What changed in this filing

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Item 1. Financial Statements

2025-05-15 compared with 2025-02-14 · 156 added, 116 removed, 505 unchanged (35% of the section changed)

25 unchanged sentences

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

No shares issued and outstanding at December 31, 2024 and September 30, 2024

No shares issued and outstanding at March 31, 2025 and September 30, 2024

Common stock, $ .001 par value:

75,000,000 shares authorized, 19,635,515 and 19,599,052 issued at December 31, 2024 and September 30, 2024, respectively

75,000,000 shares authorized, 19,651,771 and 19,599,052 issued at March 31, 2025 and September 30, 2024, respectively

Additional paid-in capital

Retained earnings

Treasury stock, at cost, 2,096,451 shares at December 31, 2024 and at September 30, 2024, respectively

Treasury stock, at cost, 2,096,451 shares at March 31, 2025 and at September 30, 2024, respectively

( 21,368,537 )

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended December 31,

Three Months Ended March 31,

Six Months Ended March 31,

Total net sales

9 unchanged sentences

Income before income taxes

Income tax expense (benefit)

Income tax expense

Net income per common share:

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

Three Months Ended December 31, 2024

shareholders’

4 unchanged sentences

( 21,368,537 )

Share-based compensation

Balance, March 31, 2025

( 21,368,537 )

See accompanying notes to the unaudited condensed consolidated financial statements.

6 unchanged sentences

( 21,368,537 )

Share-based compensation

Balance, March 31, 2024

( 21,368,537 )

See accompanying notes to the unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended December 31,

For the Six Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

3 unchanged sentences

Stock options

Restricted stock awards and Market stock unit awards

Gain on disposal of property and equipment

Restricted stock awards, MSOs and MSUs

(Gain) / Loss on disposal of property and equipment

Deferred income taxes

1 unchanged sentence

Accounts receivable

Contract assets

( 1,210,605 )

Contract assets

( 4,590,467 )

( 2,227,708 )

Prepaid inventories

Prepaid expenses and other current assets

8 unchanged sentences

Purchases of property and equipment

( 1,817,015 )

Proceeds from the sale of property and equipment

Net cash (used in) provided by investing activities

( 1,817,015 )

CASH FLOWS FROM FINANCING ACTIVITIES:

4 unchanged sentences

( 13,848,749 )

( 8,791,046 )

Net cash used in financing activities

( 8,857,115 )

( 8,888,486 )

Net increase (decrease) in cash and cash equivalents

3 unchanged sentences

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for income taxes

Cash paid for interest

1 unchanged sentence

Transfer from prepaid inventory to inventory

Transfer from prepaid expenses to PP&E

Transfer from prepaid expenses to intangible assets, net

Transfer from prepaid inventory to purchases of property and equipment

Transfer from prepaid expenses and other current assets to PP&E

Transfer from intangible assets to goodwill

Transfer from prepaid expenses to other assets

See accompanying notes to the unaudited condensed consolidated financial statements.

5 unchanged sentences

Description of the Company

Incorporated in Pennsylvania in 1988, ISSC is a vertically integrated provider of flight solutions and equipment to commercial air transport, general aviation markets, the United States Department of Defense (“DoD”) and allied foreign militaries.

Incorporated in Pennsylvania in 1988, IS&S is a vertically integrated provider of flight solutions and equipment to commercial air transport, general aviation markets, the United States Department of Defense (“DoD”) and allied foreign militaries.

We operate in one business segment that designs, develops, manufactures, sells and services avionics products and systems for retrofit applications and Original Equipment Manufacturers (“OEMs”).

On September 27, 2024, the Company entered into a second Asset Purchase and License Agreement (the “September 2024 Honeywell Agreement”) with Honeywell, International Inc.

(“Honeywell”), pursuant to which 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 for consideration of $ 14.2 million in cash.

The exclusive licensing of these product lines from Honeywell is a unique opportunity for the Company that enhances its current offerings in the air transport, military and business aviation markets.

In addition, there are potential cost synergies from better utilization of the Company’s skilled engineering team and its existing operational capacity.

The Company believes the September 2024 Honeywell Agreement will help to accelerate the Company’s growth and enhance its global reputation for delivering best price-for-performance product and service solutions.

In July 2024, the Company entered into an exclusive license agreement and acquired additional key assets for certain communication and navigation product lines from Honeywell (the “July 2024 Honeywell Asset Acquisition”).

This transaction complements the previous Honeywell license and asset acquisition completed in June 2023.

Total consideration was $ 4.2 million in cash.

In June 2023, the Company entered into an Asset Purchase and License Agreement (the “June 2023 Honeywell Agreement”) with Honeywell pursuant to which Honeywell sold, assigned or licensed certain assets related to its inertial, communication and navigation product lines, 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 inertial, communication and navigation product lines to repair, overhaul, manufacture sell, import, export and distribute certain products to the Company for cash consideration of $ 35.9 million.

Basis of Presentation

2 unchanged sentences

The condensed consolidated balance sheet as of September 30, 2024 is derived from the audited financial statements of the Company.

Operating results for the three months ended December 31, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2025 which cannot be determined at this time.

Operating results for the three- and six- months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2025 which cannot be determined at this time.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024.

5 unchanged sentences

Actual results could differ from those estimates.

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

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

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

1 unchanged sentence

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 three months ended December 31, 2024, the Company has aggregated these items into one category, “Services” and reclassified Customer service and Engineering and development contracts revenues as well as Cost of sales to conform the presentation of the Consolidated Statements of Operations for three months ended December 31, 2023.

For additional information, see Note, 3 Summary of Significant Accounting Policies, (“Reclassifications ”) to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024.

For the three and six months ended March 31, 2025, the Company has aggregated these items into one category, “Services” and reclassified Customer service and Engineering and development contracts revenues as well as Cost of sales to conform the presentation of the Consolidated Statements of Operations for three and six months ended March 31, 2024.

For additional information, see Note, 3 Summary of Significant Accounting Policies, (“Reclassifications ”) to

the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024.

Business Combinations

15 unchanged sentences

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.

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

9 unchanged sentences

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 quantitative assessment consists of a comparison of the fair value of the indefinite-lived

intangible asset with its carrying amount.

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

30 unchanged sentences

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

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

Fair Value Measurement on December 31, 2024

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2025 and September 30, 2024, according to the valuation techniques the Company used to determine their fair values.

Fair Value Measurement on March 31, 2025

Quoted Price in

11 unchanged sentences

Money market funds

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

The March 31, 2025 and September 30, 2024 money market funds balance differs from the cash and cash equivalents balance on the condensed consolidated balance sheet due to the timing of sweep transactions within the PNC cash investment accounts.

Revenue from Contracts with Customers

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.

The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”).

The Company accounts for revenue in accordance with ASC Topic 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.

8 unchanged sentences

Payment terms are defined by when payment is typically due.

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.

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.

Identify the performance obligations in the contract

11 unchanged sentences

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.

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

14 unchanged sentences

The impact of adjustments in contract estimates on our operating earnings is typically reflected in consolidated revenues.

There were no material contract estimate adjustments to our condensed consolidated financial statements for the three-months ended December 31, 2024 and 2023.

There were no material contract estimate adjustments to our condensed consolidated financial statements for the three and six months ended March 31, 2025.

Contract Balances

4 unchanged sentences

Amount transferred to receivables from contract assets

( 1,029,584 )

Contract asset additions

1 unchanged sentence

Increases due to invoicing prior to satisfaction of performance obligations

December 31, 2024

March 31, 2025

Concentrations

Major Customers and Products

In the three months ended December 31, 2024, three customers, Lockheed Martin, Boeing and Pilatus Aircraft Ltd (“Pilatus”), accounted for 38 %, 9 % and 8 % of net sales, respectively.

In the three months ended December 31, 2023, one customer, Pilatus accounted for 29 % of net sales.

In the three months ended March 31, 2025, five customers, Lockheed Martin Corporation (“Lockheed Martin”), Atlas Air Inc.

(“Atlas”), The Boeing Company (“Boeing”), Pilatus Aircraft Ltd (“Pilatus”) and Kalitta Air Inc.

(“Kalitta”), accounted for 48 %, 9 %, 5 %, 5 % and 5 % of net sales, respectively.

In the six months ended March 31, 2025, five customers, Lockheed Martin, Boeing, Pilatus, Atlas, and Kalitta, accounted for 44 %, 7 %, 6 %, 5 %, and 4 % of net sales, respectively.

In the three-months ended March 31, 2024, two customers, Pilatus and Textron Aviation, Inc.

(“Textron”), accounted for 28 % and 17 % of net sales, respectively.

In the six-months ended March 31, 2024, one customer, Pilatus accounted for 29 % of net sales.

Major Suppliers

1 unchanged sentence

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

For the three months ended December 31, 2024, the Company had one supplier that was individually responsible for greater than 10% of the Company’s total inventory related purchases.

For the three months ended December 31, 2023, the Company had three suppliers that were individually responsible for greater than 10% of the Company’s total inventory related purchases.

For the three and six months ended March 31, 2025, the Company had one supplier that was individually responsible for greater than 10% of the Company’s total inventory related purchases.

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

Concentration of Credit Risk

27 unchanged sentences

September 2024 Honeywell Agreement

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.

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

On September 27, 2024, the Company entered into a second Asset Purchase and License Agreement (the “September 2024 Honeywell Agreement”) with Honeywell, International Inc.

an assignment of certain contracts;

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 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 three months ended December 31, 2024:

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.

Amounts Recognized as of

6 unchanged sentences

Prepaid equipment and other current assets

Intangible assets (b)

Intangible assets (b), (d)

( 1,490,000 )

Goodwill (c),(d)

Net assets acquired

4 unchanged sentences

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

Refer to the Company’s 2024 10K, Note 5, “Intangible assets” for further details.

Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024, 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

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.

(d) For the three months ended March 31, 2025, the fair market value of Intangible Assets, mostly related to Acquired Backlog was revised down to reflect lower forecasted margin.

Transition services agreement

2 unchanged sentences

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

For the three months ended December 31, 2024, the Company recognized no additional adjustments to prepaid expenses and other current assets within the consolidated balance sheets for services received from Honeywell.

For the three and six months ended

March 31, 2025, the Company recognized no additional adjustments to prepaid expenses and other current assets within the consolidated balance sheets for services received from Honeywell.

Acquisition and related costs

1 unchanged sentence

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

For the three months ended December 31, 2024, the Company incurred $ 86,688 of costs in connection to the September 2024 Honeywell Agreement.

For the three months ended December 31, 2023, the Company incurred no acquisition costs.

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, 2023:

Three Months Ended December 31,

Three Months Ended March 31,

Six Months Ended March 31,

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.

8 unchanged sentences

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

The transaction allows the Company to diversify its product offerings in the

aerospace industry.

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

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

In connection with the transaction, the Company entered into a term loan with PNC Bank, National Association for $ 20.0 million to fund a portion of the transaction (the “Term Loan”) – Refer to the Company’s 2024 10K, Note 8, “ Loan Agreement ” for further details.

In connection with the transaction, the Company entered into a term loan with PNC Bank, National Association for $ 20.0 million to fund a portion of the transaction (the “Term Loan”) – Refer to the Company’s Annual Report on Form10-K for the fiscal year ended

September 30, 2024, Note 8, “ Loan Agreement ” for further details.

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

34 unchanged sentences

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

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

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

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

1 unchanged sentence

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

therefore, the $ 3.5 million assumed liabilities preliminarily recorded were reversed.

therefore, the $ 3.5

million assumed liabilities preliminarily recorded were reversed.

The adjustments resulted in an overall decrease to goodwill of $ 3.5 million;

4 unchanged sentences

The prepaid expense related to the 2023 TSA was determined using the with and without method.

As of the three months ended March 31, 2025, the 2023 TSA has been fully amortized.

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;

1 unchanged sentence

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

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

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

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

Definite lived assets were recorded to the relative fair value of $ 2,601,000 to property and equipment and $ 430,000 to customer relationships and backlog.

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

11 unchanged sentences

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

As of December 31, 2024

As of March 31, 2025

Gross Carrying

17 unchanged sentences

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

The expected future amortization expense related to the customer relationships as of December 31, 2024 is as follows:

The expected future amortization expense related to the customer relationships and backlog as of March 31, 2025 is as follows:

Amortization Expense

2025 (nine months remaining)

2025 (six months remaining)

Property and equipment

8 unchanged sentences

( 12,409,862 )

Depreciation and amortization related to property and equipment was $ 622,799 and $ 142,921 for the three months ended December 31, 2024 and 2023, respectively.

Depreciation and amortization related to property and equipment was $ 272,390 and $ 146,156 for the three months ended March 31, 2025 and 2024, respectively.

Depreciation and amortization related to property and equipment was $ 894,483 and $ 271,684 for the six months ended March 31, 2025 and 2024, respectively.

In connection with June 2023 Honeywell Agreement, during the 18- month period following closing, which ended December 31, 2024, the Company received various inventory and PP&E, which was accounted for as of the acquisition date as prepaid inventory.

Rotables comprised a significant portion of the PP&E received during that 18-month period.

Rotables are parts that are not designed to be discarded after a certain period of use but rather are intended to be restored to a serviceable condition and reused.

The Company had historically depreciated rotables inventory on a straightline basis, over 5 years.

During the second quarter of 2025, the Company updated its analysis of the economic lives of various owned rotable assets.

As a result of this update, to better reflect the revised estimate of physical lives of rotable assets, the Company changed its useful lives estimate of rotable assets from 5 years to 10 years, effective as of January 1, 2025.

ASC Topic 250, “Accounting Changes and Error Corrections” (“ASC 250”), specifically ASC 250-10-45-17 states that, “ changes in accounting estimates should not be accounted for by restating or retrospectively adjusting the amounts reported in prior period financial statements or by reporting pro forma amounts.

Instead, a change in accounting estimate should be accounted for in the period of change and prospective periods .”

Adhering to the guidance found in ASC 250, the Company recognized the change in depreciation expense of Rotable assets prospectively as of January 1, 2025.

The change in accounting estimate decreased depreciation expense $0.4 million, or $ 0.02 per diluted share, for the three months ended March 31, 2025.

Other assets consist of the following:

2 unchanged sentences

Other non-current assets

Other non-current assets as of December 31, 2024 and September 30, 2024 consists primarily of deposits for medical claims required under the Company’s medical plan.

Other non-current assets as of March 31, 2025 and September 30, 2024 consists primarily of deposits for medical claims required under the Company’s medical plan.

Accrued expenses

5 unchanged sentences

Income tax payable

Warranty cost and accrual information for the three months ended December 31, 2024 is highlighted below:

Warranty cost and accrual information for the three and six months ended March 31, 2025 is highlighted below:

Three Months Ending

December 31, 2024

Six Months Ending

March 31, 2025

Warranty accrual, beginning of period

5 unchanged sentences

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

The effective tax rates for the three-months ended December 31, 2024 and 2023 were 20.1 % and 21.8 %, respectively.

The effective tax rate for the three months ended December 31, 2024 differs from the statutory tax rate primarily due to the effect of state income taxes, tax credits and certain nondeductible expenses.

The effective tax rate for the three months ended December 31, 2023 differs from the statutory tax rate primarily due to higher state taxes as a result of a taxable gain recognized from the sale of the Company’s King Air aircraft.

The effective tax rate for the three months ended March 31, 2025 was 19.2 % and differs from the statutory tax rate primarily due to the effect of state income taxes, tax credits and certain nondeductible expenses.

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

The effective tax rate for the six months ended March 31, 2025 was 19.3 % and differs from the statutory tax rate primarily due to the effect of state income taxes, tax credits and certain nondeductible expenses.

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

Shareholders’ Equity and Share-Based Payments

7 unchanged sentences

Internal Revenue Code of 1986, as amended (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 Company’s 2009 Plan as of April 2, 2019, the effective date of the 2019 Plan, all of which may be issued pursuant to awards of incentive stock options.

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 Company’s 2009 Stock-Based Incentive Compensation Plan as of April 2, 2019, the effective date of the 2019 Plan, all of which may be issued pursuant to awards of incentive stock options.

On April 18, 2024, the Company amended the 2019 Plan to include an additional 1,950,000 authorized shares available for issuance.

As of December 31, 2024, there were 1,679,135 shares of common stock available for awards under the 2019 Plan.

As of March 31, 2025, there were 1,518,517 shares of common stock available for awards under the 2019 Plan.

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

8 unchanged sentences

Market-Based Restricted Stock Units

During the three months ended December 31, 2024, to better align executive compensation with the Company’s Total Shareholder Return (“TSR”), the Board approved a special one-time grant of 201,000 market-based restricted stock units (“MSUs”) to the Company’s Chief Executive Officer under the terms and conditions of the 2019 Plan.

During the three months ended December 31, 2024, to better align executive compensation with the Company’s Total Shareholder Return, the Board approved a special one-time grant of 201,000 market-based restricted stock units (“MSUs”) to the Company’s Chief Executive Officer under the terms and conditions of the 2019 Plan.

The MSU is a restricted stock unit containing vesting terms conditional upon the attainment of both 1) continued service to vesting and 2) stock price appreciation targets indexed against the Company’s actual stock price performance over a specified measurement period.

Under the terms of the grant, the MSU will vest as follows:

Under the terms of the 2019 Plan, no MSUs are eligible for vesting prior to the first anniversary of the date of grant of the award, with the exception of accelerated vesting permitted

under certain conditions subject to the plan provisions.

Subject to the terms of the 2019 Plan, under the terms of the grant, the MSU will vest as follows:

1) an initial one -third (1/3 rd ) of the MSUs shall vest on the first trading date after the shares of the Company’s common stock have traded at a price equal to or greater than ten dollars ( $ 10.00 ) per share for twenty ( 20 ) consecutive trading days or as provided in the provisions of the second succeeding paragraph below;

1 unchanged sentence

3) the remaining MSUs shall vest on the first trading date after the shares of the Company’s common stock have traded at a price equal to or greater than fourteen dollars ( $ 14.00 ) per share for twenty ( 20 ) consecutive trading days.

Additionally, if the tranche of MSU’s subject to vesting pursuant to (1) above does not vest on or before November 20, 2027, then, with respect to such MSUs, the target trading price for the Company’s common stock will be increased to Twelve Dollars ($ 12.00 ) per share, such that the MSUs subject to (1) above will vest on the first trading date after shares of the Company’s common stock have traded at a price equal to or greater than Twelve Dollars ($ 12.00 ) per share for twenty ( 20 ) consecutive trading days.

Additionally, if the tranche of MSUs subject to vesting pursuant to (1) above does not vest on or before November 20, 2027, then, with respect to such MSUs, the target trading price for the Company’s common stock will be increased to twelve dollars ($ 12.00 ) per share, such that the MSUs subject to (1) above will vest on the first trading date after shares of the Company’s common stock have traded at a price equal to or greater than twelve dollars ($ 12.00 ) per share for twenty ( 20 ) consecutive trading days.

Any MSUs that have not vested on or before the fourth anniversary of the grant date are immediately forfeited.

With respect to each MSU that becomes vested in accordance with the terms of the award agreement, the Grantee will be entitled to receive one share of common stock upon the settlement of the MSUs.

The Company estimated both the grant-date fair value of the MSU’s awards and the derived vesting periods using a Monte Carlo simulation with the following input assumptions:

Number of MSU's Granted

The Company estimated both the grant-date fair value of the MSUs and the derived vesting periods using a Monte Carlo simulation with the following input assumptions:

Number of MSUs Granted

November 20, 2024

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Contractual Term

Utilizing Monte Carlo simulation, the MSU’s grant date fair value was estimated to be $ 1,138,557 with a $ 5.66 weighted average grant date fair value per award and the derived vesting periods were estimated to be between 0.8 years and 1.7 years.

For the three months ended December 31, 2024, the Company recognized $ 117,108 of compensation expense related to MSU awards.

As of December 31, 2024, unrecognized compensation expense of $ 1,021,449 associated with non-vested MSU’s will be recognized in future periods under the 2019 Plan.

During the three months ended December 31, 2024, no MSUs vested or were forfeited.

The compensation expense related to stock options, and restricted stock awards issued to employees under the 2019 Plan was $ 206,527 and $ 155,581 for the three months ended December 31, 2024 and 2023, respectively.

The compensation expense under the 2019 Plan related to restricted stock awards issued to non-employee members of the Board was $ 73,026 and $ 50,135 for the three months ended December 31, 2024 and 2023, respectively.

Total compensation expense associated with the 2019 Plan was $ 396,661 and $ 205,716 for the three months ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, unrecognized compensation expense of approximately $ 1,141,422 net of forfeitures, related to non-vested restricted stock under the 2019 Plan, will be recognized in future periods.

As of December 31, 2024, unrecognized compensation expense of approximately $ 459,721 , net of forfeitures, related to non-vested stock options under the 2019 Plan, will be recognized in future periods.

For the three-months ended December 31, 2024, 361,613 diluted weighted-average shares outstanding were excluded from the computation of diluted earnings per share (“EPS”), because the effect would be anti-dilutive.

Utilizing Monte Carlo simulation, the MSUs grant date fair value was estimated to be $ 1,109,340 with a $ 5.52 weighted average grant date fair value per award and the derived vesting periods were estimated to be between 1.2 years and 1.7 years.

For the three and six months ended March 31, 2025, the Company recognized $ 112,834 and $ 229,942 , respectively of compensation expense related to MSU awards.

As of March 31, 2025, unrecognized compensation expense of $ 879,398 associated with non-vested MSUs will be recognized in future periods under the 2019 Plan.

During the three and six months ended March 31, 2025, no MSUs vested or were forfeited.

On February 13, 2025, the performance condition for 67,000 units of MSUs granted to the Company’s Chief Executive Officer was met, these shares will vest according to the Company’s Amended and Restated 2019 Stock-Based Incentive Compensation Plan.

Time Based Stock Options with market based exercisability conditions

During the three months ended March 31, 2025, in a continuing effort to more closely correlate executive compensation with the Company’s Total Shareholder Return, the Board approved a grant of 72,062 time vested stock options with a market based exercise price condition (“MSOs”) to the Company’s Chief Executive Officer and 33,259 MSOs to the Company’s Chief Financial Officer under the terms and conditions of the Amended and Restated 2019 Stock-Based Incentive Compensation Plan.

The MSOs are similar to traditional time vested stock options and vest over four years , with 25 % vesting on the first anniversary of the grant date (February 19, 2026) and the remaining shares vesting quarterly at 6.25 % on the last business day of May, August, November, and February of calendar years two, three and four from date of grant.

However, the MSOs only become exercisable if the Company's share price reaches or exceeds the date of grant closing stock price of $ 8.59 plus a targeted market threshold of 15 % ($ 9.88 ) for 20 consecutive trading days at any time during the four-year vesting period.

Once this market threshold is met, the vested shares can be exercised according to the vesting schedule and the terms and conditions set forth in the 2019 Plan.

No MSOs are eligible for vesting or exercise prior to the first anniversary of the date of grant of the award, with the exception of accelerated vesting permitted under certain conditions subject to the plan provisions.

With respect to each MSO that becomes exercised in accordance with the terms of the award agreement, the Grantee will be entitled to receive one share of common stock upon the settlement of the MSOs.

The Company estimated the grant-date fair value of the MSOs awards using a Monte Carlo simulation with the following input assumptions:

Number of MSOs granted

Grant Date Stock Price

Expected Dividend Rate

Expected Volatility

Weighted average risk-free interest rate

Exercise price

Contractual Term

Utilizing Monte Carlo simulation, the aggregate MSOs grant date fair value was estimated to be $ 474,998 with a $ 4.51 weighted average grant date fair value per option and vesting periods were estimated to be between 1 years and 4 years with a 10 year contractual term.

For the three and six months ended March 31, 2025, the Company recognized $ 13,646 of compensation expense related to the MSO awards.

As of March 31, 2025, unrecognized compensation expense of $ 461,352 associated with non-vested MSOs will be recognized in future periods under the 2019 Plan.

During the three and six months ended March 31, 2025, no MSOs vested or were forfeited.

The compensation expense related to stock options, and restricted stock awards issued to employees under the 2019 Plan was $ 2 07,126 and $ 219,748 for the three months ended March 31, 2025 and 2024, respectively.

The compensation expense related to stock options, and restricted stock awards issued to employees under the 2019 Plan was $ 413,651 and $ 375,328 for the six months ended March 31, 2025 and 2024, respectively.

The compensation expense under the 2019 Plan related to restricted stock awards issued to non-employee members of the Board was $ 71,438 and $ 49,590 for the three months ended March 31, 2025 and 2024, respectively.

The compensation expense under the 2019 Plan related to restricted stock awards issued to non-employee members of the Board was $ 144,464 and $ 99,726 for the six months ended March 31, 2025 and 2024, respectively.

Total compensation expense associated with the 2019 Plan was $ 405,025 and $ 269,338 for the three months ended March 31, 2025 and 2024, respectively.

Total compensation expense associated with the 2019 Plan was $ 801,650 and $ 475,055 for the six months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, unrecognized compensation expense of approximately $ 1,431,266 net of forfeitures, related to non-vested restricted stock under the 2019 Plan, will be recognized in future periods.

As of March 31, 2025, unrecognized compensation expense of approximately $ 348,618 , net of forfeitures, related to non-vested stock options under the 2019 Plan, will be recognized in future periods.

Earnings Per Share

Three Months Ended December 31,

Three Months Ended March 31,

Six Months Ended March 31,

Basic weighted average shares

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Diluted EPS is computed assuming the conversion, or exercise of all dilutive securities such as employee stock options MSUs and RSUs.

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

The number of incremental shares from assumed vestings of MSU’s is calculated using the ‘if-converted method.’ As of December 31, 2024 no outstanding MSU’s were included in the three months ended December 31, 2024 weighted-average diluted shares calculation using the if converted method.

As of December 31, 2024 and 2023, there were 361,613 and 224,374 options to purchase common stock outstanding, respectively, and 201,000 and 0 MSU’S subject to vesting outstanding, respectively.

As of December 31, 2024 and 2023, there were 204,707 and 101,968 shares of restricted stock units subject to vesting outstanding, respectively.

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

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

The number of incremental shares from assumed vestings of MSUs is calculated using the ‘if-converted method.’ As of March 31, 2025 no outstanding MSUs were included in the three and six months ended March 31, 2025 weighted-average diluted shares calculation using the if converted method.

As of March 31, 2025 and 2024, there were 433,655 and 297,014 options to purchase common stock outstanding, respectively, and 201,000 and 0 MSUs subject to vesting outstanding, respectively.

As of March 31, 2025 and 2024, there were 194,914 and 173,555 shares of restricted stock units subject to vesting outstanding, respectively.

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

Additionally, the weighted-average diluted shares calculation excludes RSUs that are deemed anti-dilutive when applying the treasury stock method.

For the three-months ended December 31, 2024 and 2023, respectively, 361,613 and 213,409 diluted weighted-average shares outstanding were excluded from the computation of diluted EPS because the effect would be anti-dilutive.

For the three months ended March 31, 2025 and 2024, respectively, 136,613 and 243,749 diluted weighted-average shares outstanding were excluded from the computation of diluted EPS because the effect would be anti-dilutive.

For the six months ended March 31, 2025 and 2024, respectively, 249,113 and 228,579 diluted weighted-average shares outstanding were excluded from the computation of diluted EPS because the effect would be anti-dilutive.

Commitments and Contingencies

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Prior balances are disclosed below for comparability.

Sales to Eclipse amounted to approximately $ 5,981 and $ 84,500 for the three months ended December 31, 2024 and 2023, respectively.

Sales to Eclipse amounted to approximately $ 1 4,900 and $ 9,000 for the three months ended March 31, 2025 and 2024, respectively.

Sales to Eclipse amounted to approximately $ 17,600 and $ 93,000 for the six months ended March 31, 2025 and 2024, respectively.

A company in which Parizad Olver (Parchi), a former member of the Board, 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.

On October 18, 2024, the Company entered into a consulting agreement with Peduzzi Associated, ltd.

(“PAL”), an entity in which Maj.

(“PAL”), an entity in which board member Maj.

General Dean serves as President.

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The term of the agreement is for one year and in consideration for services the Company will pay PAL a retainer of $ 9,500 per month.

For the three months ended December 31, 2024, the Company paid PAL $ 28,500 .

For the three and six months ended March 31, 2025, the Company paid PAL $ 28,500 and $ 57,000 , respectively.

Loan Agreement

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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 December 31, 2024.

As of the three months ended December 31, 2024, The outstanding balance drawn on the A&R Revolving Line of Credit was $ 26,512,491 with an effective interest rate of 6.3 percent.

As of December 31, 2024, the Company had availability of $ 8,487,509 under the A&R Revolving Line of Credit.

The Company was in compliance with all applicable covenants throughout and at March 31, 2025.

As of the three months ended March 31, 2025, the outstanding balance drawn on the A&R Revolving Line of Credit was $ 27,401,323 with an effective interest rate of 5.9 percent.

As of March 31, 2025, the Company had availability of $ 7,598,677 under the A&R Revolving Line of Credit.

Subsequent Events

On January 27, 2025, the Board increased the size of the Board to six directors and appointed Denise Devine to serve as an independent director, effective immediately, for a term until the Company’s next annual meeting of shareholders or until her successor is duly elected and qualified or until her earlier death, disqualification, resignation or removal.

In connection therewith, Ms.

Devine was also appointed by the Board to serve as a member of the Audit Committee.

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

What changed 10-Q

Item 1. Financial Statements