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What changed in INNOVATIVE SOLUTIONS & SUPPORT INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of INNOVATIVE SOLUTIONS & SUPPORT INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+271 added−242 removedSource: 10-K (2025-12-23) vs 10-K (2024-12-30)

Top changes in INNOVATIVE SOLUTIONS & SUPPORT INC's 2025 10-K

271 paragraphs added · 242 removed · 188 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

64 edited+19 added−14 removed34 unchanged
Biggest changeAny newly acquired products and technology may enable the Company to sell to a new group of buyers and introduce them to our broader range of products. #2 - Improve Operational Efficiency • The Company works to build on its legacy of strong operational execution to generate attractive margins through both increased operating leverage from higher revenues, and internal margin initiatives.
Biggest changeThe Company works to build on its legacy of strong operational execution to generate attractive margins through both increased operating leverage from greater revenues and internal margin initiatives. The Company believes it can realize efficiencies in the manufacturing and repair of the acquired Honeywell products by insourcing the production of product sub-assemblies.
We believe ISSC has demonstrated a track record of performance excellence across each of these areas that has resulted in long-standing customer relationships, often characterized by recurring contractual relationships. With respect to our products, the Company’s principal competitors include Honeywell Aerospace, Collins Aerospace, GE Aerospace, Thales Defense & Security, Inc., Elbit Systems and Garmin Ltd.
We believe IA has demonstrated a track record of performance excellence across each of these areas that has resulted in long-standing customer relationships, often characterized by recurring contractual relationships. With respect to our products, the Company’s principal competitors include Honeywell Aerospace, Collins Aerospace, GE Aerospace, Thales Defense & Security, Inc., Elbit Systems and Garmin Ltd.
The Company believes that its COCKPIT/IP® has significant benefits over competitive flat panel displays, including lower cost, larger size, reduced weight, enhanced viewing angles, and a broader array of functions. The Company’s patented and proprietary Integrity Checking Processor and Zooming features provide increased situational awareness, reliability, performance and utility to the owner/operator.
The Company anticipates that its COCKPIT/IP® has significant benefits over competitive flat panel displays, including lower cost, larger size, reduced weight, enhanced viewing angles, and a broader array of functions. The Company’s patented and proprietary Integrity Checking Processor and Zooming features provide increased situational awareness, reliability, performance and utility to the owner/operator.
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 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 complemented the previous Honeywell license and asset acquisition completed in June 2023. Total consideration was $4.2 million in cash.
In October 2024, we announced our ThrustSense® Autothrottle system was selected by the US Army to be installed on their C-12 (B200) aircraft equipped with ProLine21 avionics suites. Deliveries of the IS&S ThrustSense Autothrottle system for this application began in September 2024, with ongoing installations anticipated.
In October 2024, we announced our ThrustSense® Autothrottle system was selected by the US Army to be installed on their C-12 (B200) aircraft equipped with ProLine21 avionics suites®. Deliveries of the ThrustSense® Autothrottle system for this application began in September 2024, with ongoing installations anticipated.
We also purchase replacement parts, which are utilized in our various repair and overhaul operations. At times, we concentrate our orders among a few suppliers in order to strengthen our supplier relationships. Most of our raw materials and component parts are generally available from multiple suppliers at competitive prices.
We purchase a variety of manufactured component parts from various suppliers. We also purchase replacement parts, which are utilized in our various repair and overhaul operations. At times, we concentrate our orders among a few suppliers in order to strengthen our supplier relationships. Most of our raw materials and component parts are generally available from multiple suppliers at competitive prices.
OUR CUSTOMERS AND PRODUCT DISTRIBUTION The Company’s customers include the U.S. government (including the DoD, the Department of Interior and the Department of Homeland Security), Air Transport Services Group Inc. (“ATSG”), Amazon.com, Inc., American Airlines, Inc. (“AAL”), Boeing, Deutsche Post DHL Group, FedEx Corporation (“FedEx”), Icelandair, L3Harris Technologies, Inc.
OUR CUSTOMERS AND PRODUCT DISTRIBUTION The Company’s customers include the U.S. federal government (including the DoD, the Department of Interior and the Department of Homeland Security), Air Transport Services Group Inc. (“ATSG”), Amazon.com, Inc., American Airlines, Inc., Boeing, Deutsche Post DHL Group, FedEx Corporation (“FedEx”), Icelandair, L3Harris Technologies, Inc.
During this time, ISSC has built a strong position with a portfolio of established, long-term customers that value our ability to deliver reliable, high-quality products that incorporate advanced technologies together with expert technical support, and a competitive, value-centric approach to product pricing.
During this time, IA has built a strong position with a portfolio of established, long-term customers that value our ability to deliver reliable, high-quality products that incorporate advanced technologies together with expert technical support, and a competitive, value-centric approach to product pricing.
As a systems integrator, we leverage our proven expertise in developing end-to-end systems that combine mechanical, electrical, software, and avionics components into an integrated solution. Our activities as an integrator includes system design and analysis; integration and testing; regulatory compliance and documentation; and lifecycle support.
As a systems integrator, we leverage our proven expertise in developing end-to-end systems that combine mechanical, electrical, software, and avionics components into an integrated solution. Our activities as an integrator include system design and analysis; integration and testing; regulatory compliance and documentation; and lifecycle support.
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.
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.
We expect our main customers in the retrofit market will continue to be the DoD and defense contractors, aircraft operators and aircraft modification centers. U.S. Department of Defense and Defense Contractors. The Company markets its products directly to the DoD and to domestic and international defense contractors for end use in military aircraft retrofit programs.
We expect our main customers in the retrofit market will continue to be the DoD and defense contractors, aircraft operators and aircraft modification centers. 7 Table of Contents U.S. Department of Defense and Defense Contractors. The Company markets its products directly to the DoD and to domestic and international defense contractors for end use in military aircraft retrofit programs.
The benefits package we offer, coupled with employee recognition opportunities and employee engagement activities help create a comprehensive employee experience. ​ As of September 30, 2024, we had 133 full-time employees as compared to 98 full-time employees as of September 30, 2023. On an as-needed basis, we employ temporary personnel with specialized disciplines to fill staffing gaps.
The benefits package we offer, coupled with employee recognition opportunities and employee engagement activities help create a comprehensive employee experience. ​ As of September 30, 2025, we had 147 full-time employees as compared to 133 full-time employees as of September 30, 2024. On an as-needed basis, we employ temporary personnel with specialized disciplines to fill staffing gaps.
We do not have any employees represented by a union, and we believe that our relations with our employees are good. We provide our team members with ongoing opportunities to share thoughts and perspectives on company and employment-related matters through surveys, all-hands meetings, and management open door policies.
We do not have any employees represented by a union, and we believe that our relations with our employees are good. We provide our team members with ongoing 11 Table of Contents opportunities to share thoughts and perspectives on company and employment-related matters through surveys, all-hands meetings, and management open door policies.
DoD programs generally take one of two forms: a subcontract with a prime government contractor, such as Boeing, Lockheed Martin, or L3Harris Technologies, or a direct contract with the appropriate government entity, such as the U.S. Air Force.
DoD programs generally take one of two forms: a subcontract with a prime government contractor, such as Boeing, Lockheed Martin, or L3 Harris Technologies, or a direct contract with the appropriate government entity, such as the U.S. Air Force.
The Company’s commercial fleet customers include or have included, among others, AAL, ATSG, FedEx and Icelandair. The Company sells these customers a range of products and services. Aircraft Modification Centers. Aircraft modification centers, which repair and retrofit private aircraft, represent the primary retrofit market for private and corporate jets.
The Company’s commercial fleet customers include or have included, among others, American Airlines, Inc., ATSG, FedEx and Icelandair. The Company sells these customers a range of products and services. Aircraft Modification Centers. Aircraft modification centers, which repair and retrofit private aircraft, represent the primary retrofit market for private and corporate jets.
Given the versatility, visual appeal, and lower cost of displaying a series of instruments and other flight relevant information on a single flat panel, the Company believes that flat panel displays will increasingly replace individual analog and digital instrument LCDs and cathode ray tubes.
Given the versatility, visual appeal, and lower cost of displaying a series of instruments and other flight relevant information on a single flat panel, the Company anticipates that flat panel displays will continue to increasingly replace individual analog and digital instrument LCDs and cathode ray tubes.
Item 1. Business . INTRODUCTION As used in this Annual Report on Form 10-K, unless expressly stated otherwise or the context otherwise requires, the terms “ISSC” or “the Company”, “we”, “us” and “our”, refers to Innovative Solutions & Support and its subsidiaries.
Item 1. Business . INTRODUCTION As used in this Annual Report on Form 10-K, unless expressly stated otherwise or the context otherwise requires, the terms “IA” or “the Company”, “we”, “us” and “our”, refers to Innovative Solutions & Support, Inc. dba Innovative Aerosystems and its subsidiaries.
These audits may result in adjustments to our contract costs. Additionally, we may be subject to U.S. Government inquiries and investigations because of our participation in government procurement. Any inquiry or investigation can result in fines or limitations on our ability to continue to bid for government contracts and fulfill existing contracts.
Additionally, we may be subject to U.S. Government inquiries and investigations because of our participation in government procurement. Any inquiry or investigation can result in fines or limitations on our ability to continue to bid for government contracts and fulfill existing contracts.
At September 30, 2024, our backlog was $89.2 million compared with $13.5 million at September 30, 2023. Backlog at September 30, 2024 included $74.3 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.
At September 30, 2025, our backlog was $77.4 million compared with $89.2 million at September 30, 2024. Backlog at September 30, 2024 included $74.3 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.
ISSC has experience serving both commercial and military customers with global reach, including, among others, Amazon, American Airlines, BAE Systems, Boeing, DHL, Eclipse Aviation, FedEx, Lockheed Martin, Pilatus, and Textron. 9 Table of Contents ​ INDUSTRY OUTLOOK We operate in highly competitive markets.
IA has experience serving both commercial and military customers with global reach, including, among others, Amazon, American Airlines, BAE Systems, Boeing, DHL, Eclipse Aviation, FedEx, Lockheed Martin, Pilatus, and Textron. INDUSTRY OUTLOOK We operate in highly competitive markets.
OUR COMPETITIVE STRENGTHS • Vertically integrated model. ISSC can reduce its time-to-market through inhouse design, manufacturing and testing capabilities; full service integration and repair capabilities; and deep technical expertise. • Systems integration expertise. IS&S’s extensive system integration expertise is a key differentiator within the market and provides a compelling value to its Company’s customer base.
OUR COMPETITIVE STRENGTHS • Vertically integrated model. IA can reduce its time-to-market through in-house design, manufacturing and testing capabilities; full-service integration and repair capabilities; and deep technical expertise. • Systems integration expertise. IA’s extensive system integration expertise is a key differentiator within the market and provides a compelling value to its Company’s customer base.
Manufacturing Engineering & Design We believe that our customers value our history of technological innovation, new product development and technical expertise across multiple platforms. As of September 30, 2024, we held more than 120 U.S. and international patents relating to our products and systems.
Manufacturing Engineering & Design We believe that our customers value our history of technological innovation, new product development and technical expertise across multiple platforms. As of September 30, 2025, we held 171 U.S. and international patents relating to our products and systems.
For example, costs such as those related to charitable contributions, advertising, interest expense, 8 Table of Contents and public relations are unallowable, and therefore not recoverable through sales. During and after the fulfillment of a government contract, we may be audited in respect of the direct and allocated indirect costs attributed thereto.
For example, costs such as those related to charitable contributions, advertising, interest expense, and public relations are unallowable, and therefore not recoverable through sales. During and after the fulfillment of a government contract, we may be audited in respect of the direct and allocated indirect costs attributed thereto. These audits may result in adjustments to our contract costs.
The Company's products are manufactured, marketed and sold using a portfolio of patents, trademarks, licenses, and other forms of intellectual property, some of which expire in the future. The Company develops and acquires new intellectual property on an ongoing basis.
The Company's products are manufactured, marketed and sold using a portfolio of patents, trademarks, licenses, and other forms of intellectual property, some of which expire in the future. The Company develops and acquires new intellectual property on an ongoing basis. As of September 30, 2025, the Company held 46 U.S. patents.
Periodically, the Company evaluates our sales and marketing efforts with respect to these focus areas and, where appropriate, makes use of third-party sales representatives who receive compensation through commissions based on performance. Raw Materials We require the use of various raw materials in our manufacturing processes. We purchase a variety of manufactured component parts from various suppliers.
Periodically, the Company evaluates our sales and marketing efforts with respect to these focus areas and, where appropriate, makes use of third-party sales representatives who receive compensation through commissions based on performance. ​ 6 Table of Contents Raw Materials We require the use of various raw materials in our manufacturing processes.
(“L3 Harris Technologies”), Lockheed Martin Corporation (“Lockheed Martin”), Pilatus, Sierra Nevada Corporation, Textron, and the Department of National Defense (Canada), among others. The Company’s revenue is concentrated with a limited number of customers. In fiscal year 2024, our three largest customers, Pilatus, Textron and Honeywell accounted for 23%, 7% and 7% of total revenue, respectively.
(“L3 Harris Technologies”), Lockheed Martin Corporation (“Lockheed Martin”), Pilatus, Sierra Nevada Corporation, Textron, and the Department of National Defense (Canada), among others. The Company’s revenue is concentrated with a limited number of customers. In the fiscal year ended September 30, 2025, our three largest customers, Lockheed Martin, Pilatus, and Boeing accounted for 36%, 8% and 5% of total revenue, respectively.
We believe that retrofit of an aircraft with the COCKPIT/IP® FPDS, FMS and integrated standby unit system components is cost effective compared to the acquisition of a new aircraft and can provide similar functionality to that of new aircraft. • Expand presence in flat panel display market Due to recent demand from cargo operators, we believe that many aircraft will be retrofitted with flat panel displays over the next several years.
We believe that retrofit of an aircraft with the COCKPIT/IP® FPDS, FMS and integrated standby unit system components is cost effective compared to the acquisition of a new aircraft and can provide similar functionality to that of new aircraft. • Expand presence in flat panel display market.
We believe this expertise enhances ease of installation, reduces aircraft downtime and reduces system complexity. • Retrofit application expertise. The average age of the global commercial airline fleet has reached a record level of 14.8 years, according to the International Air Transport Association. Extending an aircraft’s lifespan increases maintenance demands.
We believe this expertise enhances ease of installation, reduces aircraft downtime and reduces system complexity. • Retrofit application expertise. The average age of the global commercial airline fleet has been increasing over the last 20 years and reached a record level of 14.8 years in late 2024, according to the International Air Transport Association.
Government also has the ability to stop work under a contract for a limited period of time for its convenience. In the event of a stop work order, we generally would be protected by provisions covering reimbursement for costs incurred on the contract to date and for costs associated with the temporary stoppage of work on the contract.
In the event of a stop work order, we generally would be protected by provisions covering reimbursement for costs incurred on the contract to date and 12 Table of Contents for costs associated with the temporary stoppage of work on the contract.
The Company has established relationships with a several aircraft modification centers throughout the United States which act as distribution outlets and installation centers for the Company’s products.
The Company has established relationships with a several aircraft modification centers throughout the United States which act as distribution outlets and installation centers for the Company’s products. Original Equipment Manufacturers The Company sells components to OEMs for use in original construction of aircraft.
In the fiscal year 2024 ended September 30, 2024, we reported net sales of $47.2 million, an increase of 35.6% on a year-over-year basis from $34.8 million in the fiscal year ended 2023, and net income of $7.0 increased 16.1% from $6.0 million in fiscal 2023.
In the fiscal year ended September 30, 2025, we reported net sales of $84.3 million, an increase of 78.6% on a year-over-year basis from $47.2 million in the fiscal year ended September 30, 2024, and net income of $15.6 million, an increase of 123.3% on a year-over-year basis from $7.0 million in the fiscal year ended September 30, 2024.
In fiscal year 2023, the three largest customers, 6 Table of Contents Pilatus, ATSG and Textron accounted for 23%, 12% and 10% of total revenue, respectively. In fiscal year 2022, the three largest customers, Pilatus, ATSG and Textron accounted for 22%, 22% and 11% of total revenue, respectively.
In the fiscal year ended September 30, 2024, our three largest customers, Pilatus, Textron and Honeywell accounted for 23%, 7% and 7% of total revenue, respectively. In fiscal year ended September 30, 2023, the three largest customers, Pilatus, ATSG and Textron accounted for 23%, 12% and 10% of total revenue, respectively.
We believe that our ability to source and integrate advanced componentry provides our customers with a unique value proposition, one that helps to reduce cost and optimize fleet utilization. Currently, we support multiple OEM platforms, including those with the Boeing Company, Eclipse Aerospace, Lockheed Martin, and Pilatus Aircraft.
We believe that our ability to source and integrate advanced componentry provides our customers with a unique value proposition, one that helps to reduce cost and optimize fleet utilization.
As of September 30, 2024, the Company held 47 U.S. patents. The Company holds 111 international patents and has 17 trademarks. Certain of these patents cover technology relating to air data measurement systems, and others cover technology relating to flat panel display systems and other aspects of the COCKPIT/IP® product. • Depth of experience in serving global customer brands.
Certain of these patents cover technology relating to air data measurement systems, and others cover technology relating to flat panel display systems and other aspects of the COCKPIT/IP® product. • Depth of experience in serving global customers.
Suppliers The Company’s manufacturing activities consist primarily of assembling and testing components and subassemblies and integrating them into finished systems. Typically, the Company purchases components for products, including any necessary raw materials, from third-party suppliers, several of which are sole source, and assembles them in a clean room environment.
Typically, the Company purchases components for products, including any necessary raw materials, from third-party suppliers, several of which are sole source, and assembles them in a clean room environment. Many of the components purchased are standard products, although certain parts are made to the Company’s specifications.
We invest heavily in engineering and development, with approximately 27% of our full-time employees serving in engineering-related roles as of September 30, 2024. We currently operate a 45,000 square foot design, manufacturing, and office facility in Exton, Pennsylvania. ISSC is ISO 9001 and AS9100D certified.
We invest heavily in engineering and development, with approximately 37 % of our full-time employees serving in engineering-related roles as of September 30, 2025. We operate an 85,000-square-foot design, manufacturing, and office facility in Exton, Pennsylvania. We are certified to both ISO 9001 and AS9100D, internationally recognized standards that define effective quality management practices.
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. As of September 30, 2024, 35% of the Company’s backlog was expected to be filled beyond fiscal year 2025. ​
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 September 30, 2025, our backlog was $77.4 million compared with $89.2 million at September 30, 2024.
Our product portfolio consists of the following five categories: Integrated Flight Deck Systems COCKPIT/IP® that include primary flight/navigation displays, crew alerting and engine displays, integrated standby instruments and mission displays. Navigation Systems that includes flight management systems, mission computers, navigation radios and transponders. Communication Systems that includes communication radios, audio panels and radio management units.
Our product portfolio consists of the following five categories: Integrated Flight Deck Systems COCKPIT/IP® that include primary flight/navigation displays, crew alerting and engine displays, integrated standby instruments and mission displays; Navigation Systems that include flight management systems, mission computers, navigation radios and transponders; Communication Systems that include communication radios, audio panels and radio management units; Sensors and Control Systems that include air data computers, attitude and heading reference systems, magnetometers, inertial reference units, GPS receivers, utility management systems and flight control computers; and Advanced Flight Actuators that include an array of linear and rotary smart-actuators for movement of aircraft levers and surfaces.
The capacity expansion is expected to cost approximately $6 million. Sales & Marketing Our multi-channel sales strategy targets passenger and cargo carrying aircraft operators, general aviation owner/operators, maintenance, repair and overhaul (“MRO”) dealer networks, distributors, avionics integrators, aircraft modification centers, the Department of Defense (“the DoD”), DoD contractors and OEMs.
We expect to leverage this more than three-fold increase in capacity to meet growing demand and scale production efficiently. Sales & Marketing Our multi-channel sales strategy targets passenger and cargo carrying aircraft operators, general aviation owner/operators, maintenance, repair and overhaul (“MRO”) dealer networks, distributors, avionics integrators, aircraft modification centers, the Department of Defense (the “DoD”), DoD contractors and OEMs.
The Company remains committed to maintaining strong financial flexibility. ​ ​ Backlog ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30 ​ ​ ​ 2024 ​ ​ 2023 Backlog, beginning of period ​ $ 13,450,881 ​ $ 11,778,988 ​ Plus: bookings during period, net ​ 48,672,715 ​ 36,480,406 ​ Plus: acquired through acquisition ​ ​ 74,307,000 ​ ​ — ​ Less: sales recognized during period ​ (47,198,020) ​ (34,808,513) ​ Backlog, end of period ​ $ 89,232,576 ​ $ 13,450,881 ​ ​ 11 Table of Contents Backlog represents the value of contracts and purchase orders, less the revenue recognized to date on those contracts and purchase orders.
Government is unable to make timely payments. ​ Backlog ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30 ​ ​ ​ ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Backlog, beginning of period ​ ​ $ 89,232,576 ​ $ 13,450,881 Plus: bookings during period, net ​ ​ 72,493,211 ​ 48,672,715 Plus: acquired through acquisition ​ ​ ​ — ​ ​ 74,307,000 Less: sales recognized during period ​ ​ (84,296,889) ​ (47,198,020) Backlog, end of period ​ ​ $ 77,428,898 ​ $ 89,232,576 ​ Backlog represents the value of contracts and purchase orders, less the revenue recognized to date on those contracts and purchase orders.
Disruptions in the global supply chain has resulted in delays in the availability of certain raw materials and increased raw material costs, among other costs such as labor, though the disruptions somewhat improved in fiscal 2024, resulting in a higher stabilization of costs, as fiscal 2024 progressed.
Disruptions in the global supply chain have resulted in delays in the availability of certain raw materials and increased raw material prices, among other costs, including labor.
These new technologies and procedures, such as traffic avoidance, ground awareness, increased precision of navigation and vertical position, runway incursion prevention and increased digital communication, will require innovation and intuitive methods to display situational awareness information for the pilots.
Emerging technologies and procedures, including traffic-avoidance systems, ground-awareness tools, enhanced navigation and vertical-position accuracy, runway-incursion prevention technologies and expanded digital communication capabilities, are expected to require new and intuitive methods for presenting situational-awareness information to pilots.
In addition, the Company believes that demand for new aircraft, FAA mandates and obsolescence issues on older aircraft will contribute to this growth. • Evaluate potential acquisitions and strategic partnerships As a part of the Company’s growth strategy, we continuously evaluate acquisition opportunities and opportunities to make investments in complementary businesses, technologies, services or products.
As a part of the Company’s growth strategy, we continuously evaluate acquisition opportunities and opportunities to make investments in complementary businesses, technologies, services or products.
The Company intends to continue to capitalize on being the first to market an autothrottle to owners and operators of turboprop aircraft. 10 Table of Contents • Focus on retrofit opportunity Given an aging global aircraft fleet, cockpit avionics upgrades for existing aircraft continue to be a significant opportunity for the Company.
Given an aging global aircraft fleet, cockpit avionics upgrades for existing aircraft continue to be a significant opportunity for the Company.
Accordingly, we believe that these advantages will allow the Company to generate increased revenues from the COCKPIT/IP® product and increase our market share.
Accordingly, we believe that these advantages will allow the Company to generate increased revenues from the COCKPIT/IP® product and increase our market share. In addition, the Company expects that demand for new aircraft, FAA mandates and obsolescence issues on older aircraft will contribute to this growth. • Evaluate potential acquisitions and strategic partnerships.
Government contracts, even if the U.S. Government is unable to make timely payments. ​ COMPETITIVE CONDITIONS We experience competition in our aerospace and defense markets across suppliers of competitive products and services as well as with vertically integrated primes.
The Company also markets its products to other OEMs including, among others, Boeing and Lockheed Martin. COMPETITIVE CONDITIONS We experience competition in our aerospace and defense markets across suppliers of competitive products and services as well as with vertically integrated primes.
We expect to recognize approximately 65% of our backlog over the next 12 months and approximately 98% over the next 24 months as revenue, with the remainder recognized thereafter. During fiscal 2024, we made important progress on our commercial growth strategy highlighted by several key awards and contract wins across our commercial, military and business aviation markets.
During the fiscal year ended September 30, 2025, we made important progress on our commercial growth strategy, highlighted by several key awards and contract wins across our commercial, military and business aviation markets.
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 OUR BUSINESS MODEL We specialize in providing systems integrations capabilities that include the design, manufacture, sale and servicing of high-performance avionics products and systems used in both commercial and military aircraft platforms.
As the Company’s product offerings focus on individual avionics components and systems, it is able to market its products to both customers building new aircraft and customers engaged in the retrofit market.
These acquisitions also enable us to market our internally developed products to newly acquired customers. As our product offerings focus on individual avionics components and systems, we are able to market our products to both original equipment manufacturers that are building new aircraft and customers participating in the retrofit market.
Original Equipment Manufacturers The Company has signed a multi-year agreement with Textron to supply ThrustSense® Autothrottles on their King Air 360 and King Air 260 production aircraft as described above in “Products - ThrustSense® Autothrottle”.
The Company has signed a multi-year agreement with Textron to supply ThrustSense® Autothrottles for their King Air 360 and King Air 260 production aircraft. The Company has also developed and manufactures the utilities management system for the Pilatus’ PC-24 aircraft under a multi-year production contract.
Based on the broad scope of the Company’s product lines, management believes that the loss or expiration of any single intellectual property right would not have a material effect on our consolidated financial statements. 7 Table of Contents HUMAN CAPITAL RESOURCES Our ability to attract, develop and retain top talent across all of our business functions, and particularly in highly technical areas, has a significant impact on organizational success.
HUMAN CAPITAL RESOURCES Our ability to attract, develop and retain top talent across all of our business functions, and particularly in highly technical areas, has a significant impact on organizational success.
We believe that the market will continue to migrate toward autonomous flight and that the flight deck will incorporate additional technologies that are stepping-stones on the path to complete autonomy. Historically, equipment data, such as engine and fuel-related information, were displayed on analog mechanical instruments.
We further expect the market to progress toward increasingly autonomous flight, with the flight deck integrating additional transitional technologies as the industry advances along the path to full autonomy. Historically, equipment data, such as engine and fuel-related information, were displayed on analog mechanical instruments. Engine and fuel instruments provide information on engine activity, including oil and hydraulic pressures and temperature.
We believe that IS&S flat panel displays provide an attractive solution to the growing need for innovation and new methods in this area. STRATEGY The foundation of our value creation framework is our focused business strategy which seeks to deliver stable commercial growth, including both organic and inorganic growth, operational excellence and disciplined capital allocation.
STRATEGY The foundation of our value creation framework is our focused business strategy which seeks to deliver stable commercial growth, including both organic and inorganic growth, operational excellence and disciplined capital allocation. Key elements of the strategy include the following: Targeted Growth • Expand product line portfolio.
In June 2023, the Company entered into an Asset Purchase and License Agreement (the “June 2023 Honeywell Agreement”) with Honeywell International, Inc.
Our primary focus will be on capital deployment in support of our growth initiatives. The Company remains committed to maintaining strong financial flexibility. Recent Acquisitions In June 2023, the Company entered into an Asset Purchase and License Agreement (the “June 2023 Honeywell Agreement”) with Honeywell International, Inc.
We will also work to realize additional efficiencies through sourcing and procurement initiatives in an effort to drive cost savings. #3 - Return-Focused Capital Allocation Strategy • We employ a disciplined, return-focused capital allocation strategy. Our primary focus will be on capital deployment in support of our growth initiatives.
We also expect to benefit from greater fixed cost leverage as we utilize the manufacturing capacity at our Exton facility more effectively. We intend to realize additional efficiencies through sourcing and procurement initiatives in an effort to drive cost savings. ​ 10 Table of Contents Return-Focused Capital Allocation Strategy Employ a disciplined, return-focused capital allocation strategy.
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. ​ 4 Table of Contents OUR BUSINESS MODEL We specialize in providing systems integrations capabilities that include the design, manufacture, sale and servicing of high-performance avionics products and systems used in both commercial and military aircraft platforms.
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.
Engine and fuel instruments provide information on engine activity, including oil and hydraulic pressures and temperature. These instruments are clustered throughout an aircraft’s cockpit. Individual instruments tend to be replaced more frequently than the aircraft itself due to obsolescence and normal wear-and-tear.
These instruments are clustered throughout an aircraft’s cockpit. Individual instruments tend to be replaced more frequently than the aircraft itself due to obsolescence and normal wear-and-tear. Increasingly, operators are replacing their clusters of analog mechanical instruments with integrated display systems, such as IA’s panel displays.
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. 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”).
Incorporated in Pennsylvania in 1988, IA 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. On October 6, 2025, the Company rebranded and adopted our new trade name, Innovative Aerosystems.
The Company has developed and manufactures the utilities management system for the Pilatus’ PC-24 aircraft under a multi-year production contract as described above under “Products - Utilities Management System.” The Company also markets its products to other OEMs including, among others, Boeing and Lockheed Martin. ​ INTELLECTUAL PROPERTY We have various trade secrets, proprietary information, trademarks, trade names, patents, copyrights and other intellectual property rights, which we believe, in the aggregate but not individually, are important to our business.
INTELLECTUAL PROPERTY We have various trade secrets, proprietary information, trademarks, trade names, patents, copyrights and other intellectual property rights, which we believe, in the aggregate but not individually, are important to our business.
Since age brings wear and tear that requires more frequent and thorough inspections and replacement of parts that fail or reach their lifetime limits. IS&S specializes in retrofitting older aircraft with state-of-the-art avionics, such as Flat Panel Display Systems and Autothrottles that significantly improve functionality and compliance with current aviation standards. • Strong Product and IP Portfolio.
IA specializes in retrofitting older aircraft with state-of-the-art avionics, such as Flat Panel Display Systems and Autothrottles that significantly improve functionality and compliance with current aviation standards. 8 Table of Contents • Strong Product and IP Portfolio. As of September 30, 2025, the Company held 46 U.S. patents. The Company also holds 125 international patents and has 17 trademarks.
The Company believes that aircraft cockpits will become more complete information centers that are capable of delivering additional information that is either mandated by regulation or demanded by pilots to assist in the safe and efficient operation of aircraft.
We believe that aircraft cockpits will continue evolving into comprehensive information centers, delivering an expanding range of data, whether mandated by regulation or demanded by pilots, to support the safe and efficient operation of aircraft.
The Company believes that the acquisition of additional product lines presents the opportunity for the Company to leverage potential cost synergies from better utilization of the Company’s skill engineering team and its existing operational capacity while expanding the Company’s customer base and providing opportunities for the Company to market its internally developed products to acquired Customers.
We source our products through internal research and development, as well as through the opportunistic licensing and acquisition of mature product lines that complement our existing business. We believe that acquiring additional product lines creates opportunities to leverage cost synergies through better utilization of our skilled engineering team and existing operational capacity, while also expanding our customer base.
During fiscal year 2024, the Company had four suppliers, Honeywell, FilConn, APCT Inc and Brandywine Precision Inc. that accounted for most of Company’s total inventory related purchases. When appropriate, the Company enters into long-term supply agreements and uses its relationships with long-term suppliers to improve product quality and availability and reduce delivery times and product costs.
Although there are a limited number of suppliers of particular components, management believes other suppliers could provide similar components on comparable terms. When appropriate, the Company enters into long-term supply agreements and uses its relationships with long-term suppliers to improve product quality and availability and reduce delivery times and product costs.
Although we believe in most cases that we could identify alternative suppliers, or alternative raw materials or component parts, the lengthy and expensive aviation authority and OEM certification processes associated with aerospace products could prevent efficient replacement of a supplier, raw material or component part.
Although we continue to evaluate various opportunities to expand our procurement network, OEM certification processes associated with aerospace products could prevent efficient replacement of a supplier, raw material or component part. Suppliers The Company’s manufacturing activities consist primarily of assembling and testing components and subassemblies and integrating them into finished systems.
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Products The Company manufactures, markets and sells a wide variety of high-value, advanced avionics solutions for commercial air transport, business aviation and military customers. It sources its products through internal research and development efforts, in addition to opportunistic licensing and acquisition of mature product lines that complement the Company’s existing business.
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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”).
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Sensors and Control Systems that includes air data computers, attitude and heading reference systems, magnetometers, inertial reference units, GPS receivers, utility management systems and flight control computers. Advanced Flight Actuators that includes an array of linear and rotary smart-actuators for movement of aircraft levers and surfaces.
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Our backlog does not include additional future orders that may be received under our current OEM contracts. We expect to recognize approximately 44 % of our backlog over the next 12 months and approximately 92% over the next 24 months as revenue, with the remainder recognized thereafter.
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These standards represent an international consensus on effective management practices with the goal of ensuring that a company can deliver its products and related services consistently in a manner that meets or exceeds customer quality requirements.
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Currently, we support multiple OEM platforms, including those with the Boeing Company, Eclipse Aerospace, Lockheed Martin, and Pilatus Aircraft. ​ 5 Table of Contents Products We manufacture, market, and sell a wide range of high-value, advanced avionics solutions for commercial air transport, business aviation, and military customers.
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The Company’s certification to these standards allows ISSC to represent to customers that it maintains high-quality industry standards in the education of its employees and in the design and manufacture of its products.
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These certifications demonstrate our rigorous processes for employee training, product design, and manufacturing, ensuring that products and related services consistently meet or exceed customer quality requirements. All of our products also undergo extensive, fully documented quality-control testing before shipment.
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In addition, the Company’s products undergo extensive and documented quality control testing prior to being delivered to customers. 5 Table of Contents We are currently expanding our Exton facility to add 40,000 square feet of capacity. The additional capacity will be used to support our commercial growth strategy, including opportunities to capitalize on our recent transactions with Honeywell.
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In the quarter ended June 30, 2025, the Company completed construction of an additional 40,000 square feet of capacity at the Exton facility, expanding it to a total of 85,000 square feet. This expansion is expected to increase IA’s manufacturing capacity by more than 300%, supporting our commercial growth strategy and enabling IA to capitalize on recent transactions with Honeywell.
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Our business has been adversely affected, though not materially, and could continue to be adversely affected in fiscal 2025 by disruptions in our ability to timely obtain raw materials and components from our suppliers in the quantities we require or on favorable terms.
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As the fiscal year ended September 30, 2025 progressed, raw material price escalation moderated, although our ability to obtain raw materials and components in a timely and cost-efficient manner remains a strategic focus entering fiscal year 2026.
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Many of the components purchased are standard products, although certain parts are made to the Company’s specifications. Although there are a limited number of suppliers of particular components, management believes other suppliers could provide similar components on comparable terms.
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Extending an aircraft’s lifespan increases maintenance demands, since age brings wear and tear that requires more frequent and thorough inspections and replacement of parts that fail or reach their lifetime limits.
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The Company has not experienced significant delays in delivery of products which could happen as a result of the inability to obtain either component parts or FAA approval of products incorporating new component parts.
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As airspace and airport environments become increasingly congested, the aviation industry and its regulators are placing greater emphasis on technologies, procedures and regulatory frameworks designed to enable higher traffic capacity while maintaining or improving safety, operational efficiency and environmental performance.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFailure to maintain an active trading market for our common stock may adversely affect our shareholders’ ability to sell our common stock in short time periods, or at all. Our common stock has experienced, and may experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock.
Biggest changeAlthough an active trading market has developed for our common stock, there can be no assurance that an active trading market for our common stock will be sustained. Failure to maintain an active trading market for our common stock may adversely affect our shareholders’ ability to sell our common stock in short time periods, or at all.
There can be no assurance that the Company will be able to retain such employees, and the loss of important personnel could damage its ability to execute its business strategy. Competition for skilled personnel is intense, and the Company may not be able to attract or retain additional qualified employees.
There can be no assurance that the Company will be able to attract or retain such employees, and the loss of important personnel could damage its ability to execute its business strategy. Competition for skilled personnel is intense, and the Company may not be able to attract or retain additional qualified employees.
Legal and Regulatory Risks The Company is subject to various laws and regulations. Changes to, or failure by the Company to comply with, these laws and regulations could have a significant impact on the Company’s business and operations. The aerospace industry is highly regulated by the U.S. government as well as other international agencies.
Legal and Regulatory Risks The Company is subject to various laws and regulations. Changes to, or failure by the Company to comply with, these laws and regulations could have a significant negative impact on the Company’s business and operations. The aerospace industry is highly regulated by the U.S. government as well as other international agencies.
Our IT networks and related systems are critical to the operation of our business and essential to our ability to successfully perform day-to-day operations. We are also involved with IT systems for certain customers and other third parties, for which we face similar security threats as for our own, in particular, the DoD.
Our IT networks and related systems are critical to the operation of our business and essential to our ability to successfully perform day-to-day operations. We are also involved with IT systems for certain customers and other third parties, for which we face similar security threats as for our own, including, in particular, the DoD.
Acquisitions involve various inherent risks, such as: our ability to assess accurately the value, strengths, weaknesses, internal controls, contingent and other liabilities and potential profitability of acquisition candidates; difficulties in integrating acquired businesses, our potential inability to achieve identified financial, operating and other synergies anticipated to result from an acquisition, and integration issues associated with internal controls of acquired businesses; the diversion of management’s attention from our existing businesses; the potential impairment of assets; potential unknown liabilities associated with a business that we acquire or in which we invest, including environmental liabilities; and production delays associated with consolidating acquired facilities and manufacturing operations.
Acquisitions involve various inherent risks, such as: our ability to assess accurately the value, strengths, weaknesses, internal controls, contingent and other liabilities and potential profitability of acquisition candidates; difficulties in integrating acquired businesses, our potential inability to achieve identified financial, operating and other synergies anticipated to result from an acquisition, and integration issues associated with internal controls of acquired businesses; the diversion of management’s attention from our existing businesses; the potential impairment of assets; potential unknown liabilities associated with a business that we acquire or in which we invest, including environmental liabilities; potential margin dilution and production delays associated with consolidating acquired facilities and manufacturing operations.
The Company depends on key personnel to manage its business effectively, and an inability to retain its key employees and plan for management succession could adversely impact the Company’s ability to compete. The Company’s success depends on the efforts, abilities, and expertise of its senior management and other key personnel.
The Company depends on key personnel to manage its business effectively, and an inability to attract and retain key employees and plan for management succession could adversely impact the Company’s ability to compete. The Company’s success depends on the efforts, abilities, and expertise of its senior management and other key personnel.
The Company could be subjected to losses in the event that the Company suffers cost overruns or contractual penalties in connection with fixed-price contracts or service arrangements to perform specified design and EDC services.
The Company could be subjected to unanticipated losses in the event that the Company suffers cost overruns or contractual penalties in connection with fixed-price contracts or service arrangements to perform specified design and EDC services.
ISSC Risk Factors Risks Related to Our Business and Industry If the Company fails to enhance existing products, or to develop and achieve market acceptance for flat panel displays, flight control computers, display generators, flight management systems, autothrottle technology and other new products that meet customer requirements, its business, financial condition and results of operation may be affected adversely.
Risk Factors. 1A Risk Factors Risks Related to Our Business and Industry If the Company fails to enhance existing products, or to develop and achieve market acceptance for flat panel displays, flight control computers, display generators, flight management systems, autothrottle technology and other new products that meet customer requirements, its business, financial condition and results of operation may be affected adversely.
Our and our customers, suppliers and other third-parties’ technology systems and networks may be damaged, disrupted, or compromised by malicious events, such as cyberattacks (including computer viruses, ransomware, and other malicious and destructive code, phishing attacks, and denial of service attacks), physical or electronic security breaches, natural disasters, fire, power loss, terrorism, war, telecommunications and electrical failures, hacking, cyberattacks, phishing attacks and other social engineering schemes, employee theft or misuse, human error, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized access or use by persons inside our organization, or persons with access to systems inside our organization.
Our and our customers, suppliers and other third-parties’ technology systems and networks may be damaged, disrupted, or compromised by malicious events, such as cyberattacks (including computer viruses, ransomware, and other malicious and destructive code, phishing attacks, and denial of service attacks), physical or electronic security breaches, natural disasters, fire, power loss, terrorism, war, telecommunications and electrical failures, hacking, cyberattacks, phishing attacks and other social engineering schemes, employee theft or misuse, human error, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized 23 Table of Contents access or use by persons inside our organization, or persons with access to systems inside our organization.
During these periods of volatility and disruption, additional risks to the Company include: • declines in revenues and profitability from reduced orders, payment delays or other factors caused by the economic problems of customers; • reprioritization of government spending away from defense programs in which the Company participates; 25 Table of Contents • reduced access to credit sources and ability to raise capital; and • disruptions in supplies or increased supply prices associated with any financial constraints faced by vendors.
During these periods of volatility and disruption, additional risks to the Company include: • declines in revenues and profitability from reduced orders, payment delays or other factors caused by the economic problems of customers; • reprioritization of government spending away from defense programs in which the Company participates; • reduced access to credit sources and ability to raise capital; and • disruptions in supplies or increased supply prices associated with any financial constraints faced by vendors.
The Company is subject to, and must comply with, various laws and regulations, including, but not limited to, the product-related and other regulations of the FAA and the EASA, U.S. government procurement regulations, the rules and regulations of the SEC, and local, state, federal, and 22 Table of Contents international tax codes, import and export controls and customs laws, employment and employment-related laws, environmental laws, intellectual property laws, and consumer protection statutes.
The Company is subject to, and must comply with, various laws and regulations, including, but not limited to, the product-related and other regulations of the FAA and the EASA, U.S. government procurement regulations, the rules and regulations of the SEC, and local, state, federal, and international tax codes, import and export controls and customs laws, employment and employment-related laws, environmental laws, intellectual property laws, and consumer protection statutes.
While these factors and their impact are difficult to predict, any one or more of them could have a material adverse effect on our competitive position, results of operations, financial condition or liquidity. In addition, given the role of our defense businesses in the support of the national security interests of the U.
While these factors and their impact are difficult to 18 Table of Contents predict, any one or more of them could have a material adverse effect on our competitive position, results of operations, financial condition or liquidity. In addition, given the role of our defense businesses in the support of the national security interests of the U.
Failure to ensure effective transfers of knowledge and smooth transitions involving senior management and other key personnel could hinder the execution of our strategic planning. We self-insure a significant portion of our employee medical insurance program, which may expose us to unpredictable costs and negatively affect our financial performance.
Failure to ensure effective transfers of knowledge and smooth transitions involving senior management and other key personnel could hinder the execution of our strategic planning. 21 Table of Contents We self-insure a significant portion of our employee medical insurance program, which may expose us to unpredictable costs and negatively affect our financial performance.
Cybersecurity threats—which include, but are not limited to, computer viruses, ransomware, break-ins, sabotage, spyware, other malware, attempts to access information, denial of service attacks and other electronic security breaches—are persistent and evolve quickly. In general, such threats have increased in 21 Table of Contents frequency, scope and potential impact in recent years.
Cybersecurity threats—which include, but are not limited to, computer viruses, ransomware, break-ins, sabotage, spyware, other malware, attempts to access information, denial of service attacks and other electronic security breaches—are persistent and evolve quickly. In general, such threats have increased in frequency, scope and potential impact in recent years.
In the performance of our contracts with the U.S. government, we operate in a highly regulated environment, and we are subject to routine audits and reviews by the U.S. government and its agencies, such as the Defense Contract Audit Agency (“DCCA”). These agencies routinely review contract performance and compliance with applicable laws, regulations and standards.
In the performance of our contracts with the U.S. government, we operate in a highly regulated environment, and we are subject to routine audits and reviews by the U.S. government and its agencies, such as the Defense Contract Audit Agency (“DCCA”). These 24 Table of Contents agencies routinely review contract performance and compliance with applicable laws, regulations and standards.
President-elect Donald Trump has indicated that his administration is likely to impose significant tariffs on imported goods. The imposition of such tariffs may strain international trade relations and increase the risk that foreign governments implement retaliatory tariffs on goods imported from the United States.
President-elect Donald Trump has indicated that his administration is likely to 25 Table of Contents impose significant tariffs on imported goods. The imposition of such tariffs may strain international trade relations and increase the risk that foreign governments implement retaliatory tariffs on goods imported from the United States.
Events such as increased trade 16 Table of Contents restrictions or retaliatory trade policies, renegotiation of existing trade agreements, or regime change can affect demand for our products and services, the competitive position of our products, our supply chain, and our ability to manufacture or sell products in certain countries.
Events such as increased trade restrictions or retaliatory trade policies, renegotiation of existing trade agreements, or regime change can affect demand for our products and services, the competitive position of our products, our supply chain, and our ability to manufacture or sell products in certain countries.
Development efforts divert resources from other potential investments in our businesses, and these efforts may not lead to the development of new technologies or products on a timely basis or meet the needs of our customers as fully as competitive offerings.
Development efforts divert resources from other potential investments in our businesses, and these efforts may not lead to the development of new technologies or products on a timely 14 Table of Contents basis or meet the needs of our customers as fully as competitive offerings.
We may experience difficulties in recruiting, training, managing, and retaining an international staff, and specifically staff related to sales management and sales personnel, which may impact in sales productivity in foreign markets.
We may experience difficulties in recruiting, training, managing, and retaining an international staff, specifically sales management and sales personnel, which may impact sales productivity in foreign markets.
Our ability to find partners to further our growth strategy is likely to be affected by factors outside of our control in the aerospace industry such as pilot unions, pilot shortages and labor strikes, including other economic and geopolitical factors. Any one of these factors may impede our ability to find strategic partners.
Our ability to find partners to further our growth strategy is likely to be affected by factors outside of our control in the aerospace industry such as the activities of pilot unions, pilot shortages and labor strikes, along with other economic and geopolitical factors. Any one of these factors may impede our ability to find strategic partners.
Risks inherent in doing business internationally include: • differing regulatory requirements; • legal uncertainty regarding liability and the enforceability of agreements and accounts receivable collection and longer collection periods; • tariffs, trade and investment barriers, and other regulatory barriers; • uncertainty of protection of our intellectual property rights; • heightened risk of unfair or corrupt business practices in certain locations; • political and economic instability, including changes in government budgets and wars, such as the wars in the Ukraine and Israel; • changes in diplomatic and trade relationships; • failure by our employees or agents to comply with U.S. laws affecting the activities of U.S. companies abroad, including the Foreign Corrupt Practices Act of 1977, as amended; • difficulty with staffing and managing widespread operations and in recruiting local experienced personnel, and the costs and expenses associated with such activities; • the impact of recessions in economies outside the U.S.; and • variances and unexpected changes in local laws and regulations. 20 Table of Contents Currently, all of the Company’s international sales are denominated in U.S. dollars.
Risks inherent in doing business internationally include: • differing regulatory requirements; • legal uncertainty regarding liability and the enforceability of agreements and accounts receivable collection and longer collection periods; • tariffs, trade and investment barriers, and other regulatory barriers; • uncertainty of protection of our intellectual property rights; • heightened risk of unfair or corrupt business practices in certain locations; • political and economic instability, including changes in government budgets and wars, such as the wars in the Ukraine and Israel; • changes in diplomatic and trade relationships; • failure by our employees or agents to comply with U.S. laws affecting the activities of U.S. companies abroad, including the Foreign Corrupt Practices Act of 1977, as amended; • difficulty with staffing and managing widespread operations and in recruiting local experienced personnel, and the costs and expenses associated with such activities; • the impact of recessions in economies outside the U.S.; and • variances and unexpected changes in local laws and regulations.
Contracts with foreign governments may contain similar provisions. There can be no assurance that we will continue to be awarded contracts by the U.S. government or any foreign government, as the market for the Company’s products is highly competitive. Our customers may terminate their contracts with us at any time.
Contracts with foreign governments may contain similar provisions. There can be no assurance that we will continue to be awarded contracts by the U.S. government or any foreign government, as the market for the Company’s products is highly competitive. Our customers may terminate their contracts with us at any time which would adversely affect our business.
During fiscal year 2024 approximately 5% percent of the Company’s total sales were derived from fixed-price EDC arrangements with customers to perform specified design and EDC services related to its products. These arrangements allow the Company to benefit by recovering some of its product development costs, but it carries the risk of potential cost overruns.
During the fiscal year ended September 30, 2025, approximately 7% percent of the Company’s total sales were derived from fixed-price EDC arrangements with customers to perform specified design and EDC services related to its products. These arrangements allow the Company to benefit by recovering some of its product development costs, but it carries the risk of potential cost overruns.
The Company cannot be certain that it will be able to develop, acquire, introduce or market its FPDS, FMS, ThrustSense® Autothrottle or other new products or product enhancements in a timely or cost-effective manner, or that any new products or product enhancements will receive market acceptance or necessary regulatory approval.
The Company cannot be certain that it will be able to develop, acquire, introduce or market its FPDS, FMS, ThrustSense® Autothrottle, military display generators and flight control computers or other new products or product enhancements in a timely or cost-effective manner, or that any new products or product enhancements will receive market acceptance or necessary regulatory approval.
Although we currently maintain insurance in amounts which we consider adequate, the nature of these risks is such that liabilities might exceed policy limits, the liabilities and hazards might not be insurable, or we may elect in the future not to insure against such liabilities due to high premium costs or other reasons, in which event we could incur significant costs that could have a materially adverse effect upon our business, financial condition and results of operations. ​ 15 Table of Contents We serve a limited number of customers and face customer concentration risk.
Although we currently maintain insurance in amounts which we consider adequate, the nature of these risks is such that liabilities might exceed policy limits, the liabilities and hazards might not be insurable, or we may elect in the future not to insure against such liabilities due to high premium costs or other reasons, in which event we could incur significant costs that could have a materially adverse effect upon our business, financial condition and results of operations.
Furthermore, the existing supply chain and labor market issues could be compounded by other events, such as an economic downturn; supplier capacity constraints for other reasons; supplier quality issues (for example, defects or fraudulent parts); supplier closing, bankruptcy or financial difficulties; price increases for various reasons; worsening shortages of raw materials or commodities; and energy supply constraints, including as a result of war or other geopolitical actions, natural disaster (including the effects of climate change), health pandemic or other business continuity events, or transport and distribution issues, any of which could further negatively impact our ability to meet our commitments to customers or increase our operating costs and therefore incrementally affect our results of operations, financial condition and liquidity.
Furthermore, the existing supply chain and labor market issues could be compounded by other events, such as an economic downturn; supplier capacity constraints for other reasons; supplier quality issues (for example, defects or fraudulent parts); supplier closing, bankruptcy or financial difficulties; price increases for various reasons; worsening shortages of raw materials or commodities; and energy supply constraints, including as a result of war or other geopolitical actions, natural disaster (including the effects of climate change), health pandemic or other business continuity events, or transport and distribution issues, any of which could further negatively impact our ability to meet our commitments to customers or increase our operating costs and therefore incrementally affect our results of operations, financial condition and liquidity. 20 Table of Contents Our subcontractors and third-party suppliers may fail to deliver high quality materials, products or services, which may result in a failure of our products or services and a violation of applicable law.
These types of claims, as well as other types of lawsuits to which we are subject from time to time, can distract management’s attention from core business operations and impact operating results, particularly if a lawsuit results in an unfavorable outcome, or could harm the Company’s reputation with customers, employees, investors and others. ​ 23 Table of Contents Tax changes could affect the Company’s effective tax rate and future profitability.
These types of claims, as well as other types of lawsuits to which we are subject from time to time, can distract management’s attention from core business operations and impact operating results, particularly if a lawsuit results in an unfavorable outcome, or could harm the Company’s reputation with customers, employees, investors and others.
The Company’s future success will depend on its ability to: • embrace rapidly changing technologies; • develop and introduce timely, high-quality, cost-effective new products and product enhancements to address the increasingly sophisticated needs of its customers; and • adapt the Company’s products to evolving industry standards and government regulations; and These factors may be costly to the Company, and there is no assurance that the Company will be successful in its strategy. 12 Table of Contents The Company’s products are currently subject to direct regulation by the FAA and other equivalent organizations.
The Company’s future success will depend on its ability to: • embrace rapidly changing technologies; • develop and introduce timely, high-quality, cost-effective new products and product enhancements to address the increasingly sophisticated needs of its customers; and • adapt the Company’s products to evolving industry standards and government regulations; and These factors may be costly to the Company, and there is no assurance that the Company will be successful in its strategy.
Similarly, the Company plans to further enhance in sales and distribution capabilities in the retrofit markets. It will be expensive and time consuming for the Company to hire a larger sales force for government and defense sales, and it may not be successful in finding appropriately qualified candidates that are able to implement the Company’s strategy.
It will be expensive and time consuming for the Company to hire a larger sales force for government and defense sales, and it may not be successful in finding appropriately qualified candidates that are able to implement the Company’s strategy.
The Company has indebtedness pursuant to loan agreements and lines of credit with PNC Bank, National Association, and may pursue additional sources of credit or borrowed money in the future under these existing credit facilities and/or enter into new financing arrangements. We may fail to pay these or additional future obligations, as and when required.
The Company has indebtedness pursuant to loan agreements and lines of credit with JP Morgan Chase Bank, N.A. and may pursue additional sources of credit or borrowed money in the future under these existing credit facilities and/or enter into new financing 27 Table of Contents arrangements. We may fail to pay these or additional future obligations, as and when required.
Sales growth will depend in part on market acceptance of and demand for the FPDS, FMS, ThrustSense® Autothrottle and any products we develop in the future.
Sales growth will depend in part on market acceptance of and demand for FPDS, FMS, ThrustSense® Autothrottle, military display generators and flight control computers and any other products we develop in the future.
The Company spends a large portion of its research and development efforts in developing and marketing the FPDS, FMS, ThrustSense® Autothrottle and complementary products.
The Company spends a large portion of its research and development efforts in developing and marketing the FPDS, FMS, ThrustSense® Autothrottle, military display generators and flight control computers and other complementary products.
However, we expect the current supply chain, labor availability and price issues, and their negative impacts on our business, to continue. In particular, we expect to experience prolonged delays for certain critical component parts and sub-systems.
The timing of the impacts of these supply chain risks and issues and our ability to mitigate them are uncertain and difficult to predict. However, we expect the current supply chain, labor availability and price issues, and their negative impacts on our business, to continue. In particular, we expect to experience prolonged delays for certain critical component parts and sub-systems.
If any such default occurs, we may be required to refinance all or part of our debt, sell strategic assets at unfavorable prices, incur additional indebtedness or issue common stock or other equity securities.
A breach of any of our covenants under our operative agreements could result in a default under such an agreement. If any such default occurs, we may be required to refinance all or part of our debt, sell strategic assets at unfavorable prices, incur additional indebtedness or issue common stock or other equity securities.
Our common stock has experienced and may continue to experience price fluctuations, which could cause you to lose a significant portion of your investment and interfere with our efforts to grow our business.
Our common stock has experienced, and may experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock. ​ ​ 26 Table of Contents Our common stock has experienced and may continue to experience significant price fluctuations, which could cause you to lose a significant portion of your investment and interfere with our efforts to grow our business.
The Company has limited experience in marketing and distributing its products internationally. The Company plans to derive increasing revenues from sales outside the U.S., particularly in Europe and Asia.
The Company has limited experience in marketing and distributing its products internationally, which may limit the Company’s ability to penetrate international markets and increase international sales. The Company plans to derive increasing revenues from sales outside the U.S., particularly in Europe and Asia.
Due to the inherent nature of our products and the industry in which we operate, a product safety failure or quality issue could seriously harm our business.
If any of these were to occur, our future results and performance could be adversely impacted. Due to the inherent nature of our products and the industry in which we operate, a product safety failure or quality issue could seriously harm our business.
Additionally, patent protection related litigation is time consuming and expensive. The Company has incurred, and may continue to incur, significant legal and other costs in defense of its intellectual property.
The Company has incurred, and may continue to incur, significant legal and other costs in defense of its intellectual property.
If we lose a significant or sole source supplier, or our key suppliers’ businesses fail, our ability to purchase components at all (in the case of sole source suppliers) or in sufficient quantities and on commercially reasonable terms would be seriously harmed as it may take a long time, and involve significant costs, to identify and qualify a sufficient alternative supplier.
If we lose a significant or sole source supplier, or our key suppliers’ businesses fail, our ability to purchase components at all (in the case of sole source suppliers) or in sufficient quantities and on commercially reasonable terms would be seriously harmed as it may take a long time, and involve significant costs, to identify and qualify a sufficient alternative supplier. 19 Table of Contents If the Company is unable to maintain relationships with key third-party suppliers, the development and distribution of its products could be delayed until equivalent components can be obtained and integrated into the products.
If the Company’s performance or the performance of the Company’s products does not meet its customers’ expectations, the Company’s reputation and its relationships could be damaged, which may have a material adverse impact on the Company’s business, financial condition and results of operations.
If the Company’s performance or the performance of the Company’s products does not meet its customers’ expectations, the Company’s reputation and its relationships could be damaged, which may have a material adverse impact on the Company’s business, financial condition and results of operations. ​ ​ 13 Table of Contents Growth of the Company’s customer base could be limited by delays or difficulties in completing development and introduction of planned products or product enhancements.
If our backlog fails to materialize, our business, financial condition and results of operations could be materially and adversely affected. The Company relies on third-party suppliers for components of its products, including several sole source suppliers, and any interruption in the supply of these components could hinder its ability to deliver products on a timely basis.
Lower earnings caused by cost overruns could furthermore have a negative impact on the Company’s business, financial condition and results of operations. The Company relies on third-party suppliers for components of its products, including several sole source suppliers, and any interruption in the supply of these components could hinder its ability to deliver products on a timely basis.
An increase in the dollar’s value compared to other currencies could render the Company’s products less competitive in international markets. In the future, the Company may be required to conduct sales in foreign country’s local currency, thus exposing it to fluctuations and volatility in exchange rates that could adversely affect its operating results.
In the future, the Company may be required to conduct sales in foreign countries local currencies, thus exposing it to fluctuations and volatility in exchange rates that could adversely affect its operating results.
Historically, the Company’s revenue and operating results have varied from quarter to quarter, and may continue to vary, which may adversely affect our business, financial condition and results of operations, and cause our stock price to decline. As such, our historical 14 Table of Contents results of operations should not be relied upon as accurate indications of future performance.
The Company’s revenue and operating results may vary significantly from quarter to quarter, which may cause its stock price to decline. Historically, the Company’s revenue and operating results have varied from quarter to quarter, and may continue to vary, which may adversely affect our business, financial condition and results of operations, and cause our stock price to decline.
Failure to remedy any material weakness in the Company’s internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict the Company’s future access to the capital markets. 24 Table of Contents ​ Risks Related to Our Common Stock, Capital Markets and Indebtedness Our common stock may be affected by limited trading volume and may fluctuate significantly.
Failure to remedy any material weakness in the Company’s internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict the Company’s future access to the capital markets.
The Company’s revenue is concentrated in a limited number of customers. During fiscal year 2024 the Company derived 36% of its revenue from a limited number of customers. The Company continues to expect a relatively small number of customers to account for a majority of its revenue for the foreseeable future.
The Company continues to expect a relatively small number of customers to account for a majority of its revenue for the foreseeable future.
The diversion of management’s attention from other business concerns and any delays or difficulties encountered in connection with the integration of the Honeywell assets could have an adverse effect on the Company’s business, financial condition and results of operations.
The diversion of management’s attention from other business concerns and any delays or difficulties encountered in connection with the integration of the Honeywell assets could have an adverse effect on the Company’s business, financial condition and results of operations. 15 Table of Contents Additionally, we may incur significant costs and risks in integrating Honeywell product lines, including the risk of additional demands on our resources, systems, procedures and controls.
Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition and results of operations. ​ ​ ​ 13 Table of Contents We may pursue strategic acquisitions, investments, strategic partnerships, product line acquisitions or other ventures, and our business could be materially harmed if we fail to successfully identify, evaluate, complete, and integrate such transactions.
We may pursue strategic acquisitions, investments, strategic partnerships, product line acquisitions or other ventures, and our business could be materially harmed if we fail to successfully identify, evaluate, complete, and integrate such transactions. Acquisitions involve inherent risks that may adversely affect our operating results and financial condition.
Acquisitions involve inherent risks that may adversely affect our operating results and financial condition. The Company may be unable to successfully integrate and realize the anticipated benefits of recent acquisitions.
The Company may be unable to successfully integrate and realize the anticipated benefits of recent acquisitions.
If our government contracts are not fully funded, or significant programs or contracts with the U.S. government are terminated, our business, financial condition and results of operations would be substantially adversely affected. Geopolitical factors and changes in policies and regulations could adversely affect our internal business.
As a result, our sales revenue in the retrofit market are vulnerable to both delays in funding and reductions in spending. If our government contracts are not fully funded, or significant programs or contracts with the U.S. government are terminated, our business, financial condition and results of operations would be substantially adversely affected.
If we are unable to retain integral members of our executive team, our competitive position in the market, relationships with potential partners, and our ability to execute our strategic business plan may be adversely affected. 19 Table of Contents The Company’s future success will depend in part on its ability to implement and improve its operational, administrative and financial systems and controls and to manage, train and expand its employee base.
Askarpour. If we are unable to retain integral members of our executive team, our competitive position in the market, relationships with potential partners, and our ability to execute our strategic business plan may be adversely affected.
Our products must continue to evolve as the industry evolves, and simultaneously continue to comply with government standards. Future generations of flat panel displays, air data systems, engine and fuel displays, flight management systems and computers and autothrottle technology which embody new technologies or new industry standards could render the Company’s products obsolete.
Future generations of flat panel displays, air data systems, engine and fuel displays, flight management systems and computers and autothrottle technology which embody new technologies or new industry standards could render the Company’s products obsolete. The market for aviation products is subject to rapid technological change, new product introductions, changes in customer preferences, and evolving industry standards and government regulations.
Similarly, due to the nature of the Company’s products, potential customers may not be willing to expend the resources and effort required to replace existing competitive technology and parts with the Company’s products. If the Company fails to modify or improve its products in response to evolving industry standards and government regulations, its products rapidly could become obsolete.
The Company cannot be assured that potential customers will accept its products or that existing customers will not abandon them. Similarly, due to the nature of the Company’s products, potential customers may not be willing to expend the resources and effort required to replace existing competitive technology and parts with the Company’s products.
Thus, any patents we currently have or may later acquire may not provide us a significant competitive advantage. If our products are not protected by patents, our technology may be rendered obsolete by competitors that may develop similar technology using our ideas and our technology, which will seriously harm our ability to generate sales revenue.
If our products are not protected by patents, our technology may be rendered obsolete by competitors that may develop similar technology using our ideas and our technology, which will seriously harm our ability to generate sales revenue. Additionally, patent protection related litigation is time consuming and expensive.
These factors and their impact are difficult to predict, and any one or more of them could have a material adverse effect on our competitive position, business, financial condition and results of operations.
These factors and their impact are difficult to predict, and any one or more of them could have a material adverse effect on our competitive position, business, financial condition and results of operations. 22 Table of Contents Risks Related to Intellectual Property, Privacy, Cybersecurity, and Technical Infrastructure Our intellectual property rights are important to our operations, and we could suffer loss if they infringe upon others’ rights or are infringed upon by others.
Given the Company’s limited customer concentration, if customers terminate their contracts with the Company without cause, prior to its expiration date, the Company’s business, financial condition and results of operations would likely be harmed.
Given the Company’s limited customer concentration, if customers terminate their contracts with the Company without cause, prior to its expiration date, the Company’s business, financial condition and results of operations would likely be harmed. 17 Table of Contents Changes in U.S. government priorities, spending levels and response to world events could adversely affect the Company’s ability to maintain or grow the revenue the Company receives through government contracting.
The value of our products relies substantially on our technical innovation in fields in which there are many patent filings. However, there is no guarantee that our patent applications will become issued patents. Moreover, even if approved, our patents may thereafter be successfully challenged by others or otherwise become invalidated for a variety of reasons.
However, there is no guarantee that our patent applications will become issued patents. Moreover, even if approved, our patents may thereafter be successfully challenged by others or otherwise become invalidated for a variety of reasons. Thus, any patents we currently have or may later acquire may not provide us a significant competitive advantage.
In the past few years, the government has not been able to complete its budget process before the end of its fiscal year, resulting in government shutdowns, as well as insufficient funding for government agencies. As a result, our sales revenue in the retrofit market are vulnerable to both delays in funding and reductions in spending.
In the past few years, the government has not been able to complete its budget process before the end of its fiscal year, resulting in government shutdowns, as well as insufficient funding for government agencies. For example, in October 2025, the U.S. federal government shut down for 43 days.
Our subcontractors and third-party suppliers may fail to produce high quality work, which may result in a failure of our products or services and a violation of applicable law. The suppliers the Company depends on may not be able to timely deliver a sufficient number of components on that are of a reliable quality on commercially reasonable terms.
The suppliers the Company depends on may not be able to timely deliver a sufficient number of components on that are of a reliable quality on commercially reasonable terms. We also depend on our key third-party suppliers to provide materials that comply with our specifications.
In seeking new customers, the Company may have difficulty in displacing the products of incumbent competitors who are more familiar with such markets and the needs of target customers. The Company cannot be assured that potential customers will accept its products or that existing customers will not abandon them.
Our growth strategy is dependent in part upon our successful entry into new markets. In seeking new customers, the Company may have difficulty in displacing the products of incumbent competitors who are more familiar with such markets and the needs of target customers.
Additionally, an open conflict or war across any region, including, but not limited to, the conflicts in Ukraine and Israel, could affect our ability to obtain raw materials. 18 Table of Contents The timing of the impacts of these supply chain risks and issues and our ability to mitigate them are uncertain and difficult to predict.
Our supply costs have increased due to the above factors. Continuing high inflation has exacerbated these increases and increased our operating costs. Additionally, an open conflict or war across any region, including, but not limited to, the conflicts in Ukraine and Israel, could affect our ability to obtain raw materials.
Delays and/or suspension of production could result in increased development costs or deflect resources from other projects.
Delays and/or suspension of production could result in increased development costs or deflect resources from other projects. Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition and results of operations.
To this end, as of September 30, 2024, the Company holds 47 U.S. patents and has 17 trademarks. In addition, the Company holds 111 international patents. The Company’s success and ability to compete will depend in part on its ability to obtain and maintain patent or other protection for its technology and products, both in the U.S. and internationally.
The Company’s success and ability to compete will depend in part on its ability to obtain and maintain patent or other protection for its technology and products, both in the U.S. and internationally. The value of our products relies substantially on our technical innovation in fields in which there are many patent filings.
The Company cannot provide assurance that current and planned personnel levels, systems, procedures and controls will be adequate to support its current and future customer base. In such a circumstance, the Company may not be able to fully capitalize on existing and potential market opportunities.
The Company’s future success will depend in part on its ability to implement and improve its operational, administrative and financial systems and controls and to manage, train and expand its employee base. The Company cannot provide assurance that current and planned personnel levels, systems, procedures and controls will be adequate to support its current and future customer base.
Changes in U.S. government priorities, spending levels and response to world events could adversely affect the Company’s ability to maintain or grow the revenue the Company receives through government contracting. A significant portion of the Company’s sales derives from defense contractors or U.S. government agencies in connection with government aircraft retrofit or OEM contracts.
A significant portion of the Company’s sales derives from defense contractors or U.S. government agencies in connection with government aircraft retrofit or OEM contracts. The military and defense market is significantly dependent upon government budget trends, particularly the U.S. Department of Defense budget.
Additionally we may incur significant costs and risks in integrating Honeywell product lines, including the risk of additional demands on our resources, systems, procedures and controls. We may also incur significant transaction costs in connection with future acquisitions, including acquisitions that we do not complete for any reason.
We may also incur significant transaction costs in connection with future acquisitions, including acquisitions that we do not complete for any reason. We are required to expense such transaction costs as incurred, which may have a material adverse impact on our financial results.
Removed
Growth of the Company’s customer base could be limited by delays or difficulties in completing development and introduction of planned products or product enhancements. Our growth strategy is dependent in part upon our successful entry into new markets.
Added
If the Company fails to modify or improve its products in response to evolving industry standards and government regulations, its products could become obsolete rapidly. Our products must continue to evolve as the industry evolves, and simultaneously continue to comply with government standards.
Removed
The market for aviation products is subject to rapid technological change, new product introductions, changes in customer preferences, and evolving industry standards and government regulations.
Added
As such, our historical results of operations should not be relied upon as accurate indications of future performance.
Removed
The Company’s products, as they relate to aircraft applications, must be approved by the FAA, EASA, or other equivalent organizations before they can be installed in an aircraft. To be certified, the Company must demonstrate that its products are accurate and able to maintain certain levels of repeatability over time.
Added
The F-16 program comprises a material portion of our revenue and reductions or delays in funding for this program and risks related to performance, schedule, cost and requirements of the program could adversely affect our performance.
Removed
Although the certification requirements of the FAA and EASA are substantially similar, no formal reciprocity exists between the two regulators. Accordingly, even though the Company’s products are approved by the FAA, the Company may need to obtain approval from EASA or other appropriate organizations to have them certified for installation outside the U.S.
Added
The F-16 program, which consists of multiple production and sustainment contracts, is our largest program and represented 36.7% of our total consolidated net sales in 2025. A decision by the U.S.
Removed
Significant delay in receiving certification for newly developed products or enhancements to the Company’s products, or the loss of certification for its existing products, could result in lost sales or delays in sales. The Company cannot ensure that it will receive regulatory approval on a timely basis or at all.
Added
Government, international partners, or FMS customer countries to cut spending on this program or reduce or delay planned orders would have an adverse impact on our business and results of operations.
Removed
We are required to expense such transaction costs as incurred, which may have a material adverse impact on our financial results. The Company’s revenue and operating results may vary significantly from quarter to quarter, which may cause its stock price to decline.
Added
Given the size and complexity of the F-16 program, we anticipate that there will be continual reviews related to aircraft performance, program and delivery schedule, cost and requirements as part of the DoD, Congressional and international countries’ oversight and budgeting processes.
Removed
Defense spending may be impacted by various factors, including the changing political environment and shifts in domestic and international markets and priorities, and ongoing and emerging conflicts.
Added
Challenges and risks associated with this program include supplier performance, contract approval and receiving 16 Table of Contents funding for contracts on a timely basis, the level of cost associated with life cycle operations, sustainment and potential contractual obligations, inflation-related cost pressures, the ability to improve affordability and potential competition from next-generation or other platforms.
Removed
Lower earnings caused by cost overruns could furthermore have a negative impact on the Company’s business, financial condition and results of operations. We currently operate without a substantial backlog. During periods of economic uncertainty, the rate of customer orders can quickly decrease, and a substantial backlog may help promote greater efficiency in production, facilitate business planning and improve revenue visibility.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeManagement reviews the Company’s IT, data security and other systems, processes, policies, procedures and controls at least annually to (a) identify, assess, monitor and mitigate cybersecurity risks; and (b) identify measures to protect and safeguard against cybersecurity threats and breaches of confidential information and data and IT infrastructure and its other assets or assets of its customers or other third parties in the Company’s possession or custody. 26 Table of Contents The Company has not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected it or are reasonably likely to materially affect it, including its operations, business strategy, results of operations, or financial condition.
Biggest changeManagement reviews the Company’s IT, data security and other systems, processes, policies, procedures and controls at least annually to (a) identify, assess, monitor and mitigate cybersecurity risks; and (b) identify measures to protect and safeguard against cybersecurity threats and breaches of confidential information and data and IT infrastructure and its other assets or assets of its customers or other third parties in the Company’s possession or custody.
The Company’s management supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by it; and alerts and reports produced by security tools deployed in the IT environment.
The Company’s management supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by it; and alerts and reports produced by security tools deployed in the IT environment. 28 Table of Contents
Added
The Company has not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected it or are reasonably likely to materially affect it, including its operations, business strategy, results of operations, or financial condition.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. In fiscal year 2001, the Company purchased 7.5 acres of land in the Eagleview Corporate Park in Exton, Pennsylvania. Shortly thereafter, the Company constructed a 45,000 square foot design, manufacturing and office facility on this site. Land development approval allows for expansion of up to 20,400 square feet.
Biggest changeItem 2. Properties. In the fiscal year ended September 30, 2001, the Company purchased 7.5 acres of land in the Eagleview Corporate Park in Exton, Pennsylvania. Shortly thereafter, the Company constructed a 45,000 square foot design, manufacturing and office facility on this site.
Removed
Such expansion would provide for a 65,400 square foot facility which the Company believes is adequate to meet the needs of the Company for the foreseeable future. We are currently making additional investments in our Exton facility to expand capacity. The Company leased two separate hangars to house the Company’s airplanes in New Castle County, Delaware under month-to-month leases.
Added
During the fiscal year ended September 30, 2025, the Company expanded the facility by approximately an additional 40,000 square feet. Subsequent to October 2025, we operate an 85,000 square foot design, manufacturing, and office facility in Exton, Pennsylvania, which we believe is adequate to meet the needs of the Company for the foreseeable future.
Removed
One hangar lease expired with the sale of the Pilatus PC-12 airplane during the quarter ended September 30, 2022. The annual lease expense for both hangars was approximately $52,000. On November 30, 2023, the Company sold its King Air aircraft and cancelled the remaining month-to-month hangar lease.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 27 ​ ​ ​ ​ PART II ​ ​ ​ ​ Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 27 Item 6. Selected Consolidated Financial Data 28 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29 Item 7A.
Biggest changeItem 4. Mine Safety Disclosures 29 ​ ​ ​ ​ PART II ​ ​ ​ ​ Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 29 Item 6. Selected Consolidated Financial Data 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31 Item 7A.
Quantitative and Qualitative Disclosures About Market Risk 39 Item 8. Financial Statements and Supplementary Data 40
Quantitative and Qualitative Disclosures About Market Risk 41 Item 8. Financial Statements and Supplementary Data 41

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeA substantially greater number of holders of the Company’s common stock are beneficial holders, whose shares of record are held by banks, brokers and other financial institutions in “street name.” Dividends The Company’s Board of Directors (the “Board”) previously declared special cash dividends in the amount of $0.65 per share in fiscal year 2020 and $0.50 per share in fiscal year 2021.
Biggest changeA substantially greater number of holders of the Company’s common stock are beneficial holders, whose shares of record are held by banks, brokers and other financial institutions in “street name.” Dividends The Company’s has not paid cash dividends since the fiscal year ended September 30, 2021.
The declaration and payment of any dividend in the future will be at the discretion of the Board and will depend on then-existing conditions, including our operating results, financial condition, business prospects and other factors the Board may deem relevant. ​ 27 Table of Contents ​
The declaration and payment of any dividend in the future will be at the discretion of the Board of Directors and will depend on then-existing conditions, including our operating results, financial condition, business prospects and other factors the Board of Directors may deem relevant.
The Company did not pay cash dividends in fiscal years 2022, 2023 and 2024. The Company intends to retain future earnings, if any, to finance the development and growth of its business and does not anticipate paying any cash dividends in the foreseeable future.
The Company intends to retain future earnings, if any, to finance the development and growth of its business and does not anticipate paying any cash dividends in the foreseeable future.
Holders of Common Stock As of December 13, 2024, there were approximately nine registered holders of the Company’s common stock.
Holders of Common Stock As of December 4 , 2025, there were approximately ten registered holders of the Company’s common stock.
Added
Securities Authorized for Issuance under Equity Compensation Plans ​ The following table sets forth additional information as of September 30, 2025 with respect to the shares of common stock that may be issued upon the exercise of options and other rights under our existing equity compensation plans and arrangements in effect as of September 30, 2025.
Added
The information includes the number of shares covered by, and the weighted average exercise price of, outstanding options and the number of shares remaining available for future grant, excluding the shares to be issued upon exercise of outstanding options. ​ ​ ​ 29 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ Securities Authorized for Issuance under Equity Compensation Plans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ ​ ​ ​ ​ securities ​ ​ ​ ​ ​ ​ ​ remaining ​ ​ Number of ​ ​ ​ ​ available for ​ ​ securities to be ​ Weighted- ​ future issuance ​ ​ issued upon ​ average ​ under equity ​ ​ exercise of ​ exercise price ​ compensation ​ ​ outstanding ​ of outstanding ​ plans (excluding ​ ​ options, ​ options, ​ securities ​ ​ warrants and ​ warrants and ​ reflected in ​ ​ rights (a) ​ rights (b) (1) ​ column(a) (c) (2) Equity compensation plans approved by security holders (3) ​ 945,769 ​ $ 8.07 ​ 1,375,682 Equity compensation plans not approved by security holders ​ - ​ ​ - ​ - Total ​ 945,769 ​ $ 8.07 ​ 1,375,682 ​ (1) Consists of the weighted average exercise price of outstanding options (“NQSOs”) and time vested stock options with a market based exercise price condition (“ MSOs”) as of September 30, 2025.
Added
(2) Consists entirely of shares of common stock that remain available for future issuance under 2019 Stock-Based Incentive Compensation Plan as of September 30, 2025. (3) Consists of 361,613 NQSO's, 72,062 MSO's, 311,094 time-vested Restricted Stock Units (“RSUs”) and 201,000 market-based restricted stock units (“MSUs”) outstanding as of September 30, 2025 under the 2019 Stock-Based Incentive Compensation Plan.
Added
(3) RSUs and MSU’s were excluded when determining the weighed-average exercise price of outstanding options, warrants and rights. Issuer Purchases of Equity Securities We did not repurchase any of our equity securities during fiscal year 2025.
Added
Recent Sales of Unregistered Securities We did not issue any equity securities during fiscal year 2025 that were not registered under the Securities Act and that have not otherwise been described in a Quarterly Report on Form 10-Q or a Periodic Report on Form 8-K. ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

48 edited+33 added−21 removed57 unchanged
Biggest changeFor example, in the 2020 fiscal year, certain of the Company’s customers temporarily suspended product deliveries as a result of the COVID-19 pandemic, and while these deliveries subsequently resumed, there is a possibility that the COVID-19 or similar pandemics will result in other suspensions, delays or order cancellations by the Company’s customers or suppliers. 30 Table of Contents Results of Operations The following table sets forth statements of operations data expressed as a percentage of total Net sales for the fiscal years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months Ending September 30, ​ 2024 2023 2022 Net sales: ​ ​ ​ ​ ​ ​ ​ Product ​ 51.4 % 64.9 % 80.7 % Services ​ 48.6 % 35.1 % 19.3 % Total net sales ​ 100.0 % 100.0 % 100.0 % ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales: ​ ​ ​ ​ Product ​ 22.4 % 27.9 % 33.9 % Services ​ 22.6 % 10.9 % 6.0 % Total cost of sales ​ 45.0 % 38.7 % 39.9 % ​ ​ ​ ​ ​ ​ ​ ​ Gross profit ​ 55.0 % 61.3 % 60.1 % ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ ​ Research and development ​ 8.8 % 9.0 % 9.8 % Selling, general and administrative ​ 25.6 % 31.1 % 24.3 % Total operating expenses ​ 34.4 % 40.1 % 34.1 % ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ 20.6 % 21.2 % 26.0 % ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ (2.0) % (1.1) % 0.0 % Interest income ​ 0.3 % 1.5 % 0.2 % Other income ​ — % 0.4 % 0.2 % ​ ​ ​ ​ ​ ​ ​ ​ Income before income taxes ​ 18.9 % 22.0 % 26.4 % ​ ​ ​ ​ ​ ​ ​ ​ Income tax expense ​ 3.9 % 4.6 % 6.5 % ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ 14.9 % 17.4 % 19.9 % ​ ​ 31 Table of Contents Fiscal Year Ended September 30, 2024 Compared to Fiscal Year Ended September 30, 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.
Biggest changeThus far, the impact to Company has been nominal. 32 Table of Contents Results of Operations The following table sets forth statements of operations data expressed as a percentage of total Net sales for the fiscal years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months Ending September 30, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 Net sales: ​ ​ ​ ​ ​ ​ ​ Product ​ 64.2 % 51.4 % 64.9 % Services ​ 35.8 % 48.6 % 35.1 % Total net sales ​ 100.0 % 100.0 % 100.0 % ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales: ​ ​ ​ ​ ​ Product ​ 32.6 % 22.4 % 27.9 % Services ​ 19.3 % 22.6 % 10.9 % Total cost of sales ​ 51.9 % 45.0 % 38.7 % ​ ​ ​ ​ ​ ​ ​ ​ Gross profit ​ 48.1 % 55.0 % 61.3 % ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ ​ ​ Research and development ​ 4.7 % 8.8 % 9.0 % Selling, general and administrative ​ 19.4 % 25.6 % 31.1 % Total operating expenses ​ 24.1 % 34.4 % 40.1 % ​ ​ ​ ​ ​ ​ ​ ​ Operating income ​ 24.0 % 20.6 % 21.2 % ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ (2.0) % (2.0) % (1.1) % Interest income ​ 0.0 % 0.3 % 1.5 % Other income ​ 1.9 % — % 0.4 % ​ ​ ​ ​ ​ ​ ​ ​ Income before income taxes ​ 23.8 % 18.9 % 22.0 % ​ ​ ​ ​ ​ ​ ​ ​ Income tax expense ​ 5.1 % 9.2 % 4.6 % ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ 18.7 % 9.7 % 17.4 % ​ ​ 33 Table of Contents Fiscal Year Ended September 30, 2025 Compared to Fiscal Year Ended September 30, 2024 ​ Historically, the Company presented Customer service and Engineering and development contracts Net Sales and Cost of sales separately on the Consolidated Statements of Operations.
In June 2023, the Company entered into 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.
In June 2023, the Company entered into an agreement with Honeywell (“The June 2023 Honeywell Agreement”) 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.
Contract costs include material, components and third-party avionics purchased from suppliers, direct labor and overhead costs. 38 Table of Contents Acquisitions and Investments, and Goodwill and Other Indefinite-Lived Intangible Assets 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.
Contract costs include material, components and third-party avionics purchased from suppliers, direct labor and overhead costs. 40 Table of Contents Acquisitions and Investments, and Goodwill and Other Indefinite-Lived Intangible Assets 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.
If sufficient funds are not available, the Company may not be able to introduce new products or compete effectively. 36 Table of Contents Inflation The Company does not believe inflation had a material effect on its financial position or results of operations during the past three years; however, it cannot predict the future effects of inflation, if any.
If sufficient funds are not available, the Company may not be able to introduce new products or compete effectively. 38 Table of Contents Inflation The Company does not believe inflation had a material effect on its financial position or results of operations during the past three years; however, it cannot predict the future effects of inflation, if any.
Investing Activities Cash used in investing activities was $16.8 million for fiscal year 2024 and was primarily due to the $14.2 million acquisition of various generations of military display generators and flight control computers in September 2024 and the $4.2 million acquisitions of certain additional assets related to the Company’s communication and navigation product lines in July of 2024.
Cash used in investing activities was $16.8 million for the fiscal year ended September 30, 2024 and was primarily due to the $14.2 million acquisition of various generations of military display generators and flight control computers in September 2024 and the $4.2 million acquisitions of certain additional assets related to the Company’s communication and navigation product lines in July of 2024.
On September 27, 2024, the Company entered into the September 2024 Honeywell Agreement with 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.
On September 27, 2024, the Company entered into a further agreement with Honeywell (the “September 2024 Honeywell Agreement”), 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 overhead portion of Cost of sales primarily comprises salaries and benefits, building occupancy costs, supplies and outside service costs related to production, purchasing, material control and quality control. 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.
The overhead portion of Cost of sales are primarily comprised of salaries and benefits, building occupancy costs, supplies and outside service costs related to production, purchasing, material control and quality control. 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.
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.
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, 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 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 Revolving Line of Credit.
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 provided for how PNC will make advances to the Company under 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.
The interest rate applicable to loans outstanding under the Revolving Line of Credit was a rate per annum equal to the sum of (A) Daily SOFR (as defined in the 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.
Summary 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. IS&S has experienced increases in expenditures since its inception and anticipates that increases in expenditures will continue in the foreseeable future.
Summary 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. IA has experienced increases in expenditures since its inception and anticipates that increases in expenditures will continue in the foreseeable future.
See Part II, Item 8, “Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements,” Note 1, “Significant Accounting and Reporting Policies,” for additional information about our significant accounting and reporting policies that require us to make certain judgments and estimates in reporting our operating results and our assets and liabilities.
See Part II, Item 8, “Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements,” Note 3, “ Significant Accounting and Reporting Policies ,” for additional information about our significant accounting and reporting policies that require us to make certain judgments and estimates in reporting our operating results and our assets and liabilities.
Financing Activities Net cash provided by financing activities was $8.5 million for the fiscal year 2024 and consisted of $43.8 million in payments against the Company’s line of credit offset by $52.3 million in additional borrowings used to fund the Company’s fiscal year 2024 acquisitions.
Net cash provided by financing activities was $8.5 million for the fiscal year ended September 30, 2024 and consisted of $43.8 million in payments against the Company’s line of credit offset by $52.3 million in additional borrowings used to fund the Company’s fiscal year ended September 30, 2024 acquisitions.
Factors that can impact general economic conditions and the level of spending by customers include, but are not limited to, general levels of consumer spending, increases in fuel and energy costs, conditions in the real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence, inflation, public health crises and pandemics, including the COVID-19 pandemic, and other macroeconomic factors that affect spending behavior.
Factors that can impact general economic conditions and the level of spending by customers include, but are not limited to, general levels of consumer spending, increases in fuel and energy costs, conditions in the real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence, inflation, public health crises and pandemics and other macroeconomic factors that affect spending behavior.
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. The Company did not pay cash dividends in fiscal years 2023 or 2024.
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. 37 Table of Contents The Company did not pay cash dividends in fiscal years 2023, 2024 or 2025.
In July 2024, the Company entered into the July 2024 Honeywell Asset Acquisition, an exclusive license agreement and acquired additional key assets for certain communication and navigation product lines from Honeywell. This transaction complements the previous Honeywell license and asset acquisition completed in June 2023. Total consideration was $4.2 million in cash.
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 complemented the previous Honeywell license and asset acquisition completed in June 2023. Total consideration was $4.2 million in cash.
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. The Company sells to both the OEM and the retrofit markets.
This approach, combined with the Company’s deep industry experience across OEMs and platforms 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. The Company sells to both the OEM and the retrofit markets.
The decrease in interest income was primarily the result of the decrease in the average cash balance in fiscal year 2024 and a general decrease in interest rates as compared to fiscal year 2023. Other income. Other income was $0.2 million in fiscal year 2023. The Company did not have any other income for fiscal year 2024. Income taxes.
The decrease in interest income was primarily the result of the decrease in the average cash balance in fiscal year 2024 and a general decrease in interest rates as compared to fiscal year 2023. ​ Other income. The Company did not have any other income for fiscal year 2024.
For the fiscal year ended September 30, 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 fiscal years ended September 30, 2023, and 2022. See Footnote 3.
For the fiscal year ended September 30, 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 fiscal year ended September 30, 2023.
Net income. As a result of the factors described above, the Company’s net income in fiscal year 2024 was $7.0 million compared to net income of $6.0 million in fiscal year 2023.
Net income. As a result of the factors described above, the Company’s net income in fiscal year 2025 was $15.6 million compared to net income of $7.0 million in fiscal year 2024.
In addition, the Company incurred amortization expense of $1,191,361 related to the customer relationships intangible asset resulting from the combined acquisitions. These increases were partially offset by a $162,000 gain from the sale of the Company’s King Air aircraft.
In addition, the Company incurred amortization expense of $1.2 million related to the customer relationships intangible asset resulting from the combined acquisitions. These increases were partially offset by a $0.2 million gain from the sale of the Company’s King Air aircraft.
In addition, the Company spent $0.7 million for the purchases of property and equipment, partially offset by proceeds of $2.2 million from the sale of the Company’s King Air aircraft. The Company plans to continue investing in capital equipment to support engineering development efforts and operations. Cash used in investing activities was $36.2 million for fiscal year 2023.
In addition, the Company spent $0.7 million for the purchases of property and equipment, partially offset by proceeds of $2.2 million from the sale of the Company’s King Air aircraft. The Company plans to continue investing in capital equipment to support engineering development efforts and operations.
On a fully diluted basis, net income per share was $0.40 in fiscal year 2024, compared to a net income of $0.35 per share in fiscal year 2023. ​ ​ ​ 32 Table of Contents Fiscal Year Ended September 30, 2023 Compared to Fiscal Year Ended September 30, 2022 ​ Net sales .
On a fully diluted basis, net income per share was $0.88 in fiscal year 2025, compared to a net income of $0.40 per share in fiscal year 2024. 34 Table of Contents Fiscal Year Ended September 30, 2024 Compared to Fiscal Year Ended September 30, 2023 ​ Net sales .
Stifel Sales Agreement 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.
Loan Agreement, for additional disclosures related the 2025 Credit Agreement. ​ 36 Table of Contents Stifel Sales Agreement 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.
Income tax expense was $1.9. million in fiscal year 2024 as compared to income tax expense of $1.6 million in fiscal year 2023. The effective tax rate in fiscal year 2024 was 20.9% as compared to 21.1% in fiscal year 2023. The increase in income tax expense was primarily due to an increase in earnings in fiscal year 2024.
Income tax expense was $4.3 million in fiscal year 2025 as compared to income tax expense of $1.9 million in fiscal year 2024. The effective tax rate in fiscal year 2025 was 21.7% as compared to 20.9% in fiscal year 2024. The increase in income tax expense was primarily due to an increase in earnings in fiscal year 2025.
Changes is certain other working capital accounts drove the remainder of the increase for fiscal year 2024. The Company generated $2.1 million of cash in operating activities during fiscal year 2023, as compared to cash generated of $6.1 million during fiscal year 2022.
Changes in certain other working capital accounts drove the remainder of the increase for fiscal year 2025. The Company generated $5.8 million of cash from operating activities during fiscal year 2024, as compared to cash generated of $2.1 million during fiscal year 2023.
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 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 million to $30 million and extend the maturity date until December 19, 2028.
Summary of Significant Accounting Policies, (“Reclassifications ”) for additional information. ​ Net sales . Net sales in fiscal year 2024 increased $12.4 million, or 36.0%, to $47.2 million from $34.8 million in fiscal year 2023. The increase in Net sales was driven by a 7% increase or $1.7 million in product sales.
Net sales in fiscal year 2024 increased $12.4 million, or 36.0%, to $47.2 million from $34.8 million in fiscal year 2023. The increase in Net sales was driven by a 7% increase or $1.7 million in product sales.
On a fully diluted basis, net income per share was $0.35 for fiscal year 2023, compared to a net income of $0.32 per share for fiscal year 2022. 33 Table of Contents Liquidity and Capital Resources Sources of Liquidity The following table highlights key financial measurements of the Company: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ ​ As of ​ ​ ​ September 30, ​ ​ September 30, ​ 2024 2023 Cash and cash equivalents ​ $ 538,977 ​ $ 3,097,193 Accounts receivable ​ $ 12,612,482 ​ $ 9,743,714 Current assets ​ $ 34,685,698 ​ $ 34,673,703 Current liabilities ​ $ 7,265,254 ​ $ 6,398,959 Contract liability ​ $ 340,481 ​ $ 143,359 Other non-current liabilities ​ $ 28,478,352 ​ $ 17,921,508 Quick ratio (1) ​ 1.81 ​ 2.01 Current ratio (2) ​ 4.77 ​ 5.42 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months Ended September 30, ​ ​ 2024 2023 2022 Cash flow activities: ​ ​ ​ Net cash provided by operating activities ​ $ 5,796,222 ​ $ 2,096,174 ​ $ 6,094,440 Net cash (used in) provided by investing activities ​ (16,881,440) ​ (36,158,373) ​ 2,589,346 Net cash provided by financing activities ​ 8,527,002 ​ 19,908,846 ​ 301,154 (1) Calculated as: the sum of cash and cash equivalents plus accounts receivable, net, divided by current liabilities (2) Calculated as: current assets divided by current liabilities The Company’s principal source of liquidity has been cash flows from current year operations and cash accumulated from prior years’ operations, supplemented with our revolving credit facility.
On a fully diluted basis, net income per share was $0.40 in fiscal year 2024, compared to a net income of $0.35 per share in fiscal year 2023. ​ ​ 35 Table of Contents Liquidity and Capital Resources Sources of Liquidity The following table highlights key financial measurements of the Company: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ ​ As of ​ ​ ​ September 30, ​ ​ September 30, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Cash and cash equivalents ​ $ 2,693,595 ​ $ 538,977 Accounts receivable ​ $ 12,956,476 ​ $ 12,612,482 Current assets ​ $ 50,727,300 ​ $ 34,685,698 Current liabilities ​ $ 16,661,109 ​ $ 7,265,254 Contract liability ​ $ 2,481,929 ​ $ 340,481 Other non-current liabilities ​ $ 22,096,502 ​ $ 28,478,352 Quick ratio (1) ​ 0.94 ​ 1.81 Current ratio (2) ​ 3.04 ​ 4.77 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months Ended September 30, ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 Cash flow activities: ​ ​ ​ ​ ​ ​ Net cash provided by operating activities ​ $ 13,303,318 ​ $ 5,796,222 ​ $ 2,096,174 Net cash (used in) investing activities ​ (6,512,106) ​ (16,881,440) ​ (36,158,373) Net cash (used in) provided by financing activities ​ (4,636,594) ​ 8,527,002 ​ 19,908,846 (1) Calculated as: the sum of cash and cash equivalents plus accounts receivable, net, divided by current liabilities (2) Calculated as: current assets divided by current liabilities The Company’s principal source of liquidity has been cash flows from current year operations and cash accumulated from prior years’ operations, supplemented with our revolving credit facility.
We are an equal opportunity employer and a Vietnam Era Veterans’ Readjustment Assistance Act federal contractor. All qualified applicants receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability status, protected veteran status or any other characteristic protected by law. The nature of our business also supports long-term sustainability.
All qualified applicants receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability status, protected veteran status or any other characteristic protected by law. The nature of the Company’s business also supports long-term sustainability.
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. ​ ​ ​ ​ ​ ​ 37 Table of Contents 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.
To achieve this core principle, the Company applies the following five steps: 39 Table of Contents 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.
R&D expenses were $4.1 million in fiscal year 2024 and $3.1 million in fiscal year 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 slightly to 8.8% of Net sales for fiscal year 2024 compared to 9.0% for fiscal year 2023.
R&D expenses were $4.1 million in fiscal year 2024 and $3.1 million in fiscal year 2023. The increase in R&D expense was due to higher salaries and benefits due to higher headcount.
Cash is used principally to finance inventory, accounts receivable, contract assets, payroll, debt service and acquisitions, as well as the Company’s known contractual and other commitments (including those described in Note 19, “Leases”).
Cash is used principally to finance inventory, accounts receivable, contract assets, payroll, debt service and acquisitions, as well as the Company’s known contractual and other commitments (including those described in footnote 19, “ Lease Recognition ” to the financial statements contained in this Annual Report on Form 10-K.
The Company currently derives the majority of its revenues from the sale and service of this equipment and related EDC services. 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.
The Company currently derives the majority of its revenues from the sale and service of this equipment and related EDC services. Most of the Company’s sales, operating results and identifiable assets are generated in the United States.
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”).
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 provided for a senior secured revolving line of credit in an aggregate principal amount of $35 million, with an expiration date of December 19, 2028 (the “Revolving Line of Credit”).
Selling, general, and administrative. SG&A expenses increased $1.3 million or 11.9%, to $12.1 million from $10.8 million in fiscal year 2023.
As a percentage of Net sales, R&D expense decreased slightly to 8.8% of Net sales for fiscal year 2024 compared to 9.0% for fiscal year 2023. ​ Selling, general, and administrative. SG&A expenses increased $1.3 million or 11.9%, to $12.1 million from $10.8 million in fiscal year 2023.
The declaration and payment of any dividend in the future will be at the discretion of the Company’s Board of Directors and will depend on then-existing conditions, including our operating results, financial condition, business prospects and other factors the Board may deem relevant. 35 Table of Contents Operating Activities The Company generated $5.8 million of cash from operating activities during fiscal year 2024, as compared to cash generated of $2.1 million during fiscal year 2023.
The declaration and payment of any dividend in the future will be at the discretion of the Company’s Board of Directors and will depend on then-existing conditions, including our operating results, financial condition, business prospects and other factors the Board may deem relevant.
Other income. Other income was $0.2 million in fiscal year 2023, an increase of $0.1 million from fiscal year 2022. Income taxes. Income tax expense was $1.6 million in fiscal year 2023 as compared to income tax expense of $1.8 million in fiscal year 2022.
Other income was $0.2 million in fiscal year 2023. ​ Income taxes. Income tax expense was $1.9. million in fiscal year 2024 as compared to income tax expense of $1.6 million in fiscal year 2023. The effective tax rate in fiscal year 2024 was 20.9% as compared to 21.1% in fiscal year 2023.
As a result of the factors described above, the Company’s net income for fiscal year 2023 was $6.0 million compared to net income of $5.5 million for fiscal year 2022.
The increase in income tax expense was primarily due to an increase in earnings in fiscal year 2024. Net income. As a result of the factors described above, the Company’s net income in fiscal year 2024 was $7.0 million compared to net income of $6.0 million in fiscal year 2023.
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. ​ 34 Table of Contents On September 30, 2024, in connection with the July 2024 Honeywell Asset Acquisition and the September 2024 Honeywell Agreement, the Company and one of its subsidiaries, Innovative Solutions and Support, LLC, entered into an Amendment to Loan Documents (the “2024 Loan Amendment”) with PNC, which amends certain terms of the Loan Agreement to increase the line of credit with PNC.
The proceeds of the Restated Line of Credit Note was 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 million, with a maturity date of June 28, 2028.
The Company also plans to enhance its focus on the environmental impact of its operations. Critical Accounting Policies and Estimates We prepare our consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”).
Critical Accounting Policies and Estimates We prepare our consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”).
The cash generated by operating activities for the year ended September 30, 2023 was primarily generated by net income of $6.0 million, increase in non-cash compensation expenses for stock options and stock awards of $0.8 million and $0.7 million, respectively, and depreciation and amortization expense of $0.7 million, partially offset by increases to accounts receivable of $5.4 million and inventories of $0.8 million.
The cash generated by operating activities for the year ended September 30, 2025 was primarily generated by net income of $15.6 million, including $1.5 million of net ERTC funds received in fiscal year 2025, non-cash compensation expenses for traditional and market-based stock options and traditional and market-based stock awards of $0.3 million and $2.0 million, respectively, and depreciation and amortization expense of $3.8 million.
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.
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, has positioned the company to deliver cost-effective solutions for the general aviation, commercial air transport, the DoD/governmental and foreign military markets.
The declaration and payment of any dividend in the future will be at the discretion of the Company’s Board of Directors. Debt Facility 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.
During the fiscal years ended September 30, 2024 and September 30,2025, we did not sell any shares of common stock under the ATM Sales Agreement. Prior Debt Facility 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.
Historically, a majority of the Company’s sales have come from the retrofit market, in which the Company, by making upgrades to improve the functionality and safety of existing machinery, facilitates the re-use and recycling of aircraft and equipment that might otherwise be scrapped as obsolete. The Company’s GPS receivers also facilitate reduced carbon footprint navigation.
Historically, a majority of the Company’s sales have been generated from the retrofit market, in which the Company upgrades existing aircraft and equipment to improve functionality, safety, and regulatory compliance.
During the fiscal year ended September 30, 2024, we did not sell any shares of common stock under the ATM Sales Agreement. 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.
On July 18th, 2025, the outstanding balance drawn on the A&R Revolving Line of Credit of $25,342,529 was fully paid. 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.
Cost of sales was $13.5 million, or 38.7% of Net sales, in fiscal year 2023 compared to $11.1 million, or 39.9% of Net sales, in fiscal year 2022. The increase in Cost of sales was primarily the result of an increase in customer service sales volume.
Cost of sales was $43.8 million, or 51.9 % of Net sales, for fiscal year 2025 compared to $21.2 million, or 45.0 % of Net sales, for fiscal year 2024. The increase in Cost of sales was primarily the result of a significant increase in overall sales volume.
Net sales in fiscal year 2023 increased $7.1 million, or 25.5%, to $34.8 million from $27.7 million in fiscal year 2022. Product sales in fiscal year 2023 increased $0.2 million compared to fiscal year 2022. Services sales in fiscal year 2023 increased $6.9 million, or 128.8%, compared to fiscal year 2022.
Services sales for fiscal year 2025 increased $7.3 million, or 31.8%, compared to Services sales for fiscal year 2024 of $22.9 million.
Removed
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.
Added
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.
Removed
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.
Added
Revenue, and costs from this production are attributed to and reported by the Company; however, the Company relies on Honeywell 31 Table of Contents for access to the operational and financial data needed to prepare its financial statements.
Removed
The Company believes that each of the June 2023 Honeywell Agreement, the July 2024 Honeywell Asset Acquisition and the September 2024 Honeywell Agreement will 29 Table of Contents 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.
Added
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.
Removed
EDC sales increased $0.7 million, or 146.8% compared to fiscal year 2022, reflecting increased EDC business. Customer service sales increased $6.2 million, or 127.2% from fiscal year 2022. The increase in customer service sales primarily reflects customer service sales of $5.8 million due to the Honeywell Agreement.
Added
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.
Removed
The increase in product sales primarily reflects increased shipments of displays to general aviation customers and commercial transport customers of $0.7 million and $0.6 million, respectively. Military product sales decreased $1.1 million due to reduced business volume. Cost of sales.
Added
We anticipate this will 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.
Removed
The Company’s overall gross margin in fiscal year 2023 was 61.3% compared to 60.1% in fiscal year 2022. The fiscal year 2023 gross margin percentage increase was primarily attributable to increased customer service sales that typically generate higher gross margins than manufactured products. Research and development .
Added
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. The Company remains confident in the long-term benefits of the Honeywell acquisitions.
Removed
R&D expenses were $3.1 million in fiscal year 2023 and $2.7 million in fiscal year 2022. R&D expense decreased to 9.0% of Net sales in fiscal year 2023 compared to 9.8% of net sales in fiscal year 2022.
Added
For example, in the fiscal year ended September 30, 2025, changes in U.S. administrative tariff policy, have led to increases in tariffs for imported goods.
Removed
The increase in R&D expense resulted primarily from increased personnel and related benefits, offset by the increase of EDC contract activity whose costs are reflected in cost of sales rather than R&D expense. Selling, general , and administrative . SG&A expenses increased $4.0 million or 60.2%, to $10.8 million from $6.8 million in fiscal year 2022.
Added
Consequently, Services revenues and cost of sales primarily comprise Customer Service, EDC and Royalties. See Footnote 3. Summary of Significant Accounting Policies, (“Reclassifications ”) for additional information. ​ Net sales . Net sales in fiscal year 2025 increased $37.1 million, or 78.6%, to $84.3 million from $47.2 million in fiscal year 2024.
Removed
SG&A expenses in fiscal year 2022 were reduced by inclusion of a gain of $1.2 million from the sale of the PC-12 aircraft.
Added
Net sales of $84.3 million for fiscal year 2025 comprised $53.3 million in organic Net sales and $31.0 million in Net sales related to the September 2024 Honeywell Agreement.
Removed
The increase in SG&A expense in fiscal year 2023 was primarily the result of increased stock-based compensation expense and legal fees, professional fees, audit fees and amortization expense primarily related to the June 2023 Honeywell Agreement and increased board of director fees. Interest income .
Added
The increase in Net sales was driven primarily by a $29.8 million, or 122.7 %, increase in Product sales derived from the September 2024 Honeywell Agreement, an increase in commercial air transport sales of $10.5 million, partially offset by a decrease of $3.7 million in sales in business aviation.
Removed
Interest income of $0.5 million in fiscal year 2023 increased by $0.4 million as compared to interest income in fiscal year 2022 of $0.1 million. The increase in interest income was primarily the result of the increase in the average cash balance in fiscal year 2023 and a general increase in interest rates as compared to fiscal year 2022.
Added
The increase in Services sales primarily reflects increases in engineering development services of $3.4 million and an increase in customer service sales from the product lines acquired from Honeywell of $1.4 million, partially offset by a decrease in legacy customer service revenue of $0.6 million. Cost of sales .
Removed
The effective tax rate in fiscal year 2023 was 21.1% as compared to 24.8% in fiscal year 2022. The higher tax and effective tax rate in fiscal year 2022 as compared to fiscal year 2023 primarily reflects higher state tax due to tax on the gain from the sale of the PC-12 aircraft. Net income.
Added
The Company’s overall gross margin for fiscal year 2025 was 48.1 % compared to 55.0% for fiscal year 2024.
Removed
Refer to Note 20, “Loan Agreement” for further details.
Added
The decrease in overall gross margin percentage for fiscal year 2025 compared to fiscal year 2024, was primarily the result of unfavorable 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.
Removed
Concurrently with the 2024 Loan Amendment, the Company entered into (i) an Amended and Restated Revolving Line of Credit Note in favor of PNC (the “A&R Revolving Line of Credit Note”), and (ii) an Amended and Restated Line of Credit and Investment Sweep Rider with PNC (the “A&R Rider”).
Added
The factors that have affected and will continue to affect the Company’s gross margin include depreciation resulting from recent product line acquisitions and the increased proportion of military sales in the Company’s sales mix. Research and development . R&D expense decreased $0.1 million, or 3.5 %, to $4.0 million for fiscal year 2025 from $4.1 million for fiscal year 2024.
Removed
On June 30, 2023, the Company entered into the Honeywell Agreement with Honeywell for cash consideration of $35.9 million whereby Honeywell sold the Company 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.
Added
As a percentage of net sales, R&D expenses decreased to 4.7% of net sales for fiscal year 2025 from 8.8% of net sales for fiscal year, 2024. The decrease in R&D expenses as a percentage of revenues in the quarter was primarily the result of additional revenues for fiscal year 2025 compared to the same period last year.
Removed
The 2023 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.
Added
In fiscal 2025 $2.6 million of R&D expense was recharacterized as Cost of sales related to the EDC sales as compared to $1.3 million in fiscal year 2024, which was offset by $1.2 million in additional engineering staffing to support the Company’s development programs. ​ Selling, general, and administrative.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAssuming that the balances during fiscal year 2024 were to remain constant and that the Company did not act to alter the existing interest rate sensitivity, a hypothetical 1% increase in variable interest rates would not have a material impact on our results of operations, financial position or cash flows. ​ ​ ​ 39 Table of Contents ​
Biggest changeAssuming that the balances during the fiscal year ended September 30, 2025 were to remain constant and that the Company did not act to alter the existing interest rate sensitivity, a hypothetical +/-1% change in interest rates would not have a material impact on our results of operations, financial position or cash flows.
Interest rate risk associated with our variable rate debt is the potential increase in interest expense from an increase in interest rates. Based on our aggregate outstanding variable rate debt balance of $28.0 million as of September 30, 2024, a hypothetical 1% in variable interest rates would have affected interest expense by approximately $0.3 million.
Interest rate risk associated with our variable rate debt is the potential increase in interest expense from an increase in interest rates. Based on our aggregate outstanding variable rate debt balance of $24.3 million as of September 30, 2025, a hypothetical change +/- 1% change in variable interest rates would have affected interest expense by approximately $0.3 million.

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