of restricted stock awards ​ 27 ​ 173,298 ​ — ​ — ​ 173,325 Net income ​ — ​ — ​ 5,523,778 ​ — ​ 5,523,778 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, September 30, 2022 ​ $ 19,413 ​ $ 52,458,121 ​ $ ( 359,042 ) ​ $ ( 21,368,537 ) ​ $ 30,749,955 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share-based compensation ​ ​ 39 ​ ​ 1,123,902 ​ ​ — ​ ​ — ​ ​ 1,123,941 Exercise of stock options ​ ​ 58 ​ ​ 408,789 ​ ​ — ​ ​ — ​ ​ 408,847 Issuance of restricted stock awards ​ ​ 33 ​ ​ 326,453 ​ ​ — ​ ​ — ​ ​ 326,486 Net income ​ ​ — ​ ​ — ​ ​ 6,027,755 ​ ​ — ​ ​ 6,027,755 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, September 30, 2023 ​ $ 19,543 ​ $ 54,317,265 ​ $ 5,668,713 ​ $ ( 21,368,537 ) ​ $ 38,636,984 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share-based compensation ​ ​ 56 ​ ​ 1,003,235 ​ ​ — ​ ​ — ​ ​ 1,003,291 Net income ​ ​ — ​ ​ — ​ ​ 6,998,380 ​ ​ — ​ ​ 6,998,380 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, September 30, 2024 ​ $ 19,599 ​ $ 55,320,500 ​ $ 12,667,093 ​ $ ( 21,368,537 ) ​ $ 46,638,655 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 46 Table of Contents INNOVATIVE SOLUTIONS AND SUPPORT, INC. ​ CONSOLIDATED STATEMENTS OF CASH FLOWS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Year Ended September 30, ​ 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 6,998,380 ​ $ 6,027,755 ​ $ 5,523,778 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 2,097,942 ​ 697,943 ​ 368,499 Share-based compensation expense ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock options ​ 301,101 ​ 756,198 ​ 166,617 Restricted stock awards ​ 702,191 ​ 694,230 ​ 173,325 Impairment of long-lived assets ​ ​ — ​ ​ 44,400 ​ ​ — Gain on disposal of property and equipment ​ ( 160,577 ) ​ — ​ ( 1,191,743 ) Excess and obsolete inventory cost ​ — ​ 44,308 ​ — Deferred income taxes ​ ( 1,136,809 ) ​ 9,503 ​ 1,017,335 (Increase) decrease in: ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts receivable ​ ( 2,868,768 ) ​ ( 5,446,257 ) ​ ( 251,120 ) Contract assets ​ ( 1,192,921 ) ​ ( 324,397 ) ​ ( 162,742 ) Inventories ​ ( 2,338,176 ) ​ ( 834,917 ) ​ ( 708,859 ) Prepaid expenses and other current assets ​ 811,669 ​ 69,458 ​ ( 309,394 ) Other non-current assets ​ ( 294,969 ) ​ ( 101,356 ) ​ — Increase (decrease) in: ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts payable ​ 978,203 ​ 628,430 ​ 85,224 Accrued expenses ​ 624,346 ​ 203,754 ​ 1,272,826 Income taxes payable ​ 1,077,488 ​ ( 257,055 ) ​ 269,015 Contract liabilities ​ 197,122 ​ ( 115,823 ) ​ ( 158,321 ) Net cash provided by operating activities ​ 5,796,222 ​ 2,096,174 ​ 6,094,440 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​ ​ ​ ​ ​ ​ ​ Purchases of property and equipment ​ ( 657,790 ) ​ ( 298,373 ) ​ ( 161,230 ) Acquisition of assets ​ ​ ( 4,249,460 ) ​ ​ — ​ ​ — Acquisition of a business ​ ( 14,200,000 ) ​ ( 35,860,000 ) ​ — Proceeds from the sale of property and equipment ​ ​ 2,225,810 ​ ​ — ​ ​ 2,750,576 Net cash (used in) provided by investing activities ​ ( 16,881,440 ) ​ ( 36,158,373 ) ​ 2,589,346 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ ​ ​ ​ ​ ​ ​ Proceeds from exercise of stock options ​ — ​ 408,846 ​ 301,154 Debt payments ​ ​ ( 43,825,825 ) ​ ​ ( 500,000 ) ​ ​ — Debt proceeds ​ ​ 52,352,827 ​ ​ 20,000,000 ​ ​ — Net cash provided by financing activities ​ 8,527,002 ​ 19,908,846 ​ 301,154 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (decrease) increase in cash and cash equivalents ​ ( 2,558,216 ) ​ ( 14,153,353 ) ​ 8,984,940 Cash and cash equivalents, beginning of year ​ 3,097,193 ​ 17,250,546 ​ 8,265,606 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents, end of year ​ $ 538,977 ​ $ 3,097,193 ​ $ 17,250,546 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash paid for income taxes ​ $ 1,913,456 ​ $ 1,855,069 ​ $ 531,481 Cash paid for interest ​ ​ 847,085 ​ ​ 260,889 ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION ​ ​ ​ ​ ​ ​ ​ ​ ​ Transfer from prepaid inventory to purchases of property and equipment ​ $ 3,327,000 ​ ​ — ​ ​ — Transfer from prepaid inventory to inventory ​ ​ 4,254,492 ​ ​ — ​ ​ — Transfer from prepaid inventory to goodwill ​ ​ 516,580 ​ ​ — ​ ​ — Transfer from prepaid inventory to intangible assets, net ​ ​ 800,000 ​ ​ — ​ ​ — ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ ​ ​ ​ 47 Table of Contents INNOVATIVE SOLUTIONS AND SUPPORT, INC. ​ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ 1. Background ​ Innovative Solutions and Support, Inc. (the “Company,” “IS&S,” “we” or “us”) was incorporated in Pennsylvania on February 12, 1988. The Company operates in one business segment as a systems integrator that designs, develops, manufactures, sells and services 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, Department of Defense (“DoD”)/governmental and foreign military markets. This approach, combined with the Company’s industry experience, is designed to enable IS&S to develop high-quality products and systems, to reduce product time to market and to achieve cost advantages over products offered by its competitors. 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 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; an assignment of certain customer contracts; and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its inertial, communication and navigation product lines to repair, overhaul, manufacture sell, import, export and distribute certain products to the Company. See Note 4, “Acquisition” for more details. 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. The shares will be offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-267595), which was declared effective by the SEC on October 14, 2022. The Company filed a prospectus supplement, dated September 22, 2023, with the SEC in connection with the offer and sale of the shares. Subject to the terms and conditions of the ATM Sales Agreement, the Sales Agent will use commercially reasonable efforts to sell shares of the Company’s common stock from time to time, based upon the Company’s instructions. The Company is not obligated to sell any shares under the ATM Sales Agreement, and the Company or the Sales Agent may at any time suspend 48 Table of Contents 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 years 2024 and 2023, we did not sell any shares of common stock under the ATM Sales Agreement. ​ 2. Concentrations ​ 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 ​ The Company buys several of its components from sole source suppliers. Although there are a limited number of suppliers of particular components, management believes other suppliers could provide similar components on comparable terms. ​ During fiscal 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 ​ Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash balances and accounts receivable. The Company invests its excess cash where preservation of principal is the major consideration. Cash balances are maintained with two major banks. Balances on deposit with certain money market accounts and operating accounts may exceed the Federal Deposit Insurance Corporation limits. The Company’s customer base consists principally of companies within the aviation industry. The Company requests advance payments and/or letters of credit from customers that it considers to be significant credit risks. ​ 3. Summary of Significant Accounting Policies ​ Principles of Consolidation ​ The Company’s consolidated financial statements include the accounts of its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. ​ ​ Reclassification ​ 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. ​ 49 Table of Contents 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 ​ The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which require management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Estimates are used in accounting for, among other items, valuation of tangible and intangible assets acquired, long term contracts, evaluation of allowances for 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. In determining whether an acquisition should be accounted for as a business combination or an asset acquisition, the Company first performs a screening test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this is the case, the acquired set is not deemed to be a business and is instead accounted for as an asset acquisition. If this is not the case, the Company then further evaluates whether the acquired set includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. If so, the Company concludes that the acquired set is a business. ​ The Company accounts for business acquisitions using the acquisition method of accounting. Under this method of accounting, assets acquired and liabilities assumed are recorded at their respective fair values at the date of the acquisition. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but these assumptions are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any excess of the purchase price over the fair value of the net assets acquired is recognized as goodwill. ​ During the measurement period, which may be up to one year from the acquisition date, the Company adjusts the provisional amounts of assets acquired and liabilities assumed with the corresponding offset to goodwill to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded within the Company’s consolidated statements of operations. ​ 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. ​ 50 Table of Contents Intangible Assets ​ 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. ​ Intangible assets with a finite life are amortized over their estimated useful life and are reported net of accumulated amortization. They are assessed for impairment in accordance with the Company’s policy on assessing long-lived assets for impairment described below. ​ Indefinite-lived intangible assets are not amortized, but are subject to an annual impairment test, or when events or circumstances dictate, more frequently. The impairment review for indefinite-lived intangible assets can be performed using a qualitative or quantitative impairment assessment. The quantitative assessment consists of a comparison of the fair value of the indefinite-lived intangible asset with its carrying amount. . 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. If the fair value exceeds its carrying amount, the indefinite-lived intangible asset is not considered impaired. ​ Goodwill ​ Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The recorded amounts of goodwill from business combinations are based on management’s best estimates of the fair values of assets acquired and liabilities assumed at the date of acquisition. Goodwill is assigned to the reporting units that are expected to benefit from the synergies of the business combination that generated the goodwill. The Company’s goodwill impairment test is performed at the reporting unit level. Reporting units are determined based on an evaluation of the Company’s operating segments and the components making up those operating segments. ​ Goodwill is tested for impairment annually, or in an interim period, if certain changes in circumstances indicate a possibility that an impairment may exist. Factors to consider that may indicate an impairment may exist are: the macroeconomic conditions, industry and market considerations such as a significant adverse change in the business climate, cost factors, overall financial performance such as current-period operating results or cash flow declines combined with a history of operating results or cash flow declines or a projection/forecast that demonstrates continuing declines in the cash flow or the inability to improve the operations to forecasted levels, and any entity-specific events. ​ If the Company determines that it is more likely than not that the fair value of the reporting unit is below the carrying amount as part of its qualitative assessment, a quantitative assessment of goodwill is required. In the quantitative evaluation, the fair value of the reporting unit is determined and compared to the carrying value. If the fair value is greater than the carrying value, then the goodwill is deemed not to be impaired and no further action is required. If the fair value is less than the carrying value, goodwill is considered impaired and a charge is reported as impairment of goodwill in the consolidated statements of operations. ​ Cash and Cash Equivalents ​ Highly liquid investments, purchased with an original maturity of three months or less, are classified as cash equivalents. Cash equivalents at September 30, 2024 and 2023 consist of cash on deposit and cash invested in money market funds with financial institutions. Due to the short maturity of these instruments, the carrying values on our consolidated balance sheets approximate fair value. ​ 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. ​ 51 Table of Contents Inventory Valuation ​ Inventories are stated at the lower of cost (first-in, first-out) or net realizable value, net of write-downs for excess and obsolete inventory, and consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, September 30, ​ ​ 2024 ​ 2023 Raw materials ​ $ 9,862,591 ​ $ 5,162,177 Work-in-process ​ 1,357,504 ​ 966,888 Finished goods ​ 1,512,286 ​ 10,648 ​ ​ $ 12,732,381 ​ $ 6,139,713 ​ Assets Held for Sale ​ Asset to be disposed of by sale (“disposal groups”) are reclassified into “assets held for sale” if their carrying amounts are principally expected to be recovered through a sale transaction rather than through continuing use. The reclassification occurs when the disposal group is available for immediate sale and the sale is probable. These criteria are generally met when an agreement to sell exists, or management has committed to a plan to sell the assets within one year. Disposal groups are measured at the lower of carrying amount or fair value less costs to sell and are not depreciated or amortized. When the net realizable value of a disposal group increases during a period, a gain can be recognized to the extent that it does not increase the value of the disposal group beyond its original carrying value when the disposal group was reclassified as held for sale. The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less costs to sell is reported as an adjustment to the carrying value of the disposal group. ​ Property and Equipment ​ Property, 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 ​ The Company assesses the impairment of long-lived assets in accordance with FASB ASC Topic 360-10, “ Property, Plant and Equipment.” This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In addition, long-lived assets to be disposed of should be reported at the lower of the carrying amount or fair value less cost to sell. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to estimated future cash flows expected to result from use of the asset. If the carrying amount of the asset exceeds the estimated expected undiscounted future cash flows, the Company measures the amount of the impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows. ​ Revenue Recognition ​ The Company enters into sales arrangements with customers that, in general, provide for the Company to design, develop, manufacture and deliver large flat-panel display systems, flight information computers, autothrottles and advanced monitoring systems that measure and display critical flight information, including data relative to aircraft separation, airspeed, altitude and engine and fuel data measurements. ​ 52 Table of Contents Revenue from Contracts with Customers The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is that an entity recognizes revenue when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services. To achieve this core principle, the Company applies the following five steps: ​ 1) Identify the contract with a customer ​ The Company’s contract with its customers typically is in the form of a purchase order issued to the Company by its customers and, to a lesser degree, in the form of a purchase order issued in connection with a formal contract executed with a customer. 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. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer. ​ 2) Identify the performance obligations in the contract ​ Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. Most of our revenue is derived from purchases under which we provide a specific product or service and, as a result, there is only one performance obligation. In the event that a contract includes multiple promised goods or services, such as an EDC contract which includes both engineering services and a resulting product shipment, the Company must apply judgment to determine whether promised goods or services are capable of being distinct in the context of the contract. In these cases, the Company considers whether the customer could, on its own, or together with other resources that are readily available from third parties, produce the physical product using only the output resulting from the Company’s completion of engineering services. If the customer cannot produce the physical product, then the promised goods or services are accounted for as a combined performance obligation. ​ 3) Determine the transaction price ​ The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. ​ 4) Allocate the transaction price to performance obligations in the contract ​ If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price by taking into account available information such as market conditions as well as the cost of the goods or services and the Company’s normal margins for similar performance obligations. ​ 5) Recognize revenue when or as the Company satisfies a performance obligation ​ The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or service to a customer. 53 Table of Contents Historically, the Company has also recognized revenue from EDC contracts and is recognized over time using an input measure (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress. Contract costs include material, components and third-party avionics purchased from suppliers, direct labor and overhead costs. ​ Contract Estimates ​ Accounting for performance obligations in long-term contracts that are satisfied over time involves the use of various techniques to estimate progress towards satisfaction of the performance obligation. The Company typically measures progress based on costs incurred compared to estimated total contract costs. Contract cost estimates are based on various assumptions to project the outcome of future events that often span more than a single year. These assumptions include the amount of labor and labor costs, the quantity and cost of raw materials used in the completion of the performance obligation and the complexity of the work to be performed. ​ As a significant change in one or more of these estimates could affect the profitability of our contracts, we review and update our contract-related estimates regularly. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the quarter it is identified. ​ The impact of adjustments in contract estimates on our operating earnings can be reflected in either operating costs and expenses or revenue. Therefore, no adjustment on any contract was material to our consolidated financial statements for the fiscal years ended September 30, 2024 and 2023. ​ Contract Balances ​ Contract assets consist of the right to consideration in exchange for product offerings that we have transferred to a customer under the contract. Contract liabilities primarily relate to consideration received in advance of performance under the contract. The following table reflects the Company’s contract assets and liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contract ​ Contract ​ ​ Assets ​ Liabilities September 30, 2022 ​ $ 162,742 ​ $ 259,183 Amount transferred to receivables from contract assets ​ ​ - ​ ​ — Contract asset additions ​ ​ 324,397 ​ ​ — Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period ​ ​ — ​ ​ ( 240,944 ) Increases due to invoicing prior to satisfaction of performance obligations ​ ​ — ​ ​ 125,120 September 30, 2023 ​ $ 487,139 ​ $ 143,359 Amount transferred to receivables from contract assets ​ ( 373,139 ) ​ ​ — Contract asset additions ​ 1,566,060 ​ ​ — Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period ​ — ​ ​ ( 122,541 ) Increases due to invoicing prior to satisfaction of performance obligations ​ — ​ ​ 319,663 September 30, 2024 ​ $ 1,680,060 ​ $ 340,481 ​ Lease Recognition ​ The Company accounts for leases in accordance with ASU 2016-02, Leases (Topic 842). At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable. The Company does not have any financing leases that are material. ​ Income Taxes ​ Income taxes are recorded in accordance with ASC Topic 740, “ Income Taxes ” (“ASC Topic 740”), which utilizes a balance sheet approach to provide for income taxes. Under this method, the Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company’s assets, liabilities and expected benefits of 54 Table of Contents 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. Specific tax items discrete to a particular quarter are recorded in income tax expense for that quarter. The estimated annual effective tax rate used in providing for income taxes on a year-to-date basis may change in subsequent periods. ​ Deferred tax assets are reduced by a valuation allowance if, based on the consideration of all available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. Significant weight is given to evidence that can be verified objectively, and significant management judgment is required in determining any valuation allowance recorded against net deferred tax assets. The Company evaluates deferred income taxes on a quarterly basis to determine if a valuation allowance is required by considering available evidence. Deferred tax assets are recognized when expected future taxable income is sufficient to allow the related tax benefits to reduce taxes that would otherwise be payable. The sources of taxable income that may be available to realize the benefit of deferred tax assets are future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and credit carryforwards, taxable income in carry-back years and tax planning strategies which are both prudent and feasible. For the 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. If the Company were to determine that it would be able to realize additional state deferred tax assets in the future, it would make an adjustment to the valuation allowance which would reduce the provision for income taxes. ​ The accounting for uncertainty in income taxes requires a more likely than not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company records a liability for the difference between the (i) benefit recognized and measured for financial statement purposes and (ii) the tax position taken or expected to be taken on the Company’s tax return. To the extent that the Company’s assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. The Company has elected to record any interest or penalties associated with uncertain tax positions as income tax expense. ​ The Company files a consolidated U.S. federal income tax return. The Company prepares and files tax returns based on the interpretation of tax laws and regulations and records estimates based on these judgments and interpretations. In the normal course of business, the tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities, and the Company records a liability when it is probable that there will be an assessment. The Company adjusts the estimates periodically as a result of ongoing examinations by and settlements with the various taxing authorities, and changes in tax laws, regulations and precedent. The consolidated tax provision of any given year includes adjustments to prior years’ income tax accruals that are considered appropriate and any related estimated interest. Management believes that it has made adequate accruals for income taxes. Differences between estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material effect on the Company’s consolidated financial position but could possibly be material to its consolidated results of operations or cash flow of any one period. ​ Engineering Development ​ 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 - Services based on the method of contract accounting (either percentage-of-completion or completed contract) applicable to such contracts. ​ Fair Value of Financial Instruments ​ The net carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate their fair value because of the short-term nature of these instruments. The carrying value of our debt approximates fair value as the interest rate is variable and approximates current market levels. For financial assets and liabilities measured at fair value on a recurring basis, fair value is the 55 Table of Contents price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value as follows: ​ Level 1 — Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date. ​ Level 2 — Other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including: ​ ● Quoted prices for similar assets or liabilities in active markets; ● Quoted prices for identical or similar assets in non-active markets; ● Inputs other than quoted prices that are observable for the asset or liability; and ● Inputs that are derived principally from or corroborated by other observable market data. ​ Level 3 — Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. ​ ​ ​ ​ ​ ​ The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2024 and 2023, according to the valuation techniques the Company used to determine their fair values. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurement on September 30, 2024 ​ Quoted Price in Significant Other Significant ​ ​ Active Markets for ​ Observable ​ Unobservable ​ ​ Identical Assets ​ Inputs ​ Inputs ​ ​ (Level 1) ​ (Level 2) ​ (Level 3) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents: ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market funds ​ $ 504,104 ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurement on September 30, 2023 ​ Quoted Price in Significant Other Significant ​ ​ Active Markets for ​ Observable ​ Unobservable ​ ​ Identical Assets ​ Inputs ​ Inputs ​ ​ (Level 1) ​ (Level 2) ​ (Level 3) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents: ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market funds ​ $ 3,665,128 ​ $ — ​ $ — ​ The 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 ​ The Company accounts for share-based compensation under ASC Topic 718, which requires the Company to measure the cost of employee or non-employee director services received in exchange for an award of equity instruments based on the grant-date fair value of the award using an option pricing model. The Company recognizes such cost over the period during which an employee or non-employee director is required to provide service in exchange for the award. ​ 56 Table of Contents Accordingly, adoption of ASC Topic 718’s fair value method results in recording compensation costs under the Company’s stock based compensation plans. The Company determined the fair value of its stock option awards at the date of grant using the Black-Scholes option pricing model. Option pricing models and generally accepted valuation techniques require management to make assumptions and to apply judgment to determine the fair value of its awards. These assumptions and judgments include estimating future volatility of the Company’s stock price, expected dividend yield, future employee turnover rates, and future employee stock option exercise behaviors. Changes in these assumptions can materially affect fair value estimates. The Company does not believe that a reasonable likelihood exists that there will be a material change in future estimates or assumptions used to determine share-based compensation expense. However, if actual results are not consistent with the Company’s estimates or assumptions, the Company would adjust its estimates. Such adjustments could have a material impact on the Company’s financial position. ​ Warranty Reserves ​ The Company offers warranties on some products of various lengths, however the standard warranty period is twenty-four months . At the time of shipment, the Company establishes a reserve for estimated costs of warranties based on its best estimate of the amounts necessary to settle future and existing claims using historical data on products sold as of the balance sheet date. The length of the warranty period, the product’s failure rates and the customer’s usage affect warranty cost. If actual warranty costs differ from the Company’s estimated amounts, future results of operations could be affected adversely. Warranty cost is recorded as Cost of sales, and the reserve balance recorded as an accrued expense. While the Company maintains product quality programs and processes, its warranty obligation is affected by product failure rates and the related corrective costs. If actual product failure rates and/or corrective costs differ from the estimates, the Company revises the estimated warranty liability accordingly. ​ Self-Insurance Reserves ​ Since January 1, 2014, the Company has self-insured a significant portion of its employee medical insurance. The Company maintains a stop-loss insurance policy that limits its losses both on a per employee basis and an aggregate basis. Liabilities associated with the risks that are retained by the Company are estimated based upon actuarial assumptions such as historical claims experience and demographic factors. The Company estimated the total medical claims incurred but not reported, and the Company believes that it has adequate reserves for these claims at September 30, 2023 and 2022. However, the actual value of such claims could be significantly affected if future occurrences and claims differ from these assumptions. At September 30, 2024 and 2023, the estimated liability for medical claims incurred but not reported was $ 98,300 and $ 62,300 , respectively. 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 fiscal year ended September 30, 2024, the Company has used the excess of funded premiums to reduce amounts payable for claims incurred. ​ Treasury Stock ​ We account for treasury stock purchased under the cost method and include treasury stock as a component of shareholders’ equity. Treasury stock purchased with intent to retire (whether or not the retirement is actually accomplished) is charged to common stock. ​ 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 57 Table of Contents 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 GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for SEC small business filers for fiscal years beginning after December 15, 2022. The adoption of this standard did not have a material impact on our condensed consolidated financial statements or related disclosures. ​ 4. Acquisition ​ On September 27, 2024, the Company entered into and closed the transaction contemplated by the September 2024 Honeywell Agreement. 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 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. 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 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 ​ $ 14,060,000 ​ ​ ​ ​ ​ ​ Prepaid inventory (a) ​ $ 3,191,000 ​ Prepaid equipment and other current assets ​ ​ 160,000 ​ Intangible assets (b) ​ ​ 9,570,000 ​ Goodwill (c) ​ ​ 1,139,000 ​ Net assets acquired ​ $ 14,060,000 ​ ​ ​ ​ ​ ​ ​ (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 58 Table of Contents 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, ​ 2024 2023 Net sales ​ $ 55,545,035 ​ $ 52,287,873 Net income ​ $ 5,416,305 ​ $ 7,734,498 ​ 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; 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 June 2023 Honeywell Agreement allows the Company to diversify its product offerings in the aerospace industry. The Company 59 Table of Contents 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 Measurement Purchase Price ​ ​ (as previously reported) ​ Period Adjustments ​ Allocation Cash consideration ​ $ 35,860,000 ​ $ — ​ $ 35,860,000 Total consideration ​ $ 35,860,000 ​ $ — ​ $ 35,860,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ — Prepaid inventory (a) ​ $ 10,036,160 ​ $ ( 3,012,626 ) (d) $ 7,023,534 Equipment ​ ​ 2,609,000 ​ ​ 3,675,000 (d) ​ 6,284,000 Construction in progress ​ ​ 1,238,000 ​ ​ — ​ ​ 1,238,000 Intangible assets (b) ​ ​ 20,900,000 ​ ​ ( 3,660,000 ) (d) ​ 17,240,000 Goodwill (c) ​ ​ 4,608,041 ​ ​ ( 533,575 ) (d)(e) ​ 4,074,466 Assets acquired ​ ​ 39,391,201 ​ ​ ( 3,531,201 ) ​ ​ 35,860,000 Accrued expenses ​ ​ ( 3,531,201 ) ​ ​ 3,531,201 (e) ​ — Liabilities assumed ​ ​ ( 3,531,201 ) ​ ​ 3,531,201 ​ ​ — Net assets acquired ​ $ 35,860,000 ​ $ — ​ $ 35,860,000 ​ (a) Prepaid inventory consists of 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. The fair value of finished goods was determined based on the estimated selling price, net of selling costs and a margin on the selling activities, which resulted in a step-up in the value of the finished goods. ​ (b) Intangible assets consist of license agreements related to the license rights to use certain Honeywell intellectual property and customer relationships and are recorded at estimated fair values. The estimated fair value of the license agreement is based on a variation of the income valuation approach and is determined using the relief from royalty method. The estimated fair value of the customer relationships is based on a variation of the income valuation approach known as the multi-period excess earnings method. Refer to Note 5, “Intangible assets” for further details. ​ (c) Goodwill represents the excess of the purchase consideration over the preliminary fair value of the net assets acquired. The goodwill recognized is primarily attributable to the expected synergies from the 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. 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 60 Table of Contents 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 statement of operations. ​ ​ Transition services agreement ​ 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. The prepaid expense related to the 2023 TSA was determined using the with and without method. ​ Acquisition and related costs ​ 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 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended September 30, ​ 2023 2022 Net sales ​ $ 43,757,196 ​ $ 49,218,764 Net income ​ $ 8,542,330 ​ $ 9,716,082 ​ These pro forma results are for illustrative purposes and are not indicative of the actual results of operations that would have been achieved, nor are they indicative of future results of operations. The unaudited pro forma information for all periods presented was adjusted to give effect to pro forma events that are directly attributable to the transaction and are factually supportable. The adjustments are based on information available to the Company at this time. Accordingly, the adjustments are subject to change, and the impact of such changes may be material. The unaudited pro forma results do not include any incremental cost savings that may result from the integration. ​ Other ​ 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 61 Table of Contents 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. ​ ​ 5. Intangible assets ​ The Company’s intangible assets other than goodwill are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of September 30, 2024 ​ Gross Carrying Accumulated Accumulated Net Carrying ​ ​ Value Impairment Amortization Value License agreement (a) ​ $ 9,140,000 ​ $ — ​ $ — ​ $ 9,140,000 Customer relationships (a) ​ 13,008,332 ​ — ​ ( 1,459,861 ) ​ 11,548,471 Backlog (b) ​ ​ 6,310,000 ​ ​ — ​ ​ — ​ ​ 6,310,000 Licensing and certification rights (c) ​ 696,506 ​ ( 44,400 ) ​ ( 638,285 ) ​ 13,821 Total ​ $ 29,154,838 ​ $ ( 44,400 ) ​ $ ( 2,098,146 ) ​ $ 27,012,292 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of September 30, 2023 ​ Gross Carrying Accumulated Accumulated Net Carrying ​ Value Impairment Amortization Value License agreement (a) ​ $ 5,700,000 ​ $ — ​ $ — ​ $ 5,700,000 Customer relationships (a) ​ 10,740,000 ​ — ​ ( 268,500 ) ​ 10,471,500 Licensing and certification rights (c) ​ 696,506 ​ ( 44,400 ) ​ ( 638,285 ) ​ 13,821 Total ​ $ 17,136,506 ​ $ ( 44,400 ) ​ $ ( 906,785 ) ​ $ 16,185,321 ​ ​ (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, 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 . ​ (c) The licensing, and certification rights are amortized over a defined number of units. 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. 62 Table of Contents ​ 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. 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: ​ ​ ​ ​ ​ Year ​ Amortization Expense 2025 ​ $ 2,930,643 2026 ​ ​ 2,930,643 2027 ​ ​ 2,930,643 2028 ​ ​ 2,930,643 2029 ​ ​ 1,353,143 Thereafter ​ ​ 4,782,756 Total ​ $ 17,858,471 ​ ​ 6. Net Income Per Share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Year Ended September 30, ​ 2024 2023 2022 Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 6,998,380 ​ $ 6,027,755 ​ $ 5,523,778 Denominator: ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic weighted average shares ​ 17,459,823 ​ 17,411,684 ​ 17,256,750 Dilutive effect of share-based awards ​ 20,424 ​ 7,501 ​ 1,121 Diluted weighted average shares ​ 17,480,247 ​ 17,419,185 ​ 17,257,871 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income per common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.40 ​ $ 0.35 ​ $ 0.32 Diluted ​ $ 0.40 ​ $ 0.35 ​ $ 0.32 ​ Net income per share is calculated pursuant to ASC Topic 260, “ Earnings per Share” (“ASC Topic 260”). Basic earnings per share (“EPS”) excludes potentially dilutive securities and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS is computed assuming the conversion or exercise of all dilutive securities such as employee stock options and restricted stock units (“RSUs”). ​ The number of incremental shares from the assumed exercise of stock options and RSUs is calculated by using the treasury stock method. As of September 30, 2024, 2023 and 2022, there were 361,613 , 224,374 and 57,584 options to purchase common stock outstanding, respectively. As of September 30, 2024, 2023 and 2022, there were 242,080 , 101,968 and 32,897 shares subject to vesting of restricted stock units outstanding, respectively. The average outstanding diluted shares calculation excludes options with an exercise price that exceeds the average market price of shares during the period. For fiscal 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. ​ 7. Prepaid Expenses and Other Current Assets ​ Prepaid expenses and other current assets consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, September 30, ​ ​ 2024 ​ 2023 Prepaid insurance ​ $ 54,197 ​ $ 623,186 Honeywell TSA Agreement ​ ​ 140,000 ​ ​ 56,000 Other ​ 967,197 ​ 393,826 ​ ​ $ 1,161,394 ​ $ 1,073,012 ​ ​ 63 Table of Contents 8. Assets Held for Sale ​ The asset classified as held for sale, net consists of the following: ​ ​ ​ ​ ​ ​ ​ September 30, ​ 2023 Corporate airplane ​ ​ 2,406,468 Less: accumulated depreciation and amortization ​ ​ ( 342,650 ) ​ ​ $ 2,063,818 ​ As of September 30, 2023, the Company classified $ 2.1 million of net property and equipment as “assets held for sale” on the consolidated balance sheet. During the 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. ​ 9. Property and Equipment ​ Property and equipment, net consists of the following balances: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, September 30, ​ ​ 2024 ​ 2023 Computer equipment ​ $ 2,416,795 ​ $ 2,343,996 Furniture and office equipment ​ 984,205 ​ 970,230 Buildings and improvements ​ 6,198,690 ​ 5,926,584 Equipment other ​ 15,161,225 ​ 9,554,197 Land ​ 1,021,245 ​ 1,021,245 ​ ​ 25,782,160 ​ 19,816,252 Less accumulated depreciation and amortization ​ ( 12,409,862 ) ​ ( 11,923,825 ) ​ ​ $ 13,372,298 ​ $ 7,892,427 ​ Depreciation related to property and equipment was $ 906,581 , $ 427,317 and $ 358,837 in fiscal years 2024, 2023 and 2022, respectively. ​ 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. ​ 64 Table of Contents 10. Other Assets ​ Other assets consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, September 30, ​ ​ 2024 ​ 2023 Operating lease right-of-use assets ​ $ 2,100 ​ $ 15,065 Other non-current assets ​ 471,625 ​ 176,657 ​ ​ $ 473,725 ​ $ 191,722 ​ 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. ​ ​ 11. Accrued Expenses ​ Accrued expenses consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, September 30, ​ ​ 2024 ​ 2023 Warranty ​ $ 596,538 ​ $ 562,645 Salary, benefits and payroll taxes ​ 1,685,372 ​ 1,181,219 Professional fees ​ 262,320 ​ 200,668 Operating lease ​ ​ 2,100 ​ ​ 12,965 Income tax payable ​ ​ 1,194,185 ​ ​ — Other ​ 868,779 ​ 960,828 ​ ​ $ 4,609,294 ​ $ 2,918,325 ​ ​ ​ ​ 12. Warranty ​ The Company provides for the estimated cost of product warranties at the time revenue is recognized. Warranty cost is recorded as Cost of sales, and the reserve balance is recorded as an accrued expense in the financial statements. While the Company engages in extensive product quality programs and processes, the Company’s warranty obligation is affected by product failure rates and by the related material, labor and delivery costs incurred in correcting a product failure. If actual product failure rates, material, or labor costs differ from the Company’s estimates, further revisions to the estimated warranty liability would be recorded. ​ Warranty cost and accrual information for fiscal years ended September 30, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 Warranty accrual as of October 1, ​ $ 562,645 ​ $ 607,001 Expense accrual for fiscal year ​ 149,441 ​ 58,472 Warranty cost incurred for fiscal year ​ ( 115,548 ) ​ ( 102,828 ) Warranty accrual as of September 30, ​ $ 596,538 ​ $ 562,645 ​ ​ 13. Income Taxes ​ 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. This legislation will not have a material impact on the Company’s tax position. ​ ​ ​ 65 Table of Contents The components of income taxes are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Year Ended September 30, ​ 2024 2023 2022 Current provision (benefit): ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal ​ $ 2,617,951 ​ $ 1,541,726 ​ $ 522,473 State ​ 371,701 ​ 56,288 ​ 277,991 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total current provision (benefit) ​ 2,989,652 ​ 1,598,014 ​ 800,464 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred provision (benefit) ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal ​ ( 881,495 ) ​ 28,994 ​ 998,585 State ​ ( 254,977 ) ​ ( 19,491 ) ​ 18,782 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total deferred provision (benefit) ​ ( 1,136,472 ) ​ 9,503 ​ 1,017,367 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total current and deferred provision (benefit) ​ $ 1,853,180 ​ $ 1,607,517 ​ $ 1,817,831 ​ Following is a reconciliation of the statutory federal rate to the Company’s effective income tax rate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Year Ended September 30, ​ 2024 2023 2022 U.S. Federal statutory tax rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal benefit 1.1 % 0.4 % 11.8 % Permanent items 0.1 % — % 0.1 % Research and development tax credits ( 1.6 ) % ( 0.8 ) % ( 0.1 ) % Valuation allowance ( 0.1 ) % ( 0.1 ) % ( 6.4 ) % Change in unrecognized tax benefits 0.4 % 0.1 % ( 1.5 ) % 123R cancellations and forfeitures ​ 0.0 % 0.4 % 0.3 % Other ​ 0.0 % 0.1 % ( 0.5 ) % Effective income tax rate 20.9 % 21.1 % 24.7 % ​ The deferred tax effect of temporary differences giving rise to the Company’s deferred tax assets and liabilities consists of the components below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of September 30, ​ ​ 2024 ​ 2023 ​ ​ Non Current Non Current Deferred tax assets: ​ ​ ​ ​ ​ ​ ​ Reserves and accruals ​ $ 1,233,261 ​ $ 778,805 ​ Research and development credit ​ ​ — ​ ​ — ​ NOL carryforwards -fed/state ​ ​ 971,825 ​ ​ 980,755 ​ Depreciation ​ ​ — ​ ​ — ​ Stock options ​ ​ 375,224 ​ ​ 241,598 ​ Amortization ​ ​ 1,302,165 ​ ​ 520,445 ​ ​ ​ ​ 3,882,475 ​ ​ 2,521,603 ​ Less: Valuation allowance ​ ​ ( 969,784 ) ​ ​ ( 977,747 ) ​ Total deferred tax assets ​ ​ 2,912,691 ​ ​ 1,543,856 ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities: ​ ​ ​ ​ ​ ​ ​ Depreciation ​ ​ ( 1,287,547 ) ​ ​ ( 1,087,653 ) ​ Total deferred tax liabilities ​ ​ ( 1,287,547 ) ​ ​ ( 1,087,653 ) ​ Net deferred tax asset ​ $ 1,625,144 ​ $ 456,203 ​ ​ 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 year 2024 and 2023. 66 Table of Contents ​ Deferred tax assets are reduced by valuation allowances if, based on the consideration of all available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. Significant weight is given to evidence that can be verified objectively, and significant management judgment is required in determining any valuation allowance recorded against net deferred tax assets. The Company evaluates deferred income taxes on a quarterly basis to determine if valuation allowances are required by considering available evidence, including historical and projected taxable income and tax planning strategies which are both prudent and feasible. ASC Topic 740 requires the consideration of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Significant management judgment is required in determining any valuation allowance recorded against net deferred tax assets. 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. If the Company were to determine that it would be able to realize additional state deferred tax assets in the future, it would make an adjustment to the valuation allowance which would reduce the provision for income taxes. ​ Following is a reconciliation of beginning and ending balances of total amounts of gross unrecognized tax benefits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Year Ended September 30, ​ 2024 2023 Balance at beginning of year ​ $ 460,000 ​ $ 452,000 ​ Unrecognized tax benefits related to prior years ​ 8,000 ​ — ​ Unrecognized tax benefits related to current year ​ 28,000 ​ 8,000 ​ Decrease in unrecognized tax benefits due to the lapse of applicable statute of limitations ​ ( 12,000 ) ​ — ​ Balance at end of year ​ $ 484,000 ​ $ 460,000 ​ ​ 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. At September 30, 2024, the Company currently has no unrecognized tax benefits against which interest has been accrued, and there is no accrual recorded for penalties. ​ For the fiscal years ended September 30, 2024, 2023 and 2022, the Company did not recognize any expense for interest (net of federal impact) within income tax expense. ​ The Company is subject to income taxes in the U.S. federal and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of related tax laws and regulations and require significant judgment to apply. The Company’s federal income tax returns for the fiscal years ended September 30, 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. ​ 14. Savings Plan ​ The Company sponsors a voluntary defined contribution savings plan covering all employees. The Company made contributions of approximately $ 344,000 , $ 242,000 and $ 126,000 for the fiscal years ended September 30, 2024, 2023 and 2022, respectively. ​ 15. Share-Based Compensation ​ The Company accounts for share-based compensation under the provisions of ASC Topic 718 by using the fair value method for expensing stock options and stock awards. ​ Total share-based compensation expense was approximately $ 1,003,292 , $ 1,336,000 , and $ 345,000 for the fiscal years ended September 30, 2024, 2023 and 2022, respectively. Compensation expense related to share-based awards is recorded as a component of Cost of sales and selling, general and administrative expenses. ​ 67 Table of Contents 2019 Stock-Based Incentive Compensation Plan ​ The 2019 Stock-Based Incentive Compensation Plan (the “2019 Plan”) was approved by the Company’s shareholders at the Company’s Annual Meeting of Shareholders held on April 2, 2019. The 2019 Plan authorizes the grant of stock appreciation rights, restricted stock, options and other equity-based awards. Options granted under the 2019 Plan may be either “incentive stock options” as defined in section 422 of the Code or nonqualified stock options, as determined by the Compensation Committee. ​ Subject to an adjustment necessary upon a stock dividend, recapitalization, forward split or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase or share exchange, extraordinary or unusual cash distribution, or similar corporate transaction or event, the maximum number of shares of common stock available for awards under the 2019 Plan is 750,000 , plus 139,691 shares of common stock that were authorized but unissued under the 2009 Plan as of the effective date of the 2019 Plan (i.e., April 2, 2019), all of which may be issued pursuant to awards of incentive stock options. ​ If any award is forfeited, terminates or otherwise is settled for any reason without an actual distribution of shares to the participant, the related shares of common stock subject to such award will again be available for future grant. Any shares tendered by a participant in payment of the exercise price of an option or the tax liability with respect to an award (including, in any case, shares withheld from any such award) will not be available for future grant under the 2019 Plan. If there is any change in the Company’s corporate capitalization, the Compensation Committee must proportionately and equitably adjust the number and kind of shares of common stock which may be issued in connection with future awards, the number and kind of shares of common stock covered by awards then outstanding under the 2019 Plan, the aggregate number and kind of shares of common stock available under the 2019 Plan, any applicable individual limits on the number of shares of common stock available for awards under the 2019 Plan, the exercise or grant price of any award, or if deemed appropriate, make provision for a cash payment with respect to any outstanding award. In addition, the Compensation Committee may make adjustments in the terms and conditions of any awards, including any performance goals, in recognition of unusual or nonrecurring events affecting the Company or any subsidiary, or in response to changes in applicable laws, regulations, or accounting principles. ​ Following is a summary of option activity under the 2019 Plan for the fiscal year ended September 30, 2024, and changes during the periods then ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ Average ​ Aggregate ​ ​ ​ ​ Exercise ​ Intrinsic ​ ​ Options ​ Price ​ Value Outstanding at September 30, 2022 57,584 ​ $ 7.10 ​ $ 88,104 Granted 224,374 ​ ​ 8.19 ​ — Exercised ( 57,584 ) ​ ​ 7.10 ​ 28,792 Cancelled — ​ ​ — ​ — Outstanding at September 30, 2023 ​ 224,374 ​ $ 8.19 ​ $ — Granted ​ 161,613 ​ ​ 7.70 ​ — Exercised ​ — ​ ​ — ​ — Cancelled ​ ( 24,374 ) ​ ​ 8.21 ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding at September 30, 2024 ​ 361,613 ​ $ 7.97 ​ $ — Options exercisable at September 30, 2024 ​ 225,000 ​ $ 8.18 ​ $ — ​ The following table summarizes information about stock options under the 2019 Plan at September 30, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options Outstanding ​ Options Exercisable ​ ​ Outstanding ​ Weighted- ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ Average ​ Weighted- ​ As of ​ Weighted- Range of Exercise ​ September 30, ​ Remaining ​ Average ​ September 30, ​ Average Prices 2024 Contractual Life Exercise Price 2024 Exercise Price $ 7.06 - $ 8.19 361,613 8.8 ​ $ 7.97 225,000 ​ $ 8.18 ​ Fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. Options are exercisable over a maximum term of ten years from date of grant and vest typically over periods of three to five years from the grant date. The expected term of options represents the period of time that options granted are expected to be outstanding and is based on historical experience and the expected turnover rate of the employees receiving the options. Expected volatility is based on historical volatility 68 Table of Contents of the Company’s stock. The risk free interest rate is based on U.S. Treasuries with maturities consistent with the expected life of the options in effect at the time of grant. Compensation expense for employee stock options includes an estimate for forfeitures and is recognized ratably over the vesting term. ​ Below are the fair value assumptions used to record stock option compensation expense, related to the 2019 Plan, for the following periods identified: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended September 30, ​ 2024 2023 2022 Expected dividend rate ​ — — — ​ Expected volatility ​ 52.5 % 55.1 % — % Weighted average risk-free interest rate ​ 4.3 % 3.7 % — % Expected lives (years) ​ 6.0 5.3 — ​ ​ 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. ​ At September 30, 2024, unrecognized compensation expense of $ 495,797 , net of forfeitures, related to non-vested stock options under the 2019 Plan, will be recognized. ​ Restricted Stock Units ​ 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. Under the terms of the awards, the RSUs will vest on the first anniversary of the grant date. At the time of vesting, the RSUs will be settled in shares of the Company’s common stock at a rate of one share of stock for each unit, provided that, if a director resigns from the Board prior to the vesting date, such director shall only receive a pro rata portion of such award for time served. ​ During fiscal 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 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, 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. ​ ​ ​ ​ ​ ​ ​ ​ Non-vested Weighted Average ​ ​ Stock Awards ​ Share Price Balance at September 30, 2022 32,897 ​ $ 6.51 Granted 133,554 ​ 8.00 Issued ( 64,483 ) ​ 7.51 Cancelled — ​ — Balance at September 30, 2023 101,968 ​ $ 7.84 Granted 207,226 ​ 7.34 Issued ( 55,611 ) ​ 7.63 Cancelled ( 11,503 ) ​ 7.33 Balance at September 30, 2024 242,080 ​ $ 7.49 ​ 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. ​ 69 Table of Contents 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. ​ 16. Commitments and Contingencies ​ Purchase Obligations ​ A “purchase obligation” is defined as an agreement to purchase goods or services that is enforceable and legally binding on the Company and that specifies all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions, and the approximate timing of the transaction. These amounts primarily comprise 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. ​ Product Liability ​ The Company has product liability insurance of $ 50,000,000 . The Company has not experienced any material product liability claims. ​ Legal Proceedings ​ In the ordinary course of business, the Company is at times subject to various legal proceedings and claims. The Company does not believe any such matters that are currently pending will, individually or in the aggregate, have a material effect on the results of operations or financial position. ​ 17. Related Party Transactions ​ In recent years, the Company has had sales to AML Global Eclipse, LLC, (“Eclipse”), whose principal shareholder is also a principal shareholder in the Company. Eclipse 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 $ 0.2 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. ​ 18. Business Segments ​ 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 ​ Most of the Company’s sales, operating results and identifiable assets are generated in the United States. 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. ​ ​ 19. Lease Recognition ​ The Company accounts for leases in accordance with ASU 2016-02 and records “right-of-use” assets and corresponding lease liabilities on the balance sheet for most leases with an initial term of greater than one year. We recognize payments for leases with a term of less than one year in the statements of operations on a straight-line basis over the lease term. ​ 70 Table of Contents We lease real estate and equipment under various operating leases. A lease exists when a contract or part of a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In determining whether a lease exists, we consider whether a contract provides us with both: (a) the right to obtain substantially all of the economic benefits from the use of the identified asset and (b) the right to direct the use of the identified asset. ​ Some of our leases include base rental periods coupled with options to renew or terminate the lease, generally at our discretion. In evaluating the lease term, we consider whether we are reasonably certain to exercise such options. To the extent a significant economic incentive exists to exercise an option, that option is included within the lease term. However, based on the nature of our lease arrangements, options generally do not provide us with a significant economic incentive and are therefore excluded from the lease term for the majority of our arrangements. ​ Our leases typically include a combination of fixed and variable payments. Fixed payments are generally included when measuring the right-of-use asset and lease liability. Variable payments, which primarily represent payments based on usage of the underlying asset, are generally excluded from such measurement and expensed as incurred. In addition, certain of our lease arrangements may contain a lease coupled with an arrangement to provide other services, such as maintenance, or may require us to make other payments on behalf of the lessor related to the leased asset, such as payments for taxes or insurance. As permitted by ASU 2016-02, we have elected to account for these non-lease components together with the associated lease component if included in the lease payments. This election has been made for each of our asset classes. ​ The measurement of “right-of-use” assets and lease liabilities requires us to estimate appropriate discount rates. To the extent the rate implicit in the lease is readily determinable, such rate is utilized. However, based on information available at lease commencement for our leases, the rate implicit in the lease is not known. In these instances, we utilize an incremental borrowing rate, which represents the rate of interest that we would pay to borrow on a collateralized basis over a similar term. ​ Related assets and liabilities resulting from lease obligations are deemed to be immaterial. ​ ​ ​ ​ 20. Loan Agreement ​ On June 28, 2023, the Company and one of its subsidiaries entered into an Amendment to Loan Documents (the “Loan Amendment”) with PNC Bank, National Association (the “PNC”), which amends certain terms of that certain Loan Agreement entered into by the parties on May 11, 2023 (the “Loan Agreement” and, as amended, the “Amended Loan Agreement”) and (ii) a corresponding Term Note in favor of PNC (the “Term Note”), which together provide for a senior secured term loan in an aggregate principal amount of $ 20.0 million, with a maturity date of June 28, 2028. Availability of funds under the Term Loan was conditioned upon the closing of the transactions contemplated by the Amended Loan Agreement and was used to fund a portion of the 2023 Transaction. Under the agreement, the Company has the right to prepay any amounts outstanding at any time and from time to time, whole or in part; subject to payment of any break funding indemnification amounts. ​ The interest rate applicable to loans outstanding under the Term Loan is a floating interest rate equal to the sum of (A) the Term SOFR Rate (as defined in the Term Note) plus (B) an unadjusted spread of the Applicable SOFR Margin plus (C) a SOFR adjustment of ten basis points. The Applicable SOFR Margin ranges from 1.5 % to 2.5 % depending on the Company’s funded debt to EBITDA ratio. Commencing on June 30, 2023, the Term Loan 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 71 Table of Contents 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 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. ​ ​ ​ 21. Subsequent Events ​ None ​ Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.