What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-15 compared with 2025-02-14 · 109 added, 58 removed, 175 unchanged (49% of the section changed)

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In evaluating such statements, a number of risks, uncertainties and other factors could cause actual results, performance, financial condition, cash flows, prospects and opportunities to differ materially from those expressed in, or implied by, the forward-looking statements.

These risks, uncertainties and other factors include those set forth in Item 1A (Risk Factors) of our Annual Report on Form 10-K for the fiscal year ended September 30, 2024 and in Item 1A (Risk Factors) to Part II of this Quarterly Report on Form 10-Q, as well as the following factors:

These risks, uncertainties and other factors include those set forth in Item 1A (Risk Factors) of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024 and in Item 1A (Risk Factors) to Part II of this Quarterly Report on Form 10-Q, as well as the following factors:

● market acceptance of the Company’s ThrustSense® full-regime Autothrottle, Vmc a Mitigation, FPDS, NextGen Flight Deck and COCKPIT/IP® or other planned products or product enhancements;

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● the availability of government funding;

● the impact of general economic trends on the Company’s business;

● the impact of general economic trends, including tariffs and other trade restrictions on the Company’s business;

● disruptions in the Company’s supply chain, customer base and workforce;

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Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of the Company.

The following discussion provides an analysis of the Company’s financial condition, cash flows and results of operations from management’s perspective and should be read in conjunction with “Selected Consolidated Financial Data” and the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K.

Our objective is to also provide discussion of events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of future operating results or of future financial condition and to offer information that provides understanding of our financial condition, cash flows and results of operations.

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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, the DoD/governmental and foreign military markets.

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, the DoD/governmental and foreign military markets.

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

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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 to enhance 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 that each of the June 2023 Honeywell Agreement, the July 2024 Honeywell Asset Acquisition and the September 2024 Honeywell Agreement will help to accelerate the Company’s growth and enhance its global reputation for delivering some of the industry’s best price-for-performance product and service solutions.

Following the acquisition of Honeywell’s military display generators and flight control computers business, Honeywell has continued to manufacture these products and maintain related inventory at its facilities under the September 2024 Honeywell Agreement.

Revenue and costs from this production are attributed to and reported by the Company, but the Company relies on Honeywell for access to the operational and financial data needed to prepare its financial statements.

The Company has limited ability to oversee the operations or verify the data received from Honeywell, making it difficult to predict revenues and gross margins.

Over the coming months, the production of the military display generators and flight control computers business will cease at Honeywell facilities and transition to the Company’s facilities.

During this transition process, production will be temporarily halted while the Company ramps up its production and inventory at its facilities.

In anticipation of the transition, Honeywell is expected to accelerate its production of these products in the short term.

This will likely lead to a spike in revenues in the short term followed by a temporary dip in revenues before revenues are normalized.

As a result, the Company anticipates revenues related to the September 2024 Honeywell Agreement will continue to fluctuate significantly over the next few quarters.

The transition from Honeywell to Company facilities will involve certain risks that may impact operational performance and reported results.

While the Company cannot assure that the transition will not adversely affect operations and reported results, it is committed to closely monitoring the integration process and providing updates as necessary.

The Company remains confident in the long-term benefits of the Honeywell acquisitions.

Cost of sales related to product and service sales comprises materials, components and third-party avionics purchased from suppliers, direct labor and overhead costs.

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Cost of sales also includes warranty costs.

Cost of sales related to EDC sales comprises engineering labor, consulting services and other costs associated with specific design and development projects.

Cost of sales related to Engineering Development Contracts (“EDC”) sales comprises engineering labor, consulting services and other costs associated with specific design and development projects.

These costs are incurred pursuant to contractual arrangements and are accounted for typically as contract costs within Cost of sales, with reimbursement accounted for as a sale in accordance with the percentage-of-completion method or completed contract method of accounting.

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The Company sells its products to agencies of the United States and foreign governments, aircraft operators, aircraft modification centers and OEMs.

Customers have been and may continue to be affected by changes in economic conditions both in the United States

Customers have been and may continue to be affected by changes in economic conditions both in the United States and abroad.

Such changes may cause customers to curtail or delay their spending on both new and existing aircraft.

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The Annual Report on Form 10-K for the fiscal year ended September 30, 2024 contains a discussion of these critical accounting policies.

There have been no material changes in the Company’s critical accounting policies since September 30, 2024.

See also Note 1 to the unaudited condensed consolidated financial statements for the three months ended December 31, 2024 as set forth herein.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED

DECEMBER 31, 2024 AND 2023

See also Note 1 to the unaudited condensed consolidated financial statements for the three and six months ended March 31, 2025 as set forth herein.

In connection with June 2023 Honeywell Agreement, during the 18- month period following closing, which ended December 31, 2024, the Company received various components of PP&E.

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 PP&E 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 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.

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED

MARCH 31, 2025 AND 2024

The following table sets forth the statements of operations data expressed as a percentage of total net sales for the periods indicated (some items may not add due to rounding):

Three Months Ended December 31,

Three Months Ended March 31,

Six Months Ended March 31,

Total net sales

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Income tax expense

Three Months Ended December 31, 2024 Compared to the Three Months Ended December 31, 2023

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.

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

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

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 the 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.

Net sales for the three months ended December 31, 2024 increased $6.7 million, or 71.6%, to $16.0 million from $9.3 million for the three months ended December 31, 2023.

The increase in Net sales was driven by a 125.7% increase or $5.6 million in product sales which was driven primarily by the recent acquired military product line of $6.0 million and an increase commercial air transport sales $1.1 million partially offset by $1.2 million reduced shipsets in business aviation.

Service sales for the three months ended December 31, 2024 increased $1.1 million, or 22.5%, compared to three months ended December 31, 2023.

Net sales for the three months ended March 31, 2025 increased $11.2 million, or 104.3%, to $21.9 million from $10.7 million for the three months ended March 31, 2024.

Net sales of $21.9 million for the three months ended March 31, 2025 was comprised of $11.1 million in organic Net sales and $10.8 million in Net sales related to the September 2024 Honeywell Agreement.

The increase in Net sales was driven primarily by a $8.3 million, or 169.2%, increase in Product sales of which $7.9 million were derived from Honeywell military products.

This quarter’s Net sales benefitted from an acceleration of the production and sales of Honeywell’s military product line in anticipation of Honeywell ceasing production at its own facilities and transitioning that production to the Company’s facilities.

Net sales also benefited from an increase in commercial air transport sales of $3.7 million partially offset by $2.7 million of reduced shipsets in business aviation and $0.7 million of reduced shipsets in military.

Service sales for the three months ended March 31, 2025 increased $2.9 million, or 49.8%, compared to Services sales for the three months ended March 31, 2024.

The increase in service sales primarily reflects increases in engineering development services of $0.4 million and an increase in customer service sales from the product lines acquired from Honeywell of $3.0 million, partially offset by lower legacy customer service revenue of $0.5 million.

Cost of sales .

Cost of sales was $9.4 million, or 58.6% of Net sales, for the three months ended December 31, 2024 compared to $3.8 million, or 40.7% of Net sales, for the three months ended December 31, 2023.

Cost of sales was $10.7 million, or 48.6% of Net sales, for the three months ended March 31, 2025 compared to $5.2 million, or 48% of Net sales, for the three months ended March 31, 2024.

The increase in Cost of sales was primarily the result of an increase in overall sales volume.

The Company’s overall gross margin for the three months ended December 31, 2024 was 41.4% compared to 59.3% for the three months ended December 31, 2023.

The decrease in overall gross margin percentage for the three months ended December 31, 2024, compared to the three months ended December 31, 2023 is primarily the result of changes in product mix, increased depreciation and cost inefficiencies due to hiring and training of additional personnel and other integration costs.

There are several factors that have been impacting our gross margin capture in recent quarters, which continued during the first quarter and will remain a factor in the near-term.

These factors included incremental depreciation that has resulted from recent product line acquisitions and the shift in our sales mix, as military sales will be a higher percentage of sales.

More specifically, during the first quarter, the impact of the acquired Honeywell military product line volume with lower margins of approximately 30% gross margins, impacted the overall gross margin by approximately 5%, increased third party expenses from Honeywell with respect to their transition services of $0.2 million resulted in a 2% impact and higher depreciation from recent acquisitions of $0.5 million resulted in a 5% impact to overall margins.

The Company’s overall gross margin for the three months ended March 31, 2025 was 51.4% compared to 52.0% for the three months ended March 31, 2024.

The decrease in overall gross margin percentage for the three months ended March 31, 2025, compared to the three months ended March 31, 2024 is primarily the result of changes in product mix.

The factors that have been, and will continue to, affect the Company’s gross margin capture include depreciation resulting from recent product line acquisitions and the increased weight of military sales in the Company’s sales mix.

Research and development.

R&D expenses were $1.1 million for the three months ended December 31, 2024 and $0.9 million for the three months ended December 31, 2023.

The increase in R&D expense was due to higher salaries and benefits due to higher headcount.

As a percentage of Net sales, R&D expense decreased to 7.0% of Net sales for the three months ended December 31, 2024 compared to 9.7% for the three months ended December 31, 2023.

R&D expense decreased $0.2 million, or 15.9%, to $0.9 million for the three months ended March 31, 2025 from $1.0 million for the three months ended March 31, 2024.

As a percentage of net sales, R&D expenses decreased to 4.0% of net sales for the three months ended March 31, 2025 from 9.6% of net sales for the three months ended March 31, 2024.

The decrease in R&D expenses in the quarter was primarily the result of recharacterizing $0.2 million of R&D expense as Cost of sales related to the EDC sales.

Selling, general, and administrative.

SG&A expenses increased $1.2 million or 38.3%, to $4.2 million from $3.0 million for the three months ended December 31, 2023.

The increase in SG&A expense for the three months ended December 31, 2024 was primarily the result of increases in professional services fees of $0.2 million primarily due to acquisition related expenses and corporate initiatives.

In addition, the Company incurred increased depreciation and amortization expenses of $0.5 million related to the customer relationships and backlog intangible assets resulting from the combined acquisitions and $0.3 million was due to higher salaries and benefits due to increased headcount to support the growth of the business.

As a percentage of sales, selling, general and administrative expenses were 26.0% for the three months ended December 31, 2024 compared to 32.3% for the three months ended December 31, 2023.

SG&A expenses increased by $0.5 million or 17.4%, to $3.4 million from $2.9 million for the three months ended March 31, 2024.

The increase in SG&A expense for the three months ended March 31, 2025 was primarily the result of third party and other fees of $0.1 million, $0.1 million related to the customer relationships and backlog intangible assets resulting from the combined acquisitions and $0.2 million due to employee related expenses and benefits resulting from increased headcount.

As a percentage of Net sales, SG&A expenses were 15.6% for the three months ended March 31, 2025 compared to 27.1% for the three months ended March 31, 2024.

Interest income.

Interest income was negligible for the three months ended December 31, 2024 and decreased by $0.1 million as compared to the three months ended December 31, 2023.

The decrease in interest income was primarily the result of a general decrease in interest rates as compared to the three months ended December 31, 2023.

Interest income was negligible for the three months ended March 31, 2025 and 2024, respectively.

Other income.

The Company had no material other income for the three months ended December 31, 2024 and 2023, respectively.

The Company had no material other income for the three months ended March 31, 2025 and 2024, respectively.

Income taxes.

Income tax expense was $0.2 million for the three months ended December 31, 2024 as compared to income tax expense of $0.3 million for the three months ended December 31, 2023.

The effective tax rate for the three months ended December

31, 2024 was 20.1% as compared to 21.8% for the three months ended December 31, 2023.

The decrease in income tax expense was primarily due to a decrease in earnings for the three months ended December 31, 2024, compared to the same period last year.

As a result of the factors described above, the Company’s net income for the three months ended December 31, 2024 was $0.7 million compared to net income of $1.1 million for the three months ended December 31, 2023.

On a fully diluted basis, net income per share was $0.04 for the three months ended December 31, 2024, compared to a net income of $0.06 per share for the three months ended December 31, 2023.

Income tax expense was $1.3 million for the three months ended March 31, 2025 as compared to income tax expense of $0.3 million for the three months ended March 31, 2024.

The effective tax rate for the three months ended March 31, 2025 was 19.2 % as compared to 21.2% for the three months ended March 31, 2024.

The increase in income tax expense was primarily due to higher taxable earnings for the three months ended March 31, 2025, compared to the same period last year.

As a result of the factors described above, the Company’s net income for the three months ended March 31, 2025 was $5.3 million compared to net income of $1.2 million for the three months ended March 31, 2024.

On a fully diluted basis, net income

per share was $0.30 for the three months ended March 31, 2025, compared to a net income of $0.07 per share for the three months ended March 31, 2024.

Six Months Ended March 31, 2025 Compared to the Six Months Ended March 31, 2024

Net sales for the six months ended March 31, 2025 increased by $17.9 million, or 89.1%, to $37.9 million from $20.0 million for the six months ended March 31, 2024.

Net sales of $37.9 million for the six months ended March 31, 2025 was comprised of $21.2 million in organic Net sales and $16.7 million in Net sales related to the September 2024 Honeywell Agreement.

The increase in Net sales was driven primarily by a $13.8 million, or 147.6%, increase in Product sales derived from the September 2024 Honeywell Agreement.

and an increase in commercial air transport sales of $5.0 million, offset by $3.5 million of reduced shipsets in business aviation and $1.5 million of reduced shipsets in military.

Service sales for the six months ended March 31, 2024 increased $4.0 million, or 37.4%, compared to Services sales for the six months ended March 31, 2024.

The increase in service sales primarily reflects increases in engineering development services of $1.2 million and an increase in customer service sales from the product lines acquired from Honeywell of $3.8 million, partially offset by lower legacy customer service revenue of $1.0 million.

Cost of sales .

Cost of sales was $20.0 million, or 52.8% of Net sales, for the six months ended March 31, 2025 compared to $8.9 million, or 44.6% of Net sales, for the six months ended March 31, 2024.

The increase in Cost of sales was primarily the result of an increase in overall sales volume.

The Company’s overall gross margin for the six months ended March 31, 2025 was 47.2% compared to 55.4% for the six months ended March 31, 2024.

The decrease in overall gross margin percentage for the six months ended March 31, 2025, compared to the six months ended March 31, 2024 is primarily the result of changes in product mix, increased depreciation and cost inefficiencies due to hiring and training of additional personnel and other integration costs associated with the September 2024 Honeywell Agreement.

The factors that have been, and will continue to effect the Company’s gross margin capture include depreciation resulting from recent product line acquisitions and the increased weight of military sales in the Company’s sales mix.

Research and development.

R&D expense increased less than $0.1 million, or 2.2%, to $2.0 million for the six months ended March 31, 2025 from $1.9 million for the six months ended March 31, 2024.

As a percentage of net sales, R&D expenses decreased to 5.3% of net sales for the six months ended March 31, 2025 from 9.6% of net sales for the six months ended March 31, 2024.

The decrease in R&D expense as a percent of sales for the six months ended March 31, 2025 compared to the same period last year was primarily the result of recharacterizing $0.4 million of R&D expenses as Cost of sales related to the EDC sales.

Selling, general, and administrative.

SG&A expenses increased $1.7 million or 28.0%, to $7.6 million from $5.9 million for the six months ended March 31, 2024.

The increase in SG&A expense for the six months ended March 31, 2025 was primarily the result of increases in professional services fees and other related fees of $0.3 million primarily due to acquisition related expenses and corporate initiatives.

In addition, the Company incurred increased depreciation and amortization expenses of $0.6 million related to the customer relationships and backlog intangible assets resulting from the combined acquisitions and $0.6 million due to employee related expenses and benefits resulting from increased headcount.

As a percentage of Net sales, SG&A expenses were 20.0% for the six months ended March 31, 2025 compared to 29.5% for the six months ended March 31, 2024.

Interest income.

Interest income was negligible for the six months ended March 31, 2025 and decreased by $0.1 million as compared to the six months ended March 31, 2024.

The decrease in interest income was primarily the result of a general decrease in interest rates as compared to the six months ended March 31, 2024.

Other income.

The Company had no material other income for the six months ended March 31, 2025 and 2024, respectively.

Income taxes.

Income tax expense was $1.5 million for the six months ended March 31, 2025 as compared to income tax expense of $0.6 million for the six months ended March 31, 2024.

The effective tax rate for the six months ended March 31, 2025 was 19.3% as compared to 21.5% for the six months ended March 31, 2024.

The increase in income tax expense was primarily due to a higher taxable earnings for the six months ended March 31, 2025, compared to the same period last year.

As a result of the factors described above, the Company’s net income for the six months ended March 31, 2025 was $6.1 million compared to net income of $2.3 million for the six months ended March 31, 2024.

On a fully diluted basis, net income per share was $0.34 for the six months ended March 31, 2025, compared to a net income of $0.13 per share for the six months ended March 31, 2024.

Liquidity and Capital Resources

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Current ratio (2)

Three Months Ended December 31,

Six Months Ended March 31,

Cash flow activities:

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Net cash (used in) provided by investing activities

Net cash (used in) financing activities

Net cash (used in) provided by financing activities

(1) Calculated as:

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The Company’s existing cash balances and anticipated cash flows from operations, together with borrowings under our revolving credit facility, are expected to be adequate to satisfy the Company’s liquidity needs for at least the next 12 months.

Apart from what has been disclosed in this Management’s Discussion and Analysis, management is not aware of any trends, events or uncertainties that have had or are likely to have a material impact on our liquidity, financial condition and capital resources.The declaration and payment of any dividend in the future will be at the discretion of the Company’s Board.

The declaration and payment of any dividend in the future will be at the discretion of the Company’s Board.

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

Refer to the Company’s 2024 10K, Note 20, “ Loan Agreement ” for further details.

Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024, Note 20, “ Loan Agreement ” for further details.

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

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

The proceeds of the Restated

Line of Credit Note will be used for working capital and other general corporate purposes, for acquisitions as permitted under the Restated Loan Amendments and to pay off and close the loan evidenced by that certain Term Note executed in favor of PNC, dated June 28, 2023, which provided for a senior secured term loan in aggregate principal amount of $20,000,000, with a maturity date of June 28, 2028.

The proceeds of the Restated Line of Credit Note will be used for working capital and other general corporate purposes, for acquisitions as permitted under the Restated Loan Amendments and to pay off and close the loan evidenced by that certain Term Note executed in favor of PNC, dated June 28, 2023, which provided for a senior secured term loan in aggregate principal amount of $20,000,000, with a maturity date of June 28, 2028.

On September 30, 2024, in connection with the July 2024 Honeywell Asset Acquisition and the September 2024 Honeywell Agreement, the Company entered into 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) A&R Revolving Line of Credit Note, and (ii) 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 “Revolving Line of Credit”).

The interest rate applicable to loans outstanding under the Revolving Line of Credit is a rate per annum equal to the sum of (A) Daily SOFR (as defined in the 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.

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

As of 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.

Future Funding Requirements

The Company’s existing cash balances, anticipated cash flows from operations and current banking facility are expected to be adequate to satisfy the Company’s liquidity needs for at least the next 12 months, which include funding requirements for working capital, construction in process related to progress payments in support of the Company’s facilities expansion as well as computer software integration associated with the Company’s Netsuite ERP system.

Apart from what has been disclosed above, management is not aware of any trends, events or uncertainties that have had or are likely to have a material impact on our liquidity, financial condition and capital resources.

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Operating activities

Net cash provided by operating activities was $1.8 million for the three months ended December 31, 2024 and consisted primarily of funding from net income of $0.7 million and changes in working capital.

Net cash provided by operating activities was $3.1 million for the six months ended March 31, 2025 and consisted primarily of funding from net income of $6.1 million and changes in working capital.

Investing activities

Net cash used in investing activities was $0.3 million for the three months ended December 31, 2024 and consisted of expenditures related to additions and improvements in the Company’s facilities and purchases of equipment and computer hardware.

Net cash used in investing activities was $1.8 million for the six months ended March 31, 2025 and consisted of expenditures related to additions and improvements in the Company’s facilities and purchases of equipment and computer hardware.

Financing activities

Net cash used in financing activities was $1.5 million for the three months ended December 31, 2024 and consisted of payments against the Company’s line of credit.

Net cash used in financing activities was $0.6 million for the six months ended March 31, 2025 and consisted of payments against the Company’s line of credit.

Future capital requirements depend upon numerous factors, including market acceptance of the Company’s products, the timing and rate of expansion of business, acquisitions, joint ventures and other factors.

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Three Months Ended

December 31, 2024

Six Months Ended

March 31, 2025

Backlog, beginning of period

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Although the Company believes that the orders included in backlog are firm, most of the backlog involves orders that can be modified or terminated by the customer.

At December 31, 2024, our backlog was $80.8 million compared with $89.2 million at September 30, 2024.

Backlog at December 31, 2024 included $74.3 million of acquired backlog as a result of the September 27, 2024 acquisition.

At March 31, 2025, our backlog was $79.6 million compared with $89.2 million at September 30, 2024.

Backlog at March 31, 2025 included $66.0 million of acquired backlog as a result of the September 27, 2024 acquisition.

Backlog is converted into sales in future periods as work is performed or deliveries are made.

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In August 2024, we received a multi-million dollar production contract from a major aerospace company to supply our 19” Multifunction Display (MFD) with Integrated Mission Computer.

This order marks our latest OEM contract and builds on existing programs with Pilatus Aircraft (“Pilatus”) for the PC-24, Textron Aviation (“Textron”) for the King Air 260/360 and The Boeing Company (“Boeing”) for the KC-46A, KC-767 and the T-7A.

This order marks our latest OEM contract and builds on existing programs with Pilatus for the PC-24, Textron for the King Air 260/360 and Boeing for the KC-46A, KC-767 and the T-7A.

Off-Balance Sheet Arrangements

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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 2. Management’s Discussion and Analysis