Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Jun. 30, 2023 | Jul. 31, 2023 | |
Cover | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jun. 30, 2023 | |
Document Transition Report | false | |
Entity File Number | 000-31157 | |
Entity Registrant Name | INNOVATIVE SOLUTIONS AND SUPPORT, INC. | |
Entity Incorporation, State or Country Code | PA | |
Entity Tax Identification Number | 23-2507402 | |
Entity Address, Address Line One | 720 Pennsylvania Drive | |
Entity Address, City or Town | Exton | |
Entity Address, State or Province | PA | |
Entity Address, Postal Zip Code | 19341 | |
City Area Code | 610 | |
Local Phone Number | 646-9800 | |
Title of 12(b) Security | Common Stock, par value $0.001 per share | |
Trading Symbol | ISSC | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 17,446,990 | |
Entity Central Index Key | 0000836690 | |
Current Fiscal Year End Date | --09-30 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2023 | Sep. 30, 2022 |
Current assets | ||
Cash and cash equivalents | $ 2,572,233 | $ 17,250,546 |
Accounts receivables | 5,944,015 | 4,297,457 |
Contract assets | 252,162 | 162,742 |
Inventories | 5,742,613 | 5,349,104 |
Prepaid inventory | 10,036,160 | |
Prepaid expenses and other current assets | 1,390,034 | 1,142,470 |
Total current assets | 25,937,217 | 28,202,319 |
Goodwill | 4,608,041 | |
Intangible assets, net | 20,914,885 | 60,348 |
Property and equipment, net | 10,046,444 | 6,292,189 |
Deferred income taxes | 643,708 | 46,487 |
Other assets | 198,333 | 103,980 |
Total assets | 62,348,628 | 34,705,323 |
Current liabilities | ||
Current portion long-term debt | 2,000,000 | |
Accounts payable | 767,096 | 708,845 |
Accrued expenses | 5,275,041 | 2,972,275 |
Contract liability | 102,953 | 259,183 |
Total current liabilities | 8,145,090 | 3,940,303 |
Long-term debt | 18,000,000 | |
Other liabilities | 420,949 | 15,065 |
Total liabilities | 26,566,039 | 3,955,368 |
Commitments and contingencies | ||
Shareholders' equity | ||
Preferred stock, 10,000,000 shares authorized, $.001 par value, of which 200,000 shares are authorized as Class A Convertible stock. No shares issued and outstanding at June 30, 2023 and September 30, 2022 | ||
Common stock, $.001 par value: 75,000,000 shares authorized, 19,535,219 and 19,412,664 issued at June 30, 2023 and September 30, 2022 | 19,533 | 19,413 |
Additional paid-in capital | 54,097,502 | 52,458,121 |
Retained Earnings (accumulated deficit) | 3,034,091 | (359,042) |
Treasury stock, at cost, 2,096,451 shares at June 30, 2023 and September 30, 2022 | (21,368,537) | (21,368,537) |
Total shareholders' equity | 35,782,589 | 30,749,955 |
Total liabilities and shareholders' equity | $ 62,348,628 | $ 34,705,323 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2023 | Sep. 30, 2022 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 19,535,219 | 19,412,664 |
Treasury stock, shares | 2,096,451 | 2,096,451 |
Class A Convertible stock | ||
Preferred stock, shares authorized | 200,000 | 200,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Net Sales: | ||||
Total net sales | $ 7,959,208 | $ 6,935,976 | $ 21,815,917 | $ 20,477,574 |
Cost of sales: | ||||
Total cost of sales | 3,224,562 | 2,879,462 | 8,617,317 | 8,270,729 |
Gross profit | 4,734,646 | 4,056,514 | 13,198,600 | 12,206,845 |
Operating expenses: | ||||
Research and development | 851,296 | 676,381 | 2,387,939 | 2,062,937 |
Selling, general and administrative | 2,395,714 | 1,694,233 | 7,104,212 | 5,226,015 |
Total operating expenses | 3,247,010 | 2,370,614 | 9,492,151 | 7,288,952 |
Operating income | 1,487,636 | 1,685,900 | 3,706,449 | 4,917,893 |
Interest income | 185,652 | 10,429 | 432,495 | 10,871 |
Other income | 90,049 | 21,608 | 131,504 | 49,401 |
Income before income taxes | 1,763,337 | 1,717,937 | 4,270,448 | 4,978,165 |
Income tax expense | 339,958 | 358,763 | 877,315 | 1,056,363 |
Net income | $ 1,423,379 | $ 1,359,174 | $ 3,393,133 | $ 3,921,802 |
Net income per common share: | ||||
Basic | $ 0.08 | $ 0.08 | $ 0.19 | $ 0.23 |
Diluted | $ 0.08 | $ 0.08 | $ 0.19 | $ 0.23 |
Weighted average shares outstanding: | ||||
Basic | 17,576,969 | 17,261,349 | 17,415,358 | 17,253,822 |
Diluted | 17,577,588 | 17,265,798 | 17,419,265 | 17,255,305 |
Product | ||||
Net Sales: | ||||
Total net sales | $ 7,893,625 | $ 6,935,976 | $ 21,383,435 | $ 20,279,371 |
Cost of sales: | ||||
Total cost of sales | 3,202,870 | $ 2,879,462 | 8,538,219 | 8,253,981 |
Engineering development contracts | ||||
Net Sales: | ||||
Total net sales | 65,583 | 432,482 | 198,203 | |
Cost of sales: | ||||
Total cost of sales | $ 21,692 | $ 79,098 | $ 16,748 |
CONSOLIDATED STATEMENT OF SHARE
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY - USD ($) | Common Stock | Additional Paid-in Capital | (Accumulated Deficit) Retained Earnings | Treasury Stock | Total |
Balance, beginning at Sep. 30, 2021 | $ 19,343 | $ 51,817,095 | $ (5,882,820) | $ (21,368,537) | $ 24,585,081 |
Increase (Decrease) in Stockholders' Equity | |||||
Share-based compensation | 27 | 308,572 | 308,599 | ||
Exercise of stock options | 3 | 17,151 | 17,154 | ||
Net income | 3,921,802 | 3,921,802 | |||
Balance, ending at Jun. 30, 2022 | 19,373 | 52,142,818 | (1,961,018) | (21,368,537) | 28,832,636 |
Balance, beginning at Mar. 31, 2022 | 19,368 | 52,067,250 | (3,320,192) | (21,368,537) | 27,397,889 |
Increase (Decrease) in Stockholders' Equity | |||||
Share-based compensation | 2 | 58,417 | 58,419 | ||
Exercise of stock options | 3 | 17,151 | 17,154 | ||
Net income | 1,359,174 | 1,359,174 | |||
Balance, ending at Jun. 30, 2022 | 19,373 | 52,142,818 | (1,961,018) | (21,368,537) | 28,832,636 |
Balance, beginning at Sep. 30, 2022 | 19,413 | 52,458,121 | (359,042) | (21,368,537) | 30,749,955 |
Increase (Decrease) in Stockholders' Equity | |||||
Share-based compensation | 63 | 1,230,592 | 1,230,655 | ||
Exercise of stock options | 57 | 408,789 | 408,846 | ||
Net income | 3,393,133 | 3,393,133 | |||
Balance, ending at Jun. 30, 2023 | 19,533 | 54,097,502 | 3,034,091 | (21,368,537) | 35,782,589 |
Balance, beginning at Mar. 31, 2023 | 19,518 | 53,883,433 | 1,610,712 | (21,368,537) | 34,145,126 |
Increase (Decrease) in Stockholders' Equity | |||||
Share-based compensation | 15 | 214,069 | 214,084 | ||
Net income | 1,423,379 | 1,423,379 | |||
Balance, ending at Jun. 30, 2023 | $ 19,533 | $ 54,097,502 | $ 3,034,091 | $ (21,368,537) | $ 35,782,589 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 3,393,133 | $ 3,921,802 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 258,892 | 278,164 |
Share-based compensation expense | ||
Stock options | 646,172 | 135,273 |
Stock awards | 584,483 | 173,326 |
Impairment of long-lived assets | 44,400 | |
Loss on disposal of property and equipment | 357 | |
Deferred income taxes | (597,221) | 785,737 |
(Increase) decrease in: | ||
Accounts receivables | (1,646,558) | 1,042,975 |
Contract asset | (89,420) | |
Inventories | (393,509) | (264,789) |
Prepaid expenses and other assets | (71,679) | 69,344 |
Other non-current assets | (104,626) | |
Increase (decrease) in: | ||
Accounts payables | 58,251 | 128,859 |
Accrued expenses | (854,793) | 357,566 |
Income taxes payable/receivable | (133,370) | (119,855) |
Contract liability | (156,230) | (88,388) |
Net cash provided by operating activities | 937,925 | 6,420,371 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (165,084) | (161,230) |
Acquisition of a business | (35,860,000) | |
Net cash used in investing activities | (36,025,084) | (161,230) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Debt proceeds | 20,000,000 | |
Proceeds from exercise of stock options | 408,846 | 17,154 |
Net cash provided by financing activities | 20,408,846 | 17,154 |
Net (decrease) increase in cash and cash equivalents | (14,678,313) | 6,276,295 |
Cash and cash equivalents, beginning of period | 17,250,546 | 8,265,606 |
Cash and cash equivalents, end of period | 2,572,233 | 14,541,901 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||
Cash paid for income taxes | $ 1,608,506 | $ 390,481 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Jun. 30, 2023 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 1. Summary of Significant Accounting Policies Description of the Company Innovative Solutions and Support, Inc. (the “Company,” “IS&S,” “we” or “us”) was incorporated in Pennsylvania on February 12, 1988. The Company operates in one business segment as a systems integrator that designs, develops, manufactures, sells and services air data equipment, engine display systems, standby equipment, primary flight guidance, autothrottles and cockpit display systems for retrofit applications and original equipment manufacturers (“OEMs”). The Company supplies integrated Flight Management Systems (“FMS”), Flat Panel Display Systems (“FPDS”), FPDS with Autothrottle, air data equipment, Integrated Standby Units (“ISU”), ISU with Autothrottle and advanced Global Positioning System (“GPS”) receivers that enable reduced carbon footprint navigation. The Company has continued to position itself as a system integrator, which capability provides the Company with the potential to generate more substantive orders over a broader product base. This strategy, as both a manufacturer and integrator, is designed to leverage the latest technologies developed for the computer and telecommunications industries into advanced and cost-effective solutions for the general aviation, commercial air transport, United States Department of Defense (“DoD”)/governmental and foreign military markets. This approach, combined with the Company’s industry experience, is designed to enable IS&S to develop high-quality products and systems, to reduce product time to market, and to achieve cost advantages over products offered by its competitors. On June 30, 2023 (the “Acquisition Date”), the Company entered into an Asset Purchase and License Agreement with Honeywell International, Inc. (“Honeywell”) whereby Honeywell sold, certain assets and granted perpetual license rights to manufacture and sell licensed products related to its inertial, communication and navigation product lines (the “Product Lines”) to the Company (the “Transaction”). The Transaction involves a sale of certain inventory, equipment and customer-related documents; an assignment of certain customer contracts; and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its inertial, communication and navigation product lines to repair, overhaul, manufacture sell, import, export and distribute certain products to the Company. See Note, “Acquisition” in the Supplemental Balance Sheet Disclosures section below for more details. Basis of Presentation The accompanying unaudited consolidated financial statements are presented pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) in accordance with the disclosure requirements for the quarterly report on Form 10-Q and, therefore, do not include all of the information and footnotes required by generally accepted accounting principles in the United States (“GAAP”) for complete annual financial statements. In the opinion of Company management, the unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary to state fairly the results for the interim periods presented. The consolidated balance sheet as of September 30, 2022 is derived from the audited financial statements of the Company. Operating results for the three-and nine-month periods ended June 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2023 which cannot be determined at this time. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2022. Reclassification The Company presented intangible assets, net separately in the consolidated balance sheet as of June 30, 2023. In order to conform to the presentation of the consolidated balance sheet as of June 30, 2023, the Company reclassified $60,348 from other assets to intangible assets, net in the consolidated balance sheet as of September 30, 2022. This reclassification has no impact on the Company’s net income for the three months ended June 30, 2023 and 2022 and the nine months ended June 30, 2023 and 2022. Principles of Consolidation The Company’s consolidated financial statements include the accounts of its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Estimates are used in accounting for, among other items, valuation of tangible and intangible assets acquired, long term contracts, evaluation of allowances for doubtful accounts, product warranty cost liabilities, income taxes, engineering and material costs on Engineering Development Contract (“EDC”) programs, percentage of completion on EDC contracts, the useful lives of long-lived assets for depreciation and amortization, the recoverability of long-lived assets, evaluation of goodwill impairment, and contingencies. Estimates and assumptions are reviewed periodically and the effects of changes, if any, are reflected in the consolidated statements of operations in the period they are determined. Acquisitions The Company evaluates each of its acquisitions in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations The Company accounts for business acquisitions using the acquisition method of accounting. Under this method of accounting, assets acquired and liabilities assumed are recorded at their respective fair values at the date of the acquisition. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any excess of the purchase price over the fair value of the net assets acquired is recognized as goodwill. During the measurement period, which may be up to one year from the acquisition date, the Company adjusts the provisional amounts of assets acquired and liabilities assumed with the corresponding offset to goodwill to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded within the Company’s consolidated statements of operations. Intangible Assets The Company’s identifiable intangible assets primarily consist of license agreement and customer relationships. Intangible assets acquired in a business combination are recognized at fair value using generally accepted valuation methods deemed appropriate for the type of intangible asset acquired and are reported separately from any goodwill recognized. Intangible assets with a finite life are amortized over their estimated useful life and are reported net of accumulated amortization. They are assessed for impairment in accordance with the Company’s policy on assessing long-lived assets for impairment described below. Indefinite-lived intangible assets are not amortized, but are subject to an annual impairment test, or when events or circumstances dictate, more frequently. The impairment review for indefinite-lived intangible assets can be performed using a qualitative or quantitative impairment assessment. The quantitative assessment consists of a comparison of the fair value of the indefinite-lived intangible asset with its carrying amount. If the carrying amount exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. If the fair value exceeds its carrying amount, the indefinite-lived intangible asset is not considered impaired. Goodwill Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The recorded amounts of goodwill from business combinations are based on management’s best estimates of the fair values of assets acquired and liabilities assumed at the date of acquisition. Goodwill is assigned to the reporting units that are expected to benefit from the synergies of the business combination that generated the goodwill. The Company’s goodwill impairment test is performed at the reporting unit level. Reporting units are determined based on an evaluation of the Company’s operating segments and the components making up those operating segments. Goodwill is tested for impairment annually or in an interim period if certain changes in circumstances indicate a possibility that an impairment may exist. Factors to consider that may indicate an impairment may exist are: the macroeconomic conditions, industry and market considerations such as a significant adverse change in the business climate, cost factors, overall financial performance such as current-period operating results or cash flow declines combined with a history of operating results or cash flow declines or a projection/forecast that demonstrates continuing declines in the cash flow or the inability to improve the operations to forecasted levels, and any entity-specific events. If the Company determines that it is more likely than not that the fair value of the reporting unit is below the carrying amount as part of its qualitative assessment, a quantitative assessment of goodwill is required. In the quantitative evaluation, the fair value of the reporting unit is determined and compared to the carrying value. If the fair value is greater than the carrying value, then the goodwill is deemed not to be impaired and no further action is required. If the fair value is less than the carrying value, goodwill is considered impaired and a charge is reported as impairment of goodwill in the consolidated statements of operations. Cash and Cash Equivalents Highly liquid investments, purchased with an original maturity of three months or less, are classified as cash equivalents. Cash equivalents at June 30, 2023 and September 30, 2022 consist of cash on deposit and cash invested in money market funds with financial institutions. Inventory Valuation Inventories are stated at the lower of cost (first-in, first-out) or net realizable value, net of write-downs for excess and obsolete inventory. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are provided using an accelerated method over the estimated useful lives of the assets (the lesser of three Long-Lived Assets The Company assesses the impairment of long-lived assets in accordance with FASB ASC Topic 360-10, “ Property, Plant and Equipment.” Fair Value of Financial Instruments The net carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and short-term debt approximate their fair value because of the short-term nature of these instruments. For financial assets and liabilities measured at fair value on a recurring basis, fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value as follows: Level 1 — Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date. Level 2 — Other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including: ● Quoted prices for similar assets or liabilities in active markets; ● Quoted prices for identical or similar assets in non-active markets; ● Inputs other than quoted prices that are observable for the asset or liability; and ● Inputs that are derived principally from or corroborated by other observable market data. Level 3 — Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2023 and September 30, 2022, according to the valuation techniques the Company used to determine their fair values. Fair Value Measurement on June 30, 2023 Quoted Price in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Assets Cash and cash equivalents: Money market funds $ 2,545,241 $ — $ — Fair Value Measurement on September 30, 2022 Quoted Price in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Assets Cash and cash equivalents: Money market funds $ 16,083,571 $ — $ — Revenue Recognition The Company enters into sales arrangements with customers that, in general, provide for the Company to design, develop, manufacture and deliver large flat-panel display systems, flight information computers, autothrottles and advanced monitoring systems that measure and display critical flight information, including data relative to aircraft separation, airspeed, altitude, and engine and fuel data measurements. Revenue from Contracts with Customers The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers 1) Identify the contract with a customer The Company’s contract with its customers typically is 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. For the purpose of accounting for revenue under ASC 606, a contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer. 2) Identify the performance obligations in the contract Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. Most of our revenue is derived from purchases under which we provide a specific product or service and, as a result, there is only one 3) Determine the transaction price The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. 4) Allocate the transaction price to performance obligations in the contract If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price by taking into account available information such as market conditions as well as the cost of the goods or services and the Company’s normal margins for similar performance obligations. 5) Recognize revenue when or as the Company satisfies a performance obligation The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or service to a customer. Historically, the Company has also recognized revenue from EDC contracts and is recognized over time using an input measure (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress. Contract costs include material, components and third-party avionics purchased from suppliers, direct labor, and overhead costs. Contract Estimates Accounting for performance obligations in long-term contracts that are satisfied over time involves the use of various techniques to estimate progress towards satisfaction of the performance obligation. The Company typically measures progress based on costs incurred compared to estimated total contract costs. Contract cost estimates are based on various assumptions to project the outcome of future events that often span more than a single year. These assumptions include the amount of labor and labor costs, the quantity and cost of raw materials used in the completion of the performance obligation, and the complexity of the work to be performed. As a significant change in one or more of these estimates could affect the profitability of our contracts, we review and update our contract-related estimates regularly. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the quarter in which it is identified. The impact of adjustments in contract estimates on our operating earnings can be reflected in either operating costs and expenses or revenue. The aggregate impact of adjustments in contract estimates did not change our revenue and operating earnings (and diluted earnings per share) for the three-and nine-month periods ended June 30, 2023 and 2022, respectively. Contract Balances Contract assets consist of the right to consideration in exchange for product offerings that we have transferred to a customer under the contract. Contract liabilities primarily relate to consideration received in advance of performance under the contract. The following table reflects the Company’s contract assets and contract liabilities: Contract Contract Assets Liabilities September 30, 2022 $ 162,742 $ 259,183 Amount transferred to receivables from contract assets — — Contract asset additions 89,420 — Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period — (240,944) Increases due to invoicing prior to satisfaction of performance obligations — 84,714 June 30, 2023 $ 252,162 $ 102,953 Customer Service Revenue The Company enters into sales arrangements with customers for the repair or upgrade of its various products that are not under warranty. The Company’s customer service revenue and cost of sales are included in product sales and product cost of sales, respectively, on the accompanying consolidated statements of operations. The Company’s customer service revenue and cost of sales for the three-and nine-month periods ended June 30, 2023 and 2022 respectively are as follows: For the Three Months Ended June 30, For the Nine Months Ended June 30, 2023 2022 2023 2022 Customer Service Sales $ 1,318,214 $ 1,338,893 $ 3,774,666 $ 3,784,493 Customer Service Cost of Sales 371,359 369,562 716,655 1,112,298 Gross Profit $ 946,855 $ 969,331 $ 3,058,011 $ 2,672,195 Lease Recognition The Company accounts for leases in accordance with ASU 2016-02, Leases Income Taxes Income taxes are recorded in accordance with ASC Topic 740, “ Income Taxes Deferred tax assets are reduced by a valuation allowance if, based on the consideration of all available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. Significant weight is given to evidence that can be verified objectively, and significant management judgment is required in determining any valuation allowance recorded against net deferred tax assets. The Company evaluates deferred income taxes on a quarterly basis to determine if a valuation allowance is required by considering available evidence. Deferred tax assets are recognized when expected future taxable income is sufficient to allow the related tax benefits to reduce taxes that would otherwise be payable. The sources of taxable income that may be available to realize the benefit of deferred tax assets are future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and credit carryforwards, taxable income in carry-back years, and tax planning strategies which are both prudent and feasible. The Company will continue to assess all available evidence during future periods to evaluate any changes to the realization of its deferred tax assets. If the Company were to determine that it would be able to realize additional state deferred tax assets in the future, it would make an adjustment to the valuation allowance which would reduce the provision for income taxes. The accounting for uncertainty in income taxes requires a more likely than not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company records a liability for the difference between the (i) benefit recognized and measured for financial statement purposes and (ii) the tax position taken or expected to be taken on the Company’s tax return. To the extent that the Company’s assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. The Company has elected to record any interest or penalties associated with uncertain tax positions as income tax expense. The Company files a consolidated U.S. federal income tax return. The Company prepares and files tax returns based on the interpretation of tax laws and regulations, and records estimates based on these judgments and interpretations. In the normal course of business, the tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities, and the Company records a liability when it is probable that there will be an assessment. The Company adjusts the estimates periodically as a result of ongoing examinations by and settlements with the various taxing authorities, and changes in tax laws, regulations and precedent. The consolidated tax provision of any given year includes adjustments to prior years’ income tax accruals that are considered appropriate, and any related estimated interest. Management believes that it has made adequate accruals for income taxes. Differences between estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material effect on the Company’s consolidated financial position but could possibly be material to its consolidated results of operations or cash flow of any one period. Engineering Development The Company invests a significant percentage of its sales on engineering development, both Research & Development (“R&D”) and EDC. At June 30, 2023, approximately 23% of the Company’s employees were engineers engaged in various engineering development projects. Total engineering development expense comprises both internally funded R&D and product development and design charges related to specific customer contracts. Engineering development expense consists primarily of payroll-related expenses of employees engaged in EDC projects, engineering related product materials and equipment, and subcontracting costs. R&D charges incurred for product design, product enhancements, and future product development are expensed as incurred. Product development and design charges related to specific customer contracts are charged to cost of sales-EDC based on the method of contract accounting (either percentage-of-completion or completed contract) applicable to such contracts. Treasury Stock We account for treasury stock purchased under the cost method and include treasury stock as a component of shareholders’ equity. Treasury stock purchased with intent to retire (whether or not the retirement is actually accomplished) is charged to common stock. Share-Based Compensation The Company accounts for share-based compensation under ASC Topic 718, “Stock Compensation” Accordingly, adoption of ASC Topic 718’s fair value method results in recording compensation costs under the Company’s stock-based compensation plans. The Company determined the fair value of its stock option awards at the date of grant using the Black-Scholes option pricing model. Option pricing models and generally accepted valuation techniques require management to make assumptions and to apply judgment to determine the fair value of its awards. These assumptions and judgments include estimating future volatility of the Company’s stock price, expected dividend yield, future employee turnover rates, and future employee stock option exercise behaviors. Changes in these assumptions can materially affect fair value estimates. The Company does not believe that a reasonable likelihood exists that there will be a material change in future estimates or assumptions used to determine share-based compensation expense. However, if actual results are not consistent with the Company’s estimates or assumptions, the Company would adjust its estimates. Such adjustments could have a material impact on the Company’s financial position. Warranty Reserves The Company offers warranties on some products of various lengths, however the standard warranty period is twenty-four months. At the time of shipment, the Company establishes a reserve for estimated costs of warranties based on its best estimate of the amounts necessary to settle future and existing claims using historical data on products sold as of the balance sheet date. The length of the warranty period, the product’s failure rates, and the customer’s usage affect warranty cost. If actual warranty costs differ from the Company’s estimated amounts, future results of operations could be affected adversely. Warranty cost is recorded as cost of sales, and the reserve balance recorded as an accrued expense. While the Company maintains product quality programs and processes, its warranty obligation is affected by product failure rates and the related corrective costs. If actual product failure rates and/or corrective costs differ from the estimates, the Company revises the estimated warranty liability accordingly. Self-Insurance Reserves Since January 1, 2014, the Company has self-insured a significant portion of its employee medical insurance. The Company maintains a stop-loss insurance policy that limits its losses both on a per employee basis and an aggregate basis. Liabilities associated with the risks that are retained by the Company are estimated based upon actuarial assumptions such as historical claims experience and demographic factors. The Company estimated the total medical claims incurred but not reported and the Company believes that it has adequate reserves for these claims at June 30, 2023 and September 30, 2022, respectively. However, the actual value of such claims could be significantly affected if future occurrences and claims differ from these assumptions. At June 30, 2023 and September 30, 2022, the estimated liability for medical claims incurred but not reported was $53,419 and $51,590, respectively. The Company has recorded the excess of funded premiums over estimated claims incurred but not reported of $432,703 and $424,155 as a current asset in the accompanying consolidated balance sheets as of June 30, 2023 and September 30, 2022, respectively. Concentrations Major Customers and Products In the three-month period ended June 30, 2023, three customers, Pilatus Aircraft Ltd (“Pilatus”), Air Transport Services Group (“ATSG”) and Textron Aviation, Inc. (“Textron”), accounted for 25%, 24% and 10% of net sales, respectively. In the nine-month period ended June 30, 2023, three customers, Pilatus, ATSG and Textron, accounted for 27%, 18% and 10% of net sales, respectively. In the three-month period ended June 30, 2022, three customers, Pilatus, Textron and Cargojet Inc., accounted for 27%, 16% and 14% of net sales, respectively. In the nine-month period ended June 30, 2022, three customers, Pilatus, Textron and ATSG, accounted for 27%, 11% and 10% of net sales, respectively. Major Suppliers The Company buys several of its components from sole source suppliers. Although there are a limited number of suppliers of particular components, management believes other suppliers could provide similar components on comparable terms. For the three- and nine-month periods ended June 30, 2023, the Company had four suppliers, respectively, that were individually responsible for greater than 10% of the Company’s total inventory related purchases. For the three- and nine-month periods ended June 30, 2022, the Company had zero and two suppliers, respectively, that were individually responsible for greater than 10% of the Company’s total inventory related purchases. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash balances and accounts receivable. The Company invests its excess cash where preservation of principal is the major consideration. Cash balances are maintained with two major banks. Balances on deposit with certain money market accounts and operating accounts may exceed the Federal Deposit Insurance Corporation limits. The Company’s customer base consists principally of companies within the aviation industry. The Company requests advance payments and/or letters of credit from customers that it considers to be credit risks. Recent Accounting Pronouncements In June 2016, FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instrument |
Supplemental Balance Sheet Disc
Supplemental Balance Sheet Disclosures | 9 Months Ended |
Jun. 30, 2023 | |
Supplemental Balance Sheet Disclosures | |
Supplemental Balance Sheet Disclosures | 2. Supplemental Balance Sheet Disclosures Acquisition On June 30, 2023, the Company entered into an Asset Purchase and License Agreement with Honeywell whereby Honeywell sold certain assets and granted perpetual license rights to manufacture and sell licensed products related to its inertial, communication and navigation product lines to the Company. The Transaction involves a sale of certain inventory, equipment and customer-related documents; an assignment of certain customer contracts; and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its inertial, communication and navigation product lines to repair, overhaul, manufacture sell, import, export and distribute certain products to the Company. The Transaction allows the Company to diversify its product offerings in the aerospace industry. The Company determined that the Transaction met the definition of a business under ASC 805; therefore, the Company accounted for the Transaction as a business combination and applied the acquisition method of accounting. In connection with the Transaction, the Company entered into a term loan with PNC Bank, National Association for $20.0 million to fund a portion of the Transaction (the “Term Loan”) – refer to Note 9, “Loan Agreement” for further details. The preliminary purchase consideration transferred at the Acquisition Date was $35.9 million, which was entirely cash. The allocation of the purchase price is based upon certain preliminary valuations and other analyses that have not been finalized as of the date of this filing. Specifically, the purchase price amount for the Transaction and the allocation of the purchase consideration for prepaid inventory, equipment, construction in progress, intangible assets, and goodwill are preliminary estimates, which may be subject to change within the measurement period. The preliminary allocation of the purchase consideration as of the Acquisition Date is as follows: Cash consideration $ 35,860,000 Total consideration $ 35,860,000 Prepaid inventory $ 10,036,160 Equipment 2,609,000 Construction in progress 1,238,000 Intangible assets (a) 20,900,000 Goodwill (b) 4,608,041 Assets acquired 39,391,201 Accrued expenses (3,531,201) Liabilities assumed (3,531,201) Net assets acquired $ 35,860,000 (a) Intangible assets consist of license agreements related to the license rights to use certain Honeywell intellectual property and customer relationships and are recorded at provisional estimated fair values. The provisional estimated fair value of the license agreement is based on a variation of the income valuation approach and is determined using the relief from royalty method. The provisional estimated fair value of the customer relationships is based on a variation of the income valuation approach known as the multi-period excess earnings method. Refer to Note, “Intangible assets” for further details. (b) Goodwill represents the excess of the preliminary purchase consideration over the provisional fair value of the assets acquired and liabilities assumed. The goodwill recognized is primarily attributable to the expected synergies from the Transaction. Goodwill resulting from the Transaction has been provisionally assigned to the Company’s one operating segment; the assignment of goodwill to reporting units is not complete. The goodwill is not expected to be deductible for income tax purposes. Further, the Company determined that the preliminary goodwill was not impaired as of June 30, 2023 and as such, no impairment charges have been recorded for the three-and nine-month periods ended June 30, 2023. Transition services agreement Concurrent with the Transaction, the Company entered into a transition services agreement (the “TSA”) with Honeywell, at no additional costs, to receive certain transitional services and technical support during the transition service period. The Company accounted for the TSA separate from business combination and have recognized $140,000 in prepaid expenses and other current assets within the consolidated balance sheets for the services to be received in the future from Honeywell. The prepaid expense related to the TSA was determined using the with and without method. Acquisition and related costs For the three and nine months ended June 30, 2023, the Company incurred acquisition costs of $262,099, which were expensed as incurred and included in selling, general and administrative expenses in the consolidated statements of operations; the debt issuance costs related to the Term Loan were not material. Unaudited actual and pro forma information Since the acquisition date of the Transaction was on June 30, 2023, the Company did not recognize any revenues and net income related to the Product Lines in the consolidated statements of operations. The following unaudited pro forma summary presents consolidated information of the Company, including the Product Lines, as if the Transaction had occurred on October 1, 2021, the earliest period presented herein: Three Months Ended June 30, Nine Months Ended June 30, 2023 2022 2023 2022 Net sales $ 11,865,707 $ 12,071,221 $ 36,118,352 $ 37,553,854 Net income $ 2,661,132 $ 2,690,013 $ 7,439,335 $ 8,444,970 These pro forma results are for illustrative purposes and are not indicative of the actual results of operations that would have been achieved nor are they indicative of future results of operations. The unaudited pro forma information for all periods presented was adjusted to give effect to pro forma events that are directly attributable to the Transaction and is factually supportable. The adjustments are based on information available to the Company at this time. Accordingly, the adjustments are subject to change, and the impact of such changes may be material. The unaudited pro forma results do not include any incremental cost savings that may result from the integration. Significant adjustments to the pro forma information above include recognition of non-recurring direct incremental acquisition costs in the nine months ended June 30, 2022 and exclusion of those costs from all other periods presented; increase in interest expense related to the Term Loan; increase in amortization expense associated with the estimate of the acquired intangible assets; increase in depreciation expense related to the fair value adjustment of the acquired equipment; and increase in cost of sales related to the fair value adjustment of the acquired inventory. Inventories Inventories are stated at the lower of cost (first-in, first-out) or net realizable value, net of write-downs for excess and obsolete inventory, and consist of the following: June 30, September 30, 2023 2022 Raw materials $ 5,115,987 $ 4,451,045 Work-in-process 570,487 795,723 Finished goods 56,139 102,336 $ 5,742,613 $ 5,349,104 Prepaid expenses and other current assets Prepaid expenses and other current assets consist of the following: June 30, September 30, 2023 2022 Prepaid insurance $ 614,700 $ 777,311 Other 775,334 365,159 $ 1,390,034 $ 1,142,470 Intangible assets The Company’s intangible assets other than goodwill are as follows: As of June 30, 2023 Gross Carrying Accumulated Accumulated Net Carrying Value Impairment Amortization Value License agreement acquired from the Transaction (a) $ 7,870,000 $ — $ — $ 7,870,000 Customer relationships acquired from the Transaction (a) 13,030,000 — — 13,030,000 Licensing and certification rights (b) 696,506 (44,400) (637,221) 14,885 Total $ 21,596,506 $ (44,400) $ (637,221) $ 20,914,885 As of September 30, 2022 Gross Carrying Accumulated Accumulated Net Carrying Value Impairment Amortization Value Licensing and certification rights (b) $ 696,506 $ — $ (636,158) $ 60,348 Total $ 696,506 $ — $ (636,158) $ 60,348 (a) As part of the Transaction, the Company acquired intangible assets related to the license agreement for the license rights to use certain Honeywell intellectual property, and customer relationships. The gross carrying values are preliminary estimates and may be subject to change within the measurement period – refer to Note, “Acquisition” for further details. The license agreement has an indefinite life and is not subject to amortization; the customer relationships have an estimated weighted average life of ten years. The Company determined that the preliminary intangible assets were not impaired as of June 30, 2023 and as such, no impairment charges have been recorded for the three-and nine-month periods ended June 30, 2023. (b) The licensing and certification rights are amortized over a defined number of units. An impairment charge of $44,400 was recorded during the three-and nine-month periods ended June 30, 2023. No impairment charges were recorded during the three-and nine-month periods ended June 30, 2022. Intangible asset amortization expense was $1,063 and $0 for the three-month periods ended June 30, 2023 and 2022, respectively. Intangible asset amortization expense was $1,063 and $1,063 for the nine-month periods ended June 30, 2023 and 2022, respectively. The timing of future amortization expense is not determinable for the licensing and certification rights because they are amortized over a defined number of units. The expected future amortization expense related to the customer relationships as of June 30, 2023 is as follows: 2023 (three months remaining) $ 325,750 2024 1,303,000 2025 1,303,000 2026 1,303,000 2027 1,303,000 Thereafter 7,492,250 Total $ 13,030,000 Property and equipment Property and equipment, net consists of the following: June 30, September 30, 2023 2022 Computer equipment $ 2,325,721 $ 2,307,139 Corporate airplanes 2,406,468 2,406,468 Furniture and office equipment 976,993 976,993 Manufacturing facility 5,889,491 5,889,491 Equipment 8,292,277 5,624,966 Land 1,021,245 1,021,245 Construction in progress 1,238,000 — 22,150,195 18,226,302 Less: accumulated depreciation and amortization (12,103,751) (11,934,113) $ 10,046,444 $ 6,292,189 Depreciation and amortization related to property and equipment was $86,439 and $89,072 for the three-month periods ended June 30, 2023 and 2022, respectively. The corporate airplane is utilized primarily in support of product development. Depreciation and amortization related to property and equipment was approximately $257,829 and $269,567 for the nine-month periods ended June 30, 2023 and 2022, respectively. Other assets Other assets consist of the following: June 30, September 30, 2023 2022 Operating lease right-of-use asset $ 18,407 $ 28,680 Other non-current assets 179,926 75,300 $ 198,333 $ 103,980 Other non-current assets as of June 30, 2023 and September 30, 2022 include the security deposit for an airplane hangar, supplier credit from one of our suppliers and a deposit for medical claims required under the Company’s medical plan. In addition, other non-current assets as of June 30, 2023 and September 30, 2022 includes $56,855 and $0, respectively, of prepaid software licenses that will be earned upon the shipment of a certain product to a customer. Other non-current assets amortization expense was $2,601 and $2,021 for the three-month periods ended June 30, 2023 and 2022, respectively. Other non-current assets amortization expense was $2,601 and $7,534 for the nine-month periods ended June 30, 2023 and 2022, respectively. Accrued expenses Accrued expenses consist of the following: June 30, September 30, 2023 2022 Warranty $ 589,048 $ 607,001 Salary, benefits and payroll taxes 746,576 1,030,628 Professional fees 119,129 364,794 Operating lease 13,125 13,615 Supplier purchase orders 3,531,201 — Other 275,962 956,237 $ 5,275,041 $ 2,972,275 Warranty cost and accrual information for the three-and nine-month periods ended June 30, 2023 is highlighted below: Three Months Ending Nine Months Ending June 30, 2023 June 30, 2023 Warranty accrual, beginning of period $ 587,650 $ 607,001 Accrued expense 29,119 63,495 Warranty cost (27,721) (81,448) Warranty accrual, end of period $ 589,048 $ 589,048 |
Income Taxes
Income Taxes | 9 Months Ended |
Jun. 30, 2023 | |
Income Taxes | |
Income Taxes | 3. Income Taxes The Company will continue to assess all available evidence during future periods to evaluate any changes to the realization of its deferred tax assets. If the Company were to determine that it would be able to realize additional state deferred tax assets in the future, it would make an adjustment to the valuation allowance which would reduce the provision for income taxes. As a result of the 2017 Tax Cuts and Jobs Act, the Company must amortize amounts paid or incurred for specified research and development expenditures, including software development expenses, ratably over 60 months, beginning at the mid-point of the tax year in which the expenditures are paid or incurred. The effective tax rate for the three-month and nine-month periods ended June 30, 2023 was 19.3% and 20.5%, respectively, and differs from the statutory tax rate primarily due to an increased R&D credit, as well as permanent items and state taxes. The effective tax rate for the three-month and nine -month periods ended June 30, 2022 was 20.9% and 21.2%, respectively. and differs from the statutory tax rate primarily due to permanent items and state taxes. |
Shareholders' Equity and Share-
Shareholders' Equity and Share-Based Payments | 9 Months Ended |
Jun. 30, 2023 | |
Shareholders' Equity and Share-Based Payments | |
Shareholders' Equity and Share-Based Payments | 4. Shareholders’ Equity and Share-Based Payments At June 30, 2023, the Company’s Amended and Restated Articles of Incorporation provides the Company authority to issue 75,000,000 shares of common stock and 10,000,000 shares of preferred stock. Share-Based compensation The Company accounts for share-based compensation under the provisions of ASC Topic 718 by using the fair value method for expensing stock options and stock awards. 2019 Stock-Based Incentive Compensation Plan The 2019 Plan was approved by the Company’s shareholders at the Company’s Annual Meeting of Shareholders held on April 2, 2019. The 2019 Plan authorizes the grant of stock appreciation rights, restricted stock, options and other equity-based awards. Options granted under the 2019 Plan may be either “incentive stock options” as defined in section 422 of the Code or nonqualified stock options, as determined by the Compensation Committee. Subject to an adjustment necessary upon a stock dividend, recapitalization, forward split or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase or share exchange, extraordinary or unusual cash distribution, or similar corporate transaction or event, the maximum number of shares of common stock available for awards under the 2019 Plan is 750,000, plus 139,691 shares of common stock that were authorized but unissued under the 2009 Plan as of the effective date of the 2019 Plan (i.e., April 2, 2019), all of which may be issued pursuant to awards of incentive stock options. If any award is forfeited, terminates or otherwise is settled for any reason without an actual distribution of shares to the participant, the related shares of common stock subject to such award will again be available for future grant. Any shares tendered by a participant in payment of the exercise price of an option or the tax liability with respect to an award (including, in any case, shares withheld from any such award) will not be available for future grant under the 2019 Plan. If there is any change in the Company’s corporate capitalization, the Compensation Committee must proportionately and equitably adjust the number and kind of shares of common stock which may be issued in connection with future awards, the number and kind of shares of common stock covered by awards then outstanding under the 2019 Plan, the aggregate number and kind of shares of common stock available under the 2019 Plan, any applicable individual limits on the number of shares of common stock available for awards under the 2019 Plan, the exercise or grant price of any award, or if deemed appropriate, make provision for a cash payment with respect to any outstanding award. In addition, the Compensation Committee may make adjustments in the terms and conditions of any awards, including any performance goals, in recognition of unusual or nonrecurring events affecting the Company or any subsidiary, or in response to changes in applicable laws, regulations, or accounting principles. The compensation expense related to stock options and awards issued to employees under the 2019 Plan was $164,342 and $954,140 for the three- and nine-month periods ended June 30, 2023, respectively. The compensation expense related to stock options and awards issued to employees under the 2019 Plan was $45,088 and $135,273 for the three- and nine-month periods ended June 30, 2022, respectively. The compensation expense under the 2019 Plan related to stock awards issued to non-employee members of the Board was $49,742 and $276,515 for the three- and nine-month periods ended June 30, 2023, respectively. The compensation expense under the 2019 Plan related to stock awards issued to non-employee members of the Board was $13,331 and $173,326 for the three- and nine-month periods ended June 30, 2022, respectively. Total compensation expense associated with the 2019 Plan was $214,084 and $58,419 for the three-month periods ended June 30, 2023 and 2022, respectively. Total compensation expense associated with the 2019 Plan was $1,230,655 and $308,599 for the nine-month periods ended June 30, 2023 and 2022, respectively. At June 30, 2023, unrecognized compensation expense of approximately $260,398, net of forfeitures, related to non-vested stock options under the 2019 Plan, will be recognized. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Jun. 30, 2023 | |
Earnings Per Share | |
Earnings Per Share | 5. Earnings Per Share Three Months Ended June 30, Nine Months Ended June 30, 2023 2022 2023 2022 Numerator: Net income $ 1,423,379 $ 1,359,174 $ 3,393,133 $ 3,921,802 Denominator: Basic weighted average shares 17,576,969 17,261,349 17,415,358 17,253,822 Dilutive effect of share-based awards 619 4,449 3,907 1,483 Diluted weighted average shares 17,577,588 17,265,798 17,419,265 17,255,305 Earnings per common share: Basic EPS $ 0.08 $ 0.08 $ 0.19 $ 0.23 Diluted EPS $ 0.08 $ 0.08 $ 0.19 $ 0.23 Net income per share is calculated pursuant to ASC Topic 260, “ Earnings per Share” The number of incremental shares from the assumed exercise of stock options and RSUs is calculated by using the treasury stock method. As of June 30, 2023 and 2022, there were 128,815 and 100,000 options to purchase common stock outstanding, respectively, and 76,636 and 0 shares subject to vesting of restricted stock units outstanding, respectively. The average outstanding diluted shares calculation excludes options with an exercise price that exceeds the average market price of shares during the period. For the three-month periods ended June 30, 2023 and 2022, respectively, 312,210 and 0 diluted weighted-average shares outstanding were excluded from the computation of diluted EPS because the effect would be anti-dilutive. For the nine-month periods ended June 30, 2023 and 2022, respectively, 196,577 and 66,667 diluted weighted-average shares outstanding were excluded from the computation of diluted EPS because the effect would be anti-dilutive. |
Contingencies
Contingencies | 9 Months Ended |
Jun. 30, 2023 | |
Contingencies | |
Contingencies | 6. Contingencies In the ordinary course of business, the Company is at times subject to various legal proceedings and claims. The Company does not believe any such matters that are currently pending will, individually or in aggregate, have a material effect on the results of operations or financial position. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Jun. 30, 2023 | |
Related Party Transactions | |
Related Party Transactions | 7. Related Party Transactions In recent years, the Company has had sales to AML Global Eclipse, LLC, (“Eclipse”), whose principal shareholder is also a principal shareholder in the Company. Eclipse is a new related party for fiscal year 2022 due to their president acquiring more that 10% in shares of the company. Prior balances are disclosed below for comparability. Sales to Eclipse amounted to approximately $155,000 and $57,000 for the three-month periods ended June 30, 2023 and 2022, respectively. Sales to Eclipse amounted to approximately $231,000 and $574,000 for the nine-month periods ended June 30, 2023 and 2022, respectively. As of June 30, 2023 and September 30, 2022, contract liability to Eclipse was approximately $25,000 and $123,000, respectively. |
Leases
Leases | 9 Months Ended |
Jun. 30, 2023 | |
Leases | |
Leases | 8. Leases The Company accounts for leases in accordance with ASU 2016-02 and records “right-of-use” assets and corresponding lease liabilities on the balance sheet for most leases with an initial term of greater than one year. Consistent with previous accounting guidance, we will recognize payments for leases with a term of less than one year in the statement of operations on a straight-line basis over the lease term. We lease real estate and equipment under various operating leases. A lease exists when a contract or part of a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In determining whether a lease exists, we consider whether a contract provides us with both: (a) the right to obtain substantially all of the economic benefits from the use of the identified asset and (b) the right to direct the use of the identified asset. Some of our leases include base rental periods coupled with options to renew or terminate the lease, generally at our discretion. In evaluating the lease term, we consider whether we are reasonably certain to exercise such options. To the extent a significant economic incentive exists to exercise an option, that option is included within the lease term. However, based on the nature of our lease arrangements, options generally do not provide us with a significant economic incentive and are therefore excluded from the lease term for the majority of our arrangements. Our leases typically include a combination of fixed and variable payments. Fixed payments are generally included when measuring the right-of-use asset and lease liability. Variable payments, which primarily represent payments based on usage of the underlying asset, are generally excluded from such measurement and expensed as incurred. In addition, certain of our lease arrangements may contain a lease coupled with an arrangement to provide other services, such as maintenance, or may require us to make other payments on behalf of the lessor related to the leased asset, such as payments for taxes or insurance. As permitted by ASU 2016-02, we have elected to account for these non-lease components together with the associated lease component if included in the lease payments. This election has been made for each of our asset classes. The measurement of “right-of-use” assets and lease liabilities requires us to estimate appropriate discount rates. To the extent the rate implicit in the lease is readily determinable, such rate is utilized. However, based on information available at lease commencement for our leases, the rate implicit in the lease is not known. In these instances, we utilize an incremental borrowing rate, which represents the rate of interest that we would pay to borrow on a collateralized basis over a similar term. The following table presents the lease-related assets and liabilities reported in the Consolidated Balance Sheet as of June 30, 2023: Classification on the Consolidated Balance Sheet on June 30, 2023 Assets Operating leases Other assets $ 18,407 Liabilities Operating leases- current Accrued expenses $ 13,125 Operating leases – noncurrent Other liabilities $ 5,282 Total lease liabilities $ 18,407 Rent expense and cash paid for various operating leases in aggregate are $3,669 and $11,007 for the three- and nine-month periods ended June 30, 2023. The weighted average remaining lease term is 1.4 years and the weighted average discount rate is 5.0% as of June 30, 2023. Future minimum lease payments under operating leases are as follows at June 30, 2023: Twelve Months Ending Operating June 30, Leases 2024 $ 14,676 2025 6,115 Total minimum lease payments $ 20,791 Amount representing interest (2,384) Present value of minimum lease payments 18,407 Current portion (13,125) Long-term portion of lease obligations $ 5,282 |
Loan Agreement
Loan Agreement | 9 Months Ended |
Jun. 30, 2023 | |
Loan Agreement | |
Loan Agreement | 9. Loan Agreement On June 28, 2023, the Company and one of its subsidiaries entered into an Amendment to Loan Documents (the “Loan Amendment”) with PNC Bank, National Association (the “PNC”), which amends certain terms of that certain Loan Agreement entered into by the parties on May 11, 2023 (the “Loan Agreement” and, as amended, the “Amended Loan Agreement”) and (ii) a corresponding Term Note in favor of PNC (the “Term Note”), which together provide for a senior secured term loan in an aggregate principal amount of $20.0 million, with a maturity date of June 28, 2028. Availability of funds under the Term Loan was conditioned upon the closing of the transactions contemplated by the Amended Loan Agreement and was used to fund a portion of the Transaction. Under the agreement, the Company has the right to prepay any amounts outstanding at any time and from time to time, whole or in part; subject to payment of any break funding indemnification amounts. Future interest payments on the Term Loan, based on current interest rates, are expected to approximate $0.4 million for the remainder of fiscal 2023, $1.5 million in fiscal 2024, $1.3 million in fiscal 2025, $1.1 million in fiscal 2026, and $1.6 million thereafter. The interest rate applicable to loans outstanding under the Term Loan is a floating interest rate equal to the sum of (A) the Term SOFR Rate (as defined in the Term Note) plus (B) an unadjusted spread of the Applicable SOFR Margin plus (C) a SOFR adjustment of ten basis points. The Applicable SOFR Margin ranges from 1.5% to 2.5% depending on the Company’s funded debt to EBITDA ratio. Commencing on June 30, 2023, the Term Loan will consist of sixty In addition to providing for the Term Loan, the Loan Agreement, together with a corresponding Revolving Line of Credit Note in favor of PNC, executed May 11, 2023 (“Line of Credit Note”), provides for a senior secured revolving line of credit in an aggregate principal amount of $10,000,000, with an expiration date of May 11, 2028 (the “Revolving Line of Credit”). The interest rate applicable to loans outstanding under the Revolving Line of Credit is a rate per annum equal to the sum of (A) Daily SOFR (as defined in the Line of Credit Note) plus (B) an unadjusted spread of Applicable SOFR Margin plus (C) a SOFR adjustment of ten basis points. The Applicable SOFR Margin ranges from 1.5% to 2.5% depending on the Company’s funded debt to EBITDA ratio. The Company will pay an annual commitment fee of 0.15% on the amount available for borrowing under the revolving credit facility. The Company was in compliance with all applicable covenants throughout and at June 30, 2023. As of June 30, 2023, the term loan balance amounted to $20,000,000. There was no balance drawn on the Revolving Line of Credit as of June 30, 2023. Fixed mandatory principal repayments due on the outstanding Term Loan are as follows: Twelve Months Ending June 30, 2024 2,000,000 2025 2,000,000 2026 2,000,000 2027 2,000,000 2028 12,000,000 20,000,000 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended | 12 Months Ended |
Jun. 30, 2023 | Sep. 30, 2023 | |
Summary of Significant Accounting Policies | ||
Basis of Presentation | Basis of Presentation The accompanying unaudited consolidated financial statements are presented pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) in accordance with the disclosure requirements for the quarterly report on Form 10-Q and, therefore, do not include all of the information and footnotes required by generally accepted accounting principles in the United States (“GAAP”) for complete annual financial statements. In the opinion of Company management, the unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary to state fairly the results for the interim periods presented. The consolidated balance sheet as of September 30, 2022 is derived from the audited financial statements of the Company. Operating results for the three-and nine-month periods ended June 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2023 which cannot be determined at this time. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2022. | |
Reclassification | Reclassification The Company presented intangible assets, net separately in the consolidated balance sheet as of June 30, 2023. In order to conform to the presentation of the consolidated balance sheet as of June 30, 2023, the Company reclassified $60,348 from other assets to intangible assets, net in the consolidated balance sheet as of September 30, 2022. This reclassification has no impact on the Company’s net income for the three months ended June 30, 2023 and 2022 and the nine months ended June 30, 2023 and 2022. | |
Principles of Consolidation | Principles of Consolidation The Company’s consolidated financial statements include the accounts of its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. | |
Use of Estimates | Use of Estimates The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Estimates are used in accounting for, among other items, valuation of tangible and intangible assets acquired, long term contracts, evaluation of allowances for doubtful accounts, product warranty cost liabilities, income taxes, engineering and material costs on Engineering Development Contract (“EDC”) programs, percentage of completion on EDC contracts, the useful lives of long-lived assets for depreciation and amortization, the recoverability of long-lived assets, evaluation of goodwill impairment, and contingencies. Estimates and assumptions are reviewed periodically and the effects of changes, if any, are reflected in the consolidated statements of operations in the period they are determined. | |
Acquisitions | Acquisitions The Company evaluates each of its acquisitions in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations The Company accounts for business acquisitions using the acquisition method of accounting. Under this method of accounting, assets acquired and liabilities assumed are recorded at their respective fair values at the date of the acquisition. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any excess of the purchase price over the fair value of the net assets acquired is recognized as goodwill. During the measurement period, which may be up to one year from the acquisition date, the Company adjusts the provisional amounts of assets acquired and liabilities assumed with the corresponding offset to goodwill to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded within the Company’s consolidated statements of operations. | |
Intangible Assets | Intangible Assets The Company’s identifiable intangible assets primarily consist of license agreement and customer relationships. Intangible assets acquired in a business combination are recognized at fair value using generally accepted valuation methods deemed appropriate for the type of intangible asset acquired and are reported separately from any goodwill recognized. Intangible assets with a finite life are amortized over their estimated useful life and are reported net of accumulated amortization. They are assessed for impairment in accordance with the Company’s policy on assessing long-lived assets for impairment described below. Indefinite-lived intangible assets are not amortized, but are subject to an annual impairment test, or when events or circumstances dictate, more frequently. The impairment review for indefinite-lived intangible assets can be performed using a qualitative or quantitative impairment assessment. The quantitative assessment consists of a comparison of the fair value of the indefinite-lived intangible asset with its carrying amount. If the carrying amount exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. If the fair value exceeds its carrying amount, the indefinite-lived intangible asset is not considered impaired. | |
Goodwill | Goodwill Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The recorded amounts of goodwill from business combinations are based on management’s best estimates of the fair values of assets acquired and liabilities assumed at the date of acquisition. Goodwill is assigned to the reporting units that are expected to benefit from the synergies of the business combination that generated the goodwill. The Company’s goodwill impairment test is performed at the reporting unit level. Reporting units are determined based on an evaluation of the Company’s operating segments and the components making up those operating segments. Goodwill is tested for impairment annually or in an interim period if certain changes in circumstances indicate a possibility that an impairment may exist. Factors to consider that may indicate an impairment may exist are: the macroeconomic conditions, industry and market considerations such as a significant adverse change in the business climate, cost factors, overall financial performance such as current-period operating results or cash flow declines combined with a history of operating results or cash flow declines or a projection/forecast that demonstrates continuing declines in the cash flow or the inability to improve the operations to forecasted levels, and any entity-specific events. If the Company determines that it is more likely than not that the fair value of the reporting unit is below the carrying amount as part of its qualitative assessment, a quantitative assessment of goodwill is required. In the quantitative evaluation, the fair value of the reporting unit is determined and compared to the carrying value. If the fair value is greater than the carrying value, then the goodwill is deemed not to be impaired and no further action is required. If the fair value is less than the carrying value, goodwill is considered impaired and a charge is reported as impairment of goodwill in the consolidated statements of operations. | |
Cash and Cash Equivalents | Cash and Cash Equivalents Highly liquid investments, purchased with an original maturity of three months or less, are classified as cash equivalents. Cash equivalents at June 30, 2023 and September 30, 2022 consist of cash on deposit and cash invested in money market funds with financial institutions. | |
Inventory Valuation | Inventory Valuation Inventories are stated at the lower of cost (first-in, first-out) or net realizable value, net of write-downs for excess and obsolete inventory. | |
Property and Equipment | Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are provided using an accelerated method over the estimated useful lives of the assets (the lesser of three | |
Long-Lived Assets | Long-Lived Assets The Company assesses the impairment of long-lived assets in accordance with FASB ASC Topic 360-10, “ Property, Plant and Equipment.” | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The net carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and short-term debt approximate their fair value because of the short-term nature of these instruments. For financial assets and liabilities measured at fair value on a recurring basis, fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value as follows: Level 1 — Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date. Level 2 — Other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including: ● Quoted prices for similar assets or liabilities in active markets; ● Quoted prices for identical or similar assets in non-active markets; ● Inputs other than quoted prices that are observable for the asset or liability; and ● Inputs that are derived principally from or corroborated by other observable market data. Level 3 — Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2023 and September 30, 2022, according to the valuation techniques the Company used to determine their fair values. Fair Value Measurement on June 30, 2023 Quoted Price in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Assets Cash and cash equivalents: Money market funds $ 2,545,241 $ — $ — Fair Value Measurement on September 30, 2022 Quoted Price in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Assets Cash and cash equivalents: Money market funds $ 16,083,571 $ — $ — | |
Revenue Recognition | Revenue Recognition The Company enters into sales arrangements with customers that, in general, provide for the Company to design, develop, manufacture and deliver large flat-panel display systems, flight information computers, autothrottles and advanced monitoring systems that measure and display critical flight information, including data relative to aircraft separation, airspeed, altitude, and engine and fuel data measurements. Revenue from Contracts with Customers The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers 1) Identify the contract with a customer The Company’s contract with its customers typically is 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. For the purpose of accounting for revenue under ASC 606, a contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer. 2) Identify the performance obligations in the contract Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. Most of our revenue is derived from purchases under which we provide a specific product or service and, as a result, there is only one 3) Determine the transaction price The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. 4) Allocate the transaction price to performance obligations in the contract If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price by taking into account available information such as market conditions as well as the cost of the goods or services and the Company’s normal margins for similar performance obligations. 5) Recognize revenue when or as the Company satisfies a performance obligation The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or service to a customer. Historically, the Company has also recognized revenue from EDC contracts and is recognized over time using an input measure (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress. Contract costs include material, components and third-party avionics purchased from suppliers, direct labor, and overhead costs. Contract Estimates Accounting for performance obligations in long-term contracts that are satisfied over time involves the use of various techniques to estimate progress towards satisfaction of the performance obligation. The Company typically measures progress based on costs incurred compared to estimated total contract costs. Contract cost estimates are based on various assumptions to project the outcome of future events that often span more than a single year. These assumptions include the amount of labor and labor costs, the quantity and cost of raw materials used in the completion of the performance obligation, and the complexity of the work to be performed. As a significant change in one or more of these estimates could affect the profitability of our contracts, we review and update our contract-related estimates regularly. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the quarter in which it is identified. The impact of adjustments in contract estimates on our operating earnings can be reflected in either operating costs and expenses or revenue. The aggregate impact of adjustments in contract estimates did not change our revenue and operating earnings (and diluted earnings per share) for the three-and nine-month periods ended June 30, 2023 and 2022, respectively. Contract Balances Contract assets consist of the right to consideration in exchange for product offerings that we have transferred to a customer under the contract. Contract liabilities primarily relate to consideration received in advance of performance under the contract. The following table reflects the Company’s contract assets and contract liabilities: Contract Contract Assets Liabilities September 30, 2022 $ 162,742 $ 259,183 Amount transferred to receivables from contract assets — — Contract asset additions 89,420 — Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period — (240,944) Increases due to invoicing prior to satisfaction of performance obligations — 84,714 June 30, 2023 $ 252,162 $ 102,953 Customer Service Revenue The Company enters into sales arrangements with customers for the repair or upgrade of its various products that are not under warranty. The Company’s customer service revenue and cost of sales are included in product sales and product cost of sales, respectively, on the accompanying consolidated statements of operations. The Company’s customer service revenue and cost of sales for the three-and nine-month periods ended June 30, 2023 and 2022 respectively are as follows: For the Three Months Ended June 30, For the Nine Months Ended June 30, 2023 2022 2023 2022 Customer Service Sales $ 1,318,214 $ 1,338,893 $ 3,774,666 $ 3,784,493 Customer Service Cost of Sales 371,359 369,562 716,655 1,112,298 Gross Profit $ 946,855 $ 969,331 $ 3,058,011 $ 2,672,195 | |
Lease Recognition | Lease Recognition The Company accounts for leases in accordance with ASU 2016-02, Leases | |
Income Taxes | Income Taxes Income taxes are recorded in accordance with ASC Topic 740, “ Income Taxes Deferred tax assets are reduced by a valuation allowance if, based on the consideration of all available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. Significant weight is given to evidence that can be verified objectively, and significant management judgment is required in determining any valuation allowance recorded against net deferred tax assets. The Company evaluates deferred income taxes on a quarterly basis to determine if a valuation allowance is required by considering available evidence. Deferred tax assets are recognized when expected future taxable income is sufficient to allow the related tax benefits to reduce taxes that would otherwise be payable. The sources of taxable income that may be available to realize the benefit of deferred tax assets are future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and credit carryforwards, taxable income in carry-back years, and tax planning strategies which are both prudent and feasible. The Company will continue to assess all available evidence during future periods to evaluate any changes to the realization of its deferred tax assets. If the Company were to determine that it would be able to realize additional state deferred tax assets in the future, it would make an adjustment to the valuation allowance which would reduce the provision for income taxes. The accounting for uncertainty in income taxes requires a more likely than not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company records a liability for the difference between the (i) benefit recognized and measured for financial statement purposes and (ii) the tax position taken or expected to be taken on the Company’s tax return. To the extent that the Company’s assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. The Company has elected to record any interest or penalties associated with uncertain tax positions as income tax expense. The Company files a consolidated U.S. federal income tax return. The Company prepares and files tax returns based on the interpretation of tax laws and regulations, and records estimates based on these judgments and interpretations. In the normal course of business, the tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities, and the Company records a liability when it is probable that there will be an assessment. The Company adjusts the estimates periodically as a result of ongoing examinations by and settlements with the various taxing authorities, and changes in tax laws, regulations and precedent. The consolidated tax provision of any given year includes adjustments to prior years’ income tax accruals that are considered appropriate, and any related estimated interest. Management believes that it has made adequate accruals for income taxes. Differences between estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material effect on the Company’s consolidated financial position but could possibly be material to its consolidated results of operations or cash flow of any one period. | |
Engineering Development | Engineering Development The Company invests a significant percentage of its sales on engineering development, both Research & Development (“R&D”) and EDC. At June 30, 2023, approximately 23% of the Company’s employees were engineers engaged in various engineering development projects. Total engineering development expense comprises both internally funded R&D and product development and design charges related to specific customer contracts. Engineering development expense consists primarily of payroll-related expenses of employees engaged in EDC projects, engineering related product materials and equipment, and subcontracting costs. R&D charges incurred for product design, product enhancements, and future product development are expensed as incurred. Product development and design charges related to specific customer contracts are charged to cost of sales-EDC based on the method of contract accounting (either percentage-of-completion or completed contract) applicable to such contracts. | |
Treasury Stock | Treasury Stock We account for treasury stock purchased under the cost method and include treasury stock as a component of shareholders’ equity. Treasury stock purchased with intent to retire (whether or not the retirement is actually accomplished) is charged to common stock. | |
Share-Based Compensation | Share-Based Compensation The Company accounts for share-based compensation under ASC Topic 718, “Stock Compensation” Accordingly, adoption of ASC Topic 718’s fair value method results in recording compensation costs under the Company’s stock-based compensation plans. The Company determined the fair value of its stock option awards at the date of grant using the Black-Scholes option pricing model. Option pricing models and generally accepted valuation techniques require management to make assumptions and to apply judgment to determine the fair value of its awards. These assumptions and judgments include estimating future volatility of the Company’s stock price, expected dividend yield, future employee turnover rates, and future employee stock option exercise behaviors. Changes in these assumptions can materially affect fair value estimates. The Company does not believe that a reasonable likelihood exists that there will be a material change in future estimates or assumptions used to determine share-based compensation expense. However, if actual results are not consistent with the Company’s estimates or assumptions, the Company would adjust its estimates. Such adjustments could have a material impact on the Company’s financial position. | |
Warranty Reserves | Warranty Reserves The Company offers warranties on some products of various lengths, however the standard warranty period is twenty-four months. At the time of shipment, the Company establishes a reserve for estimated costs of warranties based on its best estimate of the amounts necessary to settle future and existing claims using historical data on products sold as of the balance sheet date. The length of the warranty period, the product’s failure rates, and the customer’s usage affect warranty cost. If actual warranty costs differ from the Company’s estimated amounts, future results of operations could be affected adversely. Warranty cost is recorded as cost of sales, and the reserve balance recorded as an accrued expense. While the Company maintains product quality programs and processes, its warranty obligation is affected by product failure rates and the related corrective costs. If actual product failure rates and/or corrective costs differ from the estimates, the Company revises the estimated warranty liability accordingly. | |
Self-Insurance Reserves | Self-Insurance Reserves Since January 1, 2014, the Company has self-insured a significant portion of its employee medical insurance. The Company maintains a stop-loss insurance policy that limits its losses both on a per employee basis and an aggregate basis. Liabilities associated with the risks that are retained by the Company are estimated based upon actuarial assumptions such as historical claims experience and demographic factors. The Company estimated the total medical claims incurred but not reported and the Company believes that it has adequate reserves for these claims at June 30, 2023 and September 30, 2022, respectively. However, the actual value of such claims could be significantly affected if future occurrences and claims differ from these assumptions. At June 30, 2023 and September 30, 2022, the estimated liability for medical claims incurred but not reported was $53,419 and $51,590, respectively. The Company has recorded the excess of funded premiums over estimated claims incurred but not reported of $432,703 and $424,155 as a current asset in the accompanying consolidated balance sheets as of June 30, 2023 and September 30, 2022, respectively. | |
Concentrations | Concentrations Major Customers and Products In the three-month period ended June 30, 2023, three customers, Pilatus Aircraft Ltd (“Pilatus”), Air Transport Services Group (“ATSG”) and Textron Aviation, Inc. (“Textron”), accounted for 25%, 24% and 10% of net sales, respectively. In the nine-month period ended June 30, 2023, three customers, Pilatus, ATSG and Textron, accounted for 27%, 18% and 10% of net sales, respectively. In the three-month period ended June 30, 2022, three customers, Pilatus, Textron and Cargojet Inc., accounted for 27%, 16% and 14% of net sales, respectively. In the nine-month period ended June 30, 2022, three customers, Pilatus, Textron and ATSG, accounted for 27%, 11% and 10% of net sales, respectively. Major Suppliers The Company buys several of its components from sole source suppliers. Although there are a limited number of suppliers of particular components, management believes other suppliers could provide similar components on comparable terms. For the three- and nine-month periods ended June 30, 2023, the Company had four suppliers, respectively, that were individually responsible for greater than 10% of the Company’s total inventory related purchases. For the three- and nine-month periods ended June 30, 2022, the Company had zero and two suppliers, respectively, that were individually responsible for greater than 10% of the Company’s total inventory related purchases. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash balances and accounts receivable. The Company invests its excess cash where preservation of principal is the major consideration. Cash balances are maintained with two major banks. Balances on deposit with certain money market accounts and operating accounts may exceed the Federal Deposit Insurance Corporation limits. The Company’s customer base consists principally of companies within the aviation industry. The Company requests advance payments and/or letters of credit from customers that it considers to be credit risks. | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In June 2016, FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instrument |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Jun. 30, 2023 | |
Summary of Significant Accounting Policies | |
Schedule of financial assets and liabilities accounted for at fair value on a recurring basis | Fair Value Measurement on June 30, 2023 Quoted Price in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Assets Cash and cash equivalents: Money market funds $ 2,545,241 $ — $ — Fair Value Measurement on September 30, 2022 Quoted Price in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Assets Cash and cash equivalents: Money market funds $ 16,083,571 $ — $ — |
Summary of contract assets and contract liabilities balances | Contract Contract Assets Liabilities September 30, 2022 $ 162,742 $ 259,183 Amount transferred to receivables from contract assets — — Contract asset additions 89,420 — Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period — (240,944) Increases due to invoicing prior to satisfaction of performance obligations — 84,714 June 30, 2023 $ 252,162 $ 102,953 |
Schedule of customer service revenue and cost of sales | For the Three Months Ended June 30, For the Nine Months Ended June 30, 2023 2022 2023 2022 Customer Service Sales $ 1,318,214 $ 1,338,893 $ 3,774,666 $ 3,784,493 Customer Service Cost of Sales 371,359 369,562 716,655 1,112,298 Gross Profit $ 946,855 $ 969,331 $ 3,058,011 $ 2,672,195 |
Supplemental Balance Sheet Di_2
Supplemental Balance Sheet Disclosures (Tables) | 9 Months Ended |
Jun. 30, 2023 | |
Supplemental Balance Sheet Disclosures | |
Schedule of preliminary allocation of the purchase consideration | Cash consideration $ 35,860,000 Total consideration $ 35,860,000 Prepaid inventory $ 10,036,160 Equipment 2,609,000 Construction in progress 1,238,000 Intangible assets (a) 20,900,000 Goodwill (b) 4,608,041 Assets acquired 39,391,201 Accrued expenses (3,531,201) Liabilities assumed (3,531,201) Net assets acquired $ 35,860,000 (a) Intangible assets consist of license agreements related to the license rights to use certain Honeywell intellectual property and customer relationships and are recorded at provisional estimated fair values. The provisional estimated fair value of the license agreement is based on a variation of the income valuation approach and is determined using the relief from royalty method. The provisional estimated fair value of the customer relationships is based on a variation of the income valuation approach known as the multi-period excess earnings method. Refer to Note, “Intangible assets” for further details. (b) Goodwill represents the excess of the preliminary purchase consideration over the provisional fair value of the assets acquired and liabilities assumed. The goodwill recognized is primarily attributable to the expected synergies from the Transaction. Goodwill resulting from the Transaction has been provisionally assigned to the Company’s one operating segment; the assignment of goodwill to reporting units is not complete. The goodwill is not expected to be deductible for income tax purposes. Further, the Company determined that the preliminary goodwill was not impaired as of June 30, 2023 and as such, no impairment charges have been recorded for the three-and nine-month periods ended June 30, 2023. |
Summary of unaudited pro forma consolidated information | Three Months Ended June 30, Nine Months Ended June 30, 2023 2022 2023 2022 Net sales $ 11,865,707 $ 12,071,221 $ 36,118,352 $ 37,553,854 Net income $ 2,661,132 $ 2,690,013 $ 7,439,335 $ 8,444,970 |
Schedule of inventories | June 30, September 30, 2023 2022 Raw materials $ 5,115,987 $ 4,451,045 Work-in-process 570,487 795,723 Finished goods 56,139 102,336 $ 5,742,613 $ 5,349,104 |
Schedule of prepaid expenses and other current assets | Prepaid expenses and other current assets consist of the following: June 30, September 30, 2023 2022 Prepaid insurance $ 614,700 $ 777,311 Other 775,334 365,159 $ 1,390,034 $ 1,142,470 |
Summary of intangible assets other than goodwill | The Company’s intangible assets other than goodwill are as follows: As of June 30, 2023 Gross Carrying Accumulated Accumulated Net Carrying Value Impairment Amortization Value License agreement acquired from the Transaction (a) $ 7,870,000 $ — $ — $ 7,870,000 Customer relationships acquired from the Transaction (a) 13,030,000 — — 13,030,000 Licensing and certification rights (b) 696,506 (44,400) (637,221) 14,885 Total $ 21,596,506 $ (44,400) $ (637,221) $ 20,914,885 As of September 30, 2022 Gross Carrying Accumulated Accumulated Net Carrying Value Impairment Amortization Value Licensing and certification rights (b) $ 696,506 $ — $ (636,158) $ 60,348 Total $ 696,506 $ — $ (636,158) $ 60,348 (a) As part of the Transaction, the Company acquired intangible assets related to the license agreement for the license rights to use certain Honeywell intellectual property, and customer relationships. The gross carrying values are preliminary estimates and may be subject to change within the measurement period – refer to Note, “Acquisition” for further details. The license agreement has an indefinite life and is not subject to amortization; the customer relationships have an estimated weighted average life of ten years. The Company determined that the preliminary intangible assets were not impaired as of June 30, 2023 and as such, no impairment charges have been recorded for the three-and nine-month periods ended June 30, 2023. (b) The licensing and certification rights are amortized over a defined number of units. An impairment charge of $44,400 was recorded during the three-and nine-month periods ended June 30, 2023. No impairment charges were recorded during the three-and nine-month periods ended June 30, 2022. |
Summary of expected future amortization expense related to the customer relationships | 2023 (three months remaining) $ 325,750 2024 1,303,000 2025 1,303,000 2026 1,303,000 2027 1,303,000 Thereafter 7,492,250 Total $ 13,030,000 |
Schedule of property and equipment, net | June 30, September 30, 2023 2022 Computer equipment $ 2,325,721 $ 2,307,139 Corporate airplanes 2,406,468 2,406,468 Furniture and office equipment 976,993 976,993 Manufacturing facility 5,889,491 5,889,491 Equipment 8,292,277 5,624,966 Land 1,021,245 1,021,245 Construction in progress 1,238,000 — 22,150,195 18,226,302 Less: accumulated depreciation and amortization (12,103,751) (11,934,113) $ 10,046,444 $ 6,292,189 |
Schedule of other assets | June 30, September 30, 2023 2022 Operating lease right-of-use asset $ 18,407 $ 28,680 Other non-current assets 179,926 75,300 $ 198,333 $ 103,980 |
Schedule of accrued expenses | June 30, September 30, 2023 2022 Warranty $ 589,048 $ 607,001 Salary, benefits and payroll taxes 746,576 1,030,628 Professional fees 119,129 364,794 Operating lease 13,125 13,615 Supplier purchase orders 3,531,201 — Other 275,962 956,237 $ 5,275,041 $ 2,972,275 |
Schedule of warranty cost and accrual information | Three Months Ending Nine Months Ending June 30, 2023 June 30, 2023 Warranty accrual, beginning of period $ 587,650 $ 607,001 Accrued expense 29,119 63,495 Warranty cost (27,721) (81,448) Warranty accrual, end of period $ 589,048 $ 589,048 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Jun. 30, 2023 | |
Earnings Per Share | |
Schedule of earnings per share | Three Months Ended June 30, Nine Months Ended June 30, 2023 2022 2023 2022 Numerator: Net income $ 1,423,379 $ 1,359,174 $ 3,393,133 $ 3,921,802 Denominator: Basic weighted average shares 17,576,969 17,261,349 17,415,358 17,253,822 Dilutive effect of share-based awards 619 4,449 3,907 1,483 Diluted weighted average shares 17,577,588 17,265,798 17,419,265 17,255,305 Earnings per common share: Basic EPS $ 0.08 $ 0.08 $ 0.19 $ 0.23 Diluted EPS $ 0.08 $ 0.08 $ 0.19 $ 0.23 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Jun. 30, 2023 | |
Leases | |
Schedule of lease-related assets and liabilities reported in the Consolidated Balance Sheet | Classification on the Consolidated Balance Sheet on June 30, 2023 Assets Operating leases Other assets $ 18,407 Liabilities Operating leases- current Accrued expenses $ 13,125 Operating leases – noncurrent Other liabilities $ 5,282 Total lease liabilities $ 18,407 |
Schedule of future minimum lease payments under operating leases | Future minimum lease payments under operating leases are as follows at June 30, 2023: Twelve Months Ending Operating June 30, Leases 2024 $ 14,676 2025 6,115 Total minimum lease payments $ 20,791 Amount representing interest (2,384) Present value of minimum lease payments 18,407 Current portion (13,125) Long-term portion of lease obligations $ 5,282 |
Loan Agreement (Tables)
Loan Agreement (Tables) | 9 Months Ended |
Jun. 30, 2023 | |
Loan Agreement | |
Schedule of fixed mandatory principal repayments due on the outstanding Term Loan | Twelve Months Ending June 30, 2024 2,000,000 2025 2,000,000 2026 2,000,000 2027 2,000,000 2028 12,000,000 20,000,000 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2023 USD ($) | Jun. 30, 2022 USD ($) | Jun. 30, 2023 USD ($) segment | Jun. 30, 2022 USD ($) | Sep. 30, 2022 USD ($) | |
Number of business segments | |||||
Number of business segments in which the entity operates | segment | 1 | ||||
Contract Balances | |||||
Balance at beginning of the period (Contract Assets) | $ 162,742 | ||||
Balance at beginning of the period (Contract Liabilities) | 259,183 | ||||
Contract asset additions | 89,420 | ||||
Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period (Contract Liabilities) | (240,944) | ||||
Increases due to invoicing prior to satisfaction of performance obligations (Contract Liabilities) | 84,714 | ||||
Balance at end of the period (Contract Assets) | $ 252,162 | 252,162 | |||
Balance at end of the period (Contract Liabilities) | 102,953 | 102,953 | |||
Customer Service Revenue | |||||
Customer Service Cost of Sales | 3,224,562 | $ 2,879,462 | 8,617,317 | $ 8,270,729 | |
Gross profit | 4,734,646 | 4,056,514 | $ 13,198,600 | 12,206,845 | |
Engineering Development | |||||
Percentage of employees who were engineers engaged in various engineering development projects | 23% | ||||
Warranty | |||||
Standard warranty period | 24 months | ||||
Self-Insurance Reserves | |||||
Estimated liability for medical claims incurred but not reported | 53,419 | $ 53,419 | $ 51,590 | ||
Excess of funded premiums over estimated claims incurred but not reported | 432,703 | 432,703 | 424,155 | ||
Reclassification of other intangible assets | 0 | 0 | 0 | 0 | $ 60,348 |
Customer Service | |||||
Customer Service Revenue | |||||
Customer Service Sales | 1,318,214 | 1,338,893 | 3,774,666 | 3,784,493 | |
Customer Service Cost of Sales | 371,359 | 369,562 | 716,655 | 1,112,298 | |
Gross profit | $ 946,855 | $ 969,331 | $ 3,058,011 | $ 2,672,195 | |
Property Plant and Equipment Other than Air Transportation Equipment and Manufacturing Facility | Minimum | |||||
Number of business segments | |||||
Estimated useful lives | 3 years | 3 years | |||
Property Plant and Equipment Other than Air Transportation Equipment and Manufacturing Facility | Maximum | |||||
Number of business segments | |||||
Estimated useful lives | 7 years | 7 years | |||
Manufacturing facility | |||||
Number of business segments | |||||
Estimated useful lives | 39 years | 39 years | |||
Corporate airplane | |||||
Number of business segments | |||||
Estimated useful lives | 10 years | 10 years |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Fair Value (Details) - USD ($) | Jun. 30, 2023 | Sep. 30, 2022 |
Fair Value, Measurements, Recurring | Quoted Price in Active Markets for Identical Assets (Level 1) | Money Market Funds | ||
Assets | ||
Cash and cash equivalents | $ 2,545,241 | $ 16,083,571 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Revenue Recognition (Details) | 9 Months Ended |
Jun. 30, 2023 | |
Revenue Recognition. | |
Revenue, remaining performance obligation, optional exemption, performance obligation [true false] | true |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Concentration Risk (Details) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2023 item customer | Jun. 30, 2022 customer | Jun. 30, 2023 customer item | Jun. 30, 2022 item customer | |
Concentration of Credit Risk | ||||
Number of banks for maintenance of cash balances | 2 | 2 | ||
Revenues Net | Customer Concentration Risk | ||||
Concentrations | ||||
Number of major customers | customer | 3 | 3 | 3 | 3 |
Revenues Net | Customer Concentration Risk | Pilatus Aircraft Ltd ("Pilatus") | ||||
Concentrations | ||||
Concentration of risk (as a percent) | 25% | 27% | 27% | 27% |
Revenues Net | Customer Concentration Risk | Air Transport Services Group | ||||
Concentrations | ||||
Concentration of risk (as a percent) | 24% | 18% | 10% | |
Revenues Net | Customer Concentration Risk | Textron Aviation, Inc | ||||
Concentrations | ||||
Concentration of risk (as a percent) | 10% | 16% | 10% | 11% |
Revenues Net | Customer Concentration Risk | Cargojet Inc. ("Cargojet") | ||||
Concentrations | ||||
Concentration of risk (as a percent) | 14% | |||
Inventory | Supplier Concentration Risk | ||||
Concentrations | ||||
Number of major suppliers | 0 | 2 |
Supplemental Balance Sheet Di_3
Supplemental Balance Sheet Disclosures - Acquisition (Details) - Honeywell International, Inc | 9 Months Ended | |
Jun. 30, 2023 USD ($) | Jun. 30, 2023 USD ($) | |
Business Acquisition [Line Items] | ||
Preliminary purchase consideration transferred | $ 35,860,000 | |
Asset Purchase and License Agreement | ||
Business Acquisition [Line Items] | ||
Preliminary purchase consideration transferred | $ 35,900,000 | |
Incurred acquisition costs | 262,099 | 262,099 |
Asset Purchase and License Agreement | PNC Bank [Member] | Term loan | ||
Business Acquisition [Line Items] | ||
Debt instrument face amount | 20,000,000 | 20,000,000 |
Transition services agreement | ||
Business Acquisition [Line Items] | ||
Business combination recognized prepaid expenses and other current assets | $ 140,000 | $ 140,000 |
Supplemental Balance Sheet Di_4
Supplemental Balance Sheet Disclosures - Preliminary allocation of the purchase consideration (Details) | 9 Months Ended | |
Jun. 30, 2023 USD ($) | Jun. 30, 2023 USD ($) | |
Business Acquisition [Line Items] | ||
Goodwill | $ 4,608,041 | $ 4,608,041 |
Honeywell International, Inc | ||
Business Acquisition [Line Items] | ||
Cash consideration | 35,860,000 | |
Total consideration | 35,860,000 | |
Prepaid inventory | 10,036,160 | 10,036,160 |
Equipment | 2,609,000 | 2,609,000 |
Intangible assets | 20,900,000 | 20,900,000 |
Goodwill | 4,608,041 | 4,608,041 |
Assets acquired | 39,391,201 | 39,391,201 |
Accrued expenses | (3,531,201) | (3,531,201) |
Liabilities assumed | (3,531,201) | (3,531,201) |
Net assets acquired | 35,860,000 | 35,860,000 |
Honeywell International, Inc | Asset Purchase and License Agreement | ||
Business Acquisition [Line Items] | ||
Total consideration | 35,900,000 | |
Construction in progress | Honeywell International, Inc | ||
Business Acquisition [Line Items] | ||
Assets acquired | $ 1,238,000 | $ 1,238,000 |
Supplemental Balance Sheet Di_5
Supplemental Balance Sheet Disclosures - Intangible assets (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Sep. 30, 2022 | |
Finite-Lived Intangible Assets, Net | |||||
Accumulated Impairment | $ (44,400) | $ (44,400) | |||
Accumulated Amortization | (637,221) | (637,221) | $ (636,158) | ||
Intangible asset amortization expense | 1,063 | $ 0 | 1,063 | $ 1,063 | |
Intangible Assets, Net (Excluding Goodwill) | |||||
Gross Carrying Value | 21,596,506 | 21,596,506 | 696,506 | ||
Accumulated Impairment | (44,400) | (44,400) | |||
Accumulated Amortization | (637,221) | (637,221) | (636,158) | ||
Net Carrying Value | 20,914,885 | 20,914,885 | 60,348 | ||
Customer relationships acquired from the Transaction | |||||
Finite-Lived Intangible Assets, Net | |||||
Gross Carrying Value | 13,030,000 | 13,030,000 | |||
Total | $ 13,030,000 | $ 13,030,000 | |||
Estimated weighted average life | 10 years | 10 years | |||
Impairment charges | $ 0 | $ 0 | |||
Licensing and certification rights | |||||
Finite-Lived Intangible Assets, Net | |||||
Gross Carrying Value | 696,506 | 696,506 | 696,506 | ||
Accumulated Impairment | (44,400) | (44,400) | |||
Accumulated Amortization | (637,221) | (637,221) | (636,158) | ||
Total | 14,885 | 14,885 | 60,348 | ||
Impairment charges | 44,400 | $ 0 | 44,400 | $ 0 | |
Intangible Assets, Net (Excluding Goodwill) | |||||
Accumulated Impairment | (44,400) | (44,400) | |||
Accumulated Amortization | (637,221) | (637,221) | $ (636,158) | ||
Licensing and certification rights | |||||
Indefinite-Lived Intangible Assets (Excluding Goodwill) | |||||
Gross Carrying Value | 7,870,000 | 7,870,000 | |||
Net Carrying Value | $ 7,870,000 | $ 7,870,000 |
Supplemental Balance Sheet Di_6
Supplemental Balance Sheet Disclosures - Intangible assets timing of future amortization expense (Details) - Customer relationships acquired from the Transaction | Jun. 30, 2023 USD ($) |
Expected future amortization expense | |
2023 (three months remaining) | $ 325,750 |
2024 | 1,303,000 |
2025 | 1,303,000 |
2026 | 1,303,000 |
2027 | 1,303,000 |
Thereafter | 7,492,250 |
Total | $ 13,030,000 |
Supplemental Balance Sheet Di_7
Supplemental Balance Sheet Disclosures - Inventories and Prepaid expenses and other current assets (Details) - USD ($) | Jun. 30, 2023 | Sep. 30, 2022 |
Inventory Valuation | ||
Raw materials | $ 5,115,987 | $ 4,451,045 |
Work-in-process | 570,487 | 795,723 |
Finished goods | 56,139 | 102,336 |
Total inventories | 5,742,613 | 5,349,104 |
Prepaid expenses and other current assets | ||
Prepaid insurance | 614,700 | 777,311 |
Other | 775,334 | 365,159 |
Total prepaid expenses and other current assets | $ 1,390,034 | $ 1,142,470 |
Supplemental Balance Sheet Di_8
Supplemental Balance Sheet Disclosures - Property and Equipment & Other Assets (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Sep. 30, 2022 | |
Property and Equipment | |||||
Property and equipment, gross | $ 22,150,195 | $ 22,150,195 | $ 18,226,302 | ||
Less: accumulated depreciation and amortization | (12,103,751) | (12,103,751) | (11,934,113) | ||
Property and equipment, net | 10,046,444 | 10,046,444 | 6,292,189 | ||
Depreciation and amortization for property and equipment | 86,439 | $ 89,072 | 257,829 | $ 269,567 | |
Other assets | |||||
Operating lease right-of-use asset | 18,407 | 18,407 | 28,680 | ||
Other non-current assets | 179,926 | 179,926 | 75,300 | ||
Total other assets | 198,333 | 198,333 | 103,980 | ||
Accumulated amortization of intangible assets | 637,221 | 637,221 | 636,158 | ||
Intangible asset amortization expense | 1,063 | 0 | 1,063 | 1,063 | |
Prepaid software licenses | 56,855 | 56,855 | 0 | ||
Computer equipment | |||||
Property and Equipment | |||||
Property and equipment, gross | 2,325,721 | 2,325,721 | 2,307,139 | ||
Corporate airplane | |||||
Property and Equipment | |||||
Property and equipment, gross | 2,406,468 | 2,406,468 | 2,406,468 | ||
Furniture and office equipment | |||||
Property and Equipment | |||||
Property and equipment, gross | 976,993 | 976,993 | 976,993 | ||
Manufacturing facility | |||||
Property and Equipment | |||||
Property and equipment, gross | 5,889,491 | 5,889,491 | 5,889,491 | ||
Equipment | |||||
Property and Equipment | |||||
Property and equipment, gross | 8,292,277 | 8,292,277 | 5,624,966 | ||
Land | |||||
Property and Equipment | |||||
Property and equipment, gross | 1,021,245 | 1,021,245 | $ 1,021,245 | ||
Construction in progress | |||||
Property and Equipment | |||||
Property and equipment, gross | 1,238,000 | 1,238,000 | |||
Prepaid software licenses | |||||
Other assets | |||||
Intangible asset amortization expense | $ 2,601 | $ 2,021 | $ 2,601 | $ 7,534 |
Supplemental Balance Sheet Di_9
Supplemental Balance Sheet Disclosures - Accrued Expenses (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2023 | Sep. 30, 2022 | |
Accrued expenses | |||
Warranty | $ 589,048 | $ 589,048 | $ 607,001 |
Salary, benefits and payroll taxes | 746,576 | 746,576 | 1,030,628 |
Professional fees | 119,129 | 119,129 | 364,794 |
Operating lease | $ 13,125 | $ 13,125 | 13,615 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Total accrued expenses | Total accrued expenses | |
Supplier purchase orders | $ 3,531,201 | $ 3,531,201 | |
Other | 275,962 | 275,962 | 956,237 |
Total accrued expenses | 5,275,041 | 5,275,041 | $ 2,972,275 |
Warranty cost and accrual information | |||
Warranty accrual, beginning of period | 587,650 | 607,001 | |
Accrued expense | 29,119 | 63,495 | |
Warranty cost | (27,721) | (81,448) | |
Warranty accrual, end of period | $ 589,048 | $ 589,048 |
Supplemental Balance Sheet D_10
Supplemental Balance Sheet Disclosures - Summary of unaudited pro forma consolidated information (Details) - Honeywell International, Inc - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Business Acquisition [Line Items] | ||||
Net sales | $ 11,865,707 | $ 12,071,221 | $ 36,118,352 | $ 37,553,854 |
Net income | $ 2,661,132 | $ 2,690,013 | $ 7,439,335 | $ 8,444,970 |
Income Taxes (Details)
Income Taxes (Details) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Income Taxes | ||||
Effective tax rate (as a percent) | 19.30% | 20.90% | 20.50% | 21.20% |
Shareholders' Equity and Shar_2
Shareholders' Equity and Share-Based Payments (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Sep. 30, 2022 | |
Shareholders' Equity and Share-Based Payments | |||||
Common stock, shares authorized | 75,000,000 | 75,000,000 | 75,000,000 | ||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | 10,000,000 | ||
2019 Plan | |||||
Shareholders' Equity and Share-Based Payments | |||||
Common stock, shares authorized | 139,691 | 139,691 | |||
Share-based compensation expense | $ 214,084 | $ 58,419 | $ 1,230,655 | $ 308,599 | |
Unrecognized compensation cost, related to non-vested stock options | $ 260,398 | $ 260,398 | |||
2019 Plan | Maximum | |||||
Shareholders' Equity and Share-Based Payments | |||||
Number of shares of common stock reserved for awards | 750,000 | 750,000 | |||
2019 Plan | Employee | |||||
Shareholders' Equity and Share-Based Payments | |||||
Share-based compensation expense | $ 164,342 | 45,088 | $ 954,140 | 135,273 | |
2019 Plan | Non Employee Director | |||||
Shareholders' Equity and Share-Based Payments | |||||
Share-based compensation expense | $ 49,742 | $ 13,331 | $ 276,515 | $ 173,326 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Numerator: | ||||
Net income | $ 1,423,379 | $ 1,359,174 | $ 3,393,133 | $ 3,921,802 |
Denominator: | ||||
Basic weighted average shares | 17,576,969 | 17,261,349 | 17,415,358 | 17,253,822 |
Dilutive effect of share-based awards | 619 | 4,449 | 3,907 | 1,483 |
Diluted weighted average shares | 17,577,588 | 17,265,798 | 17,419,265 | 17,255,305 |
Earnings per common share: | ||||
Basic EPS | $ 0.08 | $ 0.08 | $ 0.19 | $ 0.23 |
Diluted EPS | $ 0.08 | $ 0.08 | $ 0.19 | $ 0.23 |
Options to purchase common stock outstanding (in shares) | 128,815 | 100,000 | 128,815 | 100,000 |
Restricted stock units outstanding (in shares) | 76,636 | 0 | 76,636 | 0 |
Diluted weighted-average shares outstanding excluded from computation of diluted EPS (in shares) | 312,210 | 0 | 196,577 | 66,667 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Sep. 30, 2022 | |
Related Party Transactions | |||||
Acquiring of shares | 10% | 10% | |||
Investor | |||||
Related Party Transactions | |||||
Sales amount to Eclipse | $ 155,000 | $ 57,000 | $ 231,000 | $ 574,000 | |
Contract liability to Eclipse | $ 25,000 | $ 25,000 | $ 123,000 |
Leases (Details)
Leases (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2023 | Sep. 30, 2022 | |
Leases | |||
Operating leases | $ 18,407 | $ 18,407 | $ 28,680 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | Other Assets, Noncurrent | Other Assets, Noncurrent | |
Operating leases- current | $ 13,125 | $ 13,125 | $ 13,615 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Accrued Liabilities, Current | Accrued Liabilities, Current | |
Operating leases - noncurrent | $ 5,282 | $ 5,282 | |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | Other Liabilities, Noncurrent | Other Liabilities, Noncurrent | |
Present value of minimum lease payments | $ 18,407 | $ 18,407 | |
Operating leases expenses | $ 3,669 | $ 11,007 | |
Weighted average remaining lease term | 1 year 4 months 24 days | 1 year 4 months 24 days | |
Weighted average discount rate | 5% | 5% |
Leases - Future minimum lease p
Leases - Future minimum lease payments (Details) - USD ($) | Jun. 30, 2023 | Sep. 30, 2022 |
Future minimum lease payments under operating leases | ||
2024 | $ 14,676 | |
2025 | 6,115 | |
Total minimum lease payments | 20,791 | |
Amount representing interest | (2,384) | |
Present value of minimum lease payments | 18,407 | |
Current portion | (13,125) | $ (13,615) |
Long-term portion of lease obligations | $ 5,282 | |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Accrued Liabilities, Current |
Loan Agreement (Details)
Loan Agreement (Details) - USD ($) | 9 Months Ended | |||
Jun. 30, 2023 | Jun. 30, 2023 | Jun. 28, 2023 | May 11, 2023 | |
Senior secured revolving line of credit | ||||
Loan Agreement | ||||
Aggregate principal amount | $ 10,000,000 | |||
Annual commitment fee (in percent) | 0.15% | |||
Amount drawn | $ 0 | |||
SOFR | Senior secured revolving line of credit | ||||
Loan Agreement | ||||
Adjustment to variable interest rate | 10% | |||
SOFR | Minimum | Senior secured revolving line of credit | ||||
Loan Agreement | ||||
Applicable Margin | 1.50% | |||
SOFR | Maximum | Senior secured revolving line of credit | ||||
Loan Agreement | ||||
Applicable Margin | 2.50% | |||
Senior secured term loan | ||||
Loan Agreement | ||||
Aggregate principal amount | $ 20,000,000 | |||
Future interest payments, Remainder of fiscal 2023 | $ 400,000 | $ 400,000 | ||
Future interest payments, fiscal 2024 | 1,500,000 | 1,500,000 | ||
Future interest payments, fiscal 2025 | 1,300,000 | 1,300,000 | ||
Future interest payments, fiscal 2026 | 1,100,000 | 1,100,000 | ||
Future interest payments, thereafter | $ 1,600,000 | $ 1,600,000 | ||
Adjustment to variable interest rate | 10% | |||
Amortization period of debt | 10 years | |||
Balance | $ 20,000,000 | $ 20,000,000 | ||
Fixed mandatory principal repayments due on the outstanding Term Loan | ||||
2024 | 2,000,000 | 2,000,000 | ||
2025 | 2,000,000 | 2,000,000 | ||
2026 | 2,000,000 | 2,000,000 | ||
2027 | 2,000,000 | 2,000,000 | ||
2028 | 12,000,000 | 12,000,000 | ||
Total | $ 20,000,000 | $ 20,000,000 | ||
Senior secured term loan | Maximum | ||||
Loan Agreement | ||||
Amortization period of debt in equal monthly principal installments | 60 months | |||
Senior secured term loan | SOFR | Minimum | ||||
Loan Agreement | ||||
Applicable Margin | 1.50% | |||
Senior secured term loan | SOFR | Maximum | ||||
Loan Agreement | ||||
Applicable Margin | 2.50% |