Innovative Solutions and Support (ISSC) 10-K 16 Dec 16 2016 FY Annual report Financial data

Document and Entity Information

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Nov. 30, 2016	Mar. 31, 2016
Document and Entity Information
Entity Registrant Name	INNOVATIVE SOLUTIONS & SUPPORT INC
Entity Central Index Key	836,690
Document Type	10-K
Document Period End Date	Sep. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 29.6
Entity Common Stock, Shares Outstanding		16,716,014
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	FY

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 30, 2016	Sep. 30, 2015
Current Assets
Cash and cash equivalents	$ 18,767,661	$ 16,282,039
Accounts receivable	4,511,091	2,394,695
Unbilled receivables, net	1,597,672	3,920,209
Inventories	3,645,828	4,597,316
Prepaid expenses and other current assets	847,207	1,221,717
Total current assets	29,369,459	28,415,976
Property and equipment, net	6,962,562	7,095,330
Non-current deferred income taxes		426,315
Other assets	156,948	168,948
Total Assets	36,488,969	36,106,569
Current Liabilities
Accounts payable	1,503,771	1,435,981
Accrued expenses	1,889,908	2,568,531
Deferred revenue	179,585	756,745
Total current liabilities	3,573,264	4,761,257
Non-current deferred income taxes	67,701
Other liabilities		2,826
Total liabilities	3,640,965	4,764,083
Commitments and contingencies (See Note 14)
Shareholders' Equity
Preferred stock, 10,000,000 shares authorized, $.001 par value, of which 200,000 shares are authorized as Class A Convertible stock. No shares issued and outstanding at September 30, 2016 and 2015
Common stock, $.001 par value: 75,000,000 shares authorized, 18,812,465 and 18,756,089 issued at September 30, 2016 and 2015, respectively	18,813	18,756
Additional paid-in capital	51,392,159	51,148,722
Retained earnings	2,805,569	818,768
Treasury stock, at cost, 2,096,451 shares at September 30, 2016 and 1,846,451 at September 30, 2015	(21,368,537)	(20,643,760)
Total shareholders' equity	32,848,004	31,342,486
Total liabilities and shareholders' equity	$ 36,488,969	$ 36,106,569

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2016	Sep. 30, 2015
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	18,812,465	18,756,089
Treasury stock, shares	2,096,451	1,846,451
Class A Convertible stock
Preferred Stock, shares authorized	200,000	200,000

CONSOLIDATED STATEMENTS OF INCO

CONSOLIDATED STATEMENTS OF INCOME - USD ($)	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Net sales:
Product	$ 26,985,899	$ 14,573,475	$ 29,975,410
Engineering development contracts	983,804	5,493,609	14,119,613
Total net sales	27,969,703	20,067,084	44,095,023
Cost of sales:
Product	11,112,339	8,417,571	15,050,608
Engineering development contracts	369,984	4,717,778	15,458,215
Total cost of sales	11,482,323	13,135,349	30,508,823
Gross profit	16,487,380	6,931,735	13,586,200
Operating expenses:
Research and development	4,873,328	2,705,208	2,618,054
Selling, general and administrative	9,170,865	7,847,270	11,111,014
Total operating expenses	14,044,193	10,552,478	13,729,068
Operating income (loss)	2,443,187	(3,620,743)	(142,868)
Interest income	33,504	24,804	21,756
Other income	78,440	33,283	37,758
Income (loss) before income taxes	2,555,131	(3,562,656)	(83,354)
Income tax (benefit) expense	568,330	2,303,478	(283,622)
Net income (loss)	$ 1,986,801	$ (5,866,134)	$ 200,268
Net income (loss) per common share:
Basic (in dollars per share)	$ 0.12	$ (0.35)	$ 0.01
Diluted (in dollars per share)	$ 0.12	$ (0.35)	$ 0.01
Weighted average shares outstanding:
Basic (in shares)	16,927,055	16,924,189	16,927,879
Diluted (in shares)	17,039,296	16,924,189	17,149,106

CONSOLIDATED STATEMENTS OF SHAR

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($)	Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Stock	Total
Balance at Sep. 30, 2013	$ 18,632	$ 49,880,571	$ 6,484,634	$ (20,389,590)	$ 35,994,247
Increase (Decrease) in Stockholders' Equity
Share-based compensation		407,391			407,391
Exercise of stock options	58	259,505			259,563
Issuance of stock to directors	25	150,030			150,055
Net income (loss)			200,268		200,268
Balance at Sep. 30, 2014	18,715	50,697,497	6,684,902	(20,389,590)	37,011,524
Increase (Decrease) in Stockholders' Equity
Share-based compensation		262,314			262,314
Exercise of stock options	20	38,980			39,000
Issuance of stock to directors	21	149,931			149,952
Purchase of treasury stock				(254,170)	(254,170)
Net income (loss)			(5,866,134)		(5,866,134)
Balance at Sep. 30, 2015	18,756	51,148,722	818,768	(20,643,760)	31,342,486
Increase (Decrease) in Stockholders' Equity
Share-based compensation		60,272			60,272
Issuance of stock to directors	57	183,165			183,222
Purchase of treasury stock				(724,777)	(724,777)
Net income (loss)			1,986,801		1,986,801
Balance at Sep. 30, 2016	$ 18,813	$ 51,392,159	$ 2,805,569	$ (21,368,537)	$ 32,848,004

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ 1,986,801	$ (5,866,134)	$ 200,268
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	493,361	570,314	576,478
Share-based compensation expense:
Stock options	68,172	316,369	660,136
Stock awards	183,222	149,952	150,055
Tax adjustment from share-based compensation	(7,899)	(54,055)	(252,688)
Provision for (recovery) loss on unbilled receivables		1,237,841	3,680,679
(Gain) loss on disposal of property and equipment	3,605	(61,817)	78
Excess and obsolete inventory cost		225,742	196,205
Deferred income taxes	494,016	2,743,616	(648,456)
(Increase) decrease in:
Accounts receivable	(2,116,941)	2,025,168	69,571
Unbilled receivables	2,322,537	2,267,678	(4,566,965)
Inventories	951,488	647,728	(1,289,478)
Prepaid expenses and other current assets	371,684	(250,331)	(107,899)
Other non-current assets		(75,300)	105,886
Increase (decrease) in:
Accounts payable	67,790	(966,671)	30,515
Accrued expenses	(678,623)	(1,323,609)	557,222
Income taxes payable		(415,328)	(152,608)
Deferred revenue	(577,160)	230,426	78,795
Net cash provided (used in) by operating activities	3,562,053	1,401,589	(712,206)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(352,762)	(188,509)	(719,523)
Proceeds from the sale of property and equipment	1,108	69,545	601
Net cash (used in) investing activities	(351,654)	(118,964)	(718,922)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options		39,000	259,505
Purchases of treasury stock	(724,777)	(254,170)
Net cash (used in) provided by financing activities	(724,777)	(215,170)	259,505
Net increase (decrease) in cash and cash equivalents	2,485,622	1,067,455	(1,171,623)
Cash and cash equivalents, beginning of year	16,282,039	15,214,584	16,386,207
Cash and cash equivalents, end of year	18,767,661	$ 16,282,039	15,214,584
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income tax	175,000		$ 770,000
Cash received from income tax refund	$ 364,836

Background

Background	12 Months Ended
	Sep. 30, 2016
Background
Background	1. Background Innovative Solutions and Support, Inc. (the “Company” or “IS&S”) was incorporated in Pennsylvania on February 12, 1988. The Company operates in one business segment as a systems integrator that designs, manufactures, sells and services air data equipment, engine display systems, standby equipment, primary flight guidance and cockpit display systems for retrofit applications and original equipment manufacturers (“OEMs”) and retrofit applications. The Company supplies integrated Flight Management Systems (“FMS”) and advanced Global Positioning System (“GPS”) receivers that enable reduced carbon footprint navigation. The Company continues 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 to leverage the latest technologies developed for the computer and telecommunications industries into advanced and cost-effective solutions for the general aviation, commercial, commercial air transport, the 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. Customers include commercial air transport carriers and corporate/general aviation companies, the DoD and its commercial contractors, aircraft operators, aircraft modification centers, and various OEMs.

Concentrations

Concentrations	12 Months Ended
	Sep. 30, 2016
Concentrations
Concentrations	2. Concentrations Major Customers and Products In fiscal 2016, 2015 and 2014, the Company derived 51%, 57% and 59%, respectively, of total sales from five customers, although not all the same customers in each year. Accounts receivable and unbilled receivables related to those top five customers was $1.6 million, $3.5 million, and $7.9 million as at September 30, 2016, 2015 and 2014, respectively. In fiscal 2016, the three largest customers, Sierra Nevada, Jet2.com and DHL accounted for 13%, 12% and 11 of total revenue, respectively. In fiscal 2015, the two largest customers, Pilatus and Eclipse accounted for 20% and 15% of total sales, respectively. In fiscal 2014, three of the Company’s customers, Pilatus, Eclipse and FedEx, accounted for 17%, 14% and 12% of total sales, respectively. Flat panel sales were 95%, 98% and 88% of total sales in the years ended September 30, 2016, 2015 and 2014, respectively. Sales of air data systems and components were 5%, 2% and 12% of total sales for the years ended September 30, 2016, 2015 and 2014, respectively. Sales to government contractors and agencies accounted for approximately 32%, 30% and 39% of total sales during fiscal years 2016, 2015 and 2014, respectively. The government agency or general contractor typically retains the right to terminate the contract at any time at its convenience. Upon alteration or termination of these contracts, IS&S is typically entitled to an equitable adjustment to the contract price so that it would be compensated for delivered items and allowable costs incurred. Accordingly, because these contracts can be terminated, the Company cannot be assured that its backlog will result in sales. Major Suppliers The Company buys several of its components from sole source suppliers. Although there are a limited number of suppliers of particular components, management believes other suppliers could provide similar components on comparable terms. During fiscal 2016 the Company had one supplier that accounted for 25% of the Company’s total inventory related purchases. During fiscal 2015 the Company had one supplier that accounted for 43% 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 (“FDIC”) 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. The Company recorded a charge for impairment for unbilled receivables in the amount of $1.3 million in fiscal 2015 and $3.7 million related to the Delta contract as of September 30, 2014, (See Note 5. Unbilled Receivable in Notes to Consolidated Financial Statements).

Summary of Significant Accounti

Summary of Significant Accounting Policies	12 Months Ended
	Sep. 30, 2016
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies	3. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All inter-company 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, long term contracts, allowances for doubtful accounts, inventory obsolescence, product warranty cost liabilities, income taxes, engineering and material costs on EDC programs, percentage of completion on EDC contracts, recoverability of long-lived assets and contingencies. Estimates and assumptions are reviewed periodically and the effects of changes, if any, are reflected in the Consolidated Statement of Income in the period they are determined. Cash and Cash Equivalents Highly liquid investments purchased with an original maturity of three months or less are classified as cash equivalents. Cash equivalents at September 30, 2016 and 2015 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 market and consist of the following: September 30, September 30, 2016 2015 Raw materials $ $ Work-in-process Finished goods $ $ Property and Equipment Property and equipment are stated at cost. Depreciation is provided using an accelerated method over estimated useful lives of the assets (the lesser of three to seven years or over the lease term), except for the manufacturing facility and the corporate airplane. The building is being depreciated on a straight-line basis over 39 years. During fiscal 2016, no depreciation was provided for the airplane because it had been depreciated to its estimated salvage value. Major additions and improvements are capitalized, while maintenance and repairs that do not improve or extend the life of assets are charged to expense as incurred. Long-Lived Assets The Company assesses the impairment of long-lived assets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360-10, “ Property, Plant and Equipment.” This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In addition, long-lived assets to be disposed of should be reported at the lower of the carrying amount or fair value less cost to sell. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to estimated future cash flows expected to result from use of the asset. If the carrying amount of the asset exceeds the estimated expected undiscounted future cash flows, the Company measures the amount of the impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows. No impairment charges were recorded in fiscal years 2016, 2015 or 2014. 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, and advanced monitoring systems that measure and display critical flight information, including data relative to aircraft separation, airspeed, altitude, and engine and fuel data measurements. The Company’s sales arrangements may include multiple deliverables as defined in FASB ASC Topic 605-25 “ Multiple-Element Arrangements ” (“ASC Topic 605-25”), which typically include design and engineering services, and the production and delivery of the flat panel display and related components. The Company includes any design and engineering development services elements in EDC sales and any functional upgrade and product elements in product sales in the accompanying Consolidated Statement of Income. To the extent that an arrangement contains software elements that are essential to the functionality of tangible products sold in the arrangement, the Company recognizes revenue for the deliverables in accordance with the guidance included in FASB Accounting Standards Update 2009-14, “ Revenue Arrangements That Include Software Elements ” (“ASU 2009-14”); FASB ASU 2009-13, “ Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force” (“ASU 2009-13”); and FASB ASC Topic 605, “Revenue Recognition” (“ASC Topic 605”). To the extent that an arrangement contains software components, which include functional upgrades that the Company sells on a standalone basis and which it has deemed outside the scope of the exception defined by ASU 2009-14, the Company recognizes software revenue in accordance with FASB ASC Topic 985, “ Software ” (“ASC Topic 985”). Multiple Element Arrangements The Company identifies all goods and/or services that are to be delivered separately under a sales arrangement and allocates sales to each deliverable (if more than one) based on that deliverable’s fair value. The Company then considers the appropriate recognition method for each deliverable. The Company’s multiple element arrangements can include defined design and development activities and/or functional upgrades, and product sales. The Company utilizes the selling price hierarchy that has been established by ASU 2009-13, which requires that the selling price for each deliverable be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. To the extent that an arrangement includes a deliverable for which estimated selling price is used, the Company determines the best estimate of selling price by applying the same pricing policies and methodologies that it would use to determine the price to sell the deliverable on a standalone basis. To the extent that an arrangement contains defined design and EDC activities as identified deliverables in addition to products (resulting in a multiple element arrangement), the Company recognizes as EDC sales amounts earned during the design and development phase of the contract following the guidance included in FASB ASC Topic 605-35, “ Construction-Type and Production-Type Contracts ” (“ASC Topic 605-35”) under the percentage of completion method. To the extent that multiple element arrangements include product sales, sales are generally recognized once revenue recognition criteria for the product deliverables have been met based on the provisions of ASC Topic 605. Single Element Arrangements Products To the extent that a single element arrangement provides for product sales and repairs, the Company recognizes sales when revenue recognition criteria for the product deliverables have been met based on the provisions of ASC Topic 605. In addition, the Company also receives orders for equipment and parts, and in general, recognizes revenue upon shipment to customers. The Company may offer its customers extended warranties for additional fees, which it records as deferred revenue and recognizes as sales on a straight-line basis over the warranty periods. Engineering Development Contracts The Company may enter into contracts to perform specified design and EDC services related to its products. The Company recognizes revenue from these arrangements as EDC sales, following the guidance included in ASC Topic 605-35, and considers the nature of these contracts (including term, size of contract, and level of effort) when determining the appropriate accounting treatment for a particular contract. Certain of these contracts are accounted for under the percentage-of-completion method of accounting when the Company determines that progress toward completion is reasonably and reliably estimable, and the contract is long-term in nature. The Company uses the completed contract method for all other contracts. Sales and profit margins under the percentage-of-completion method are recorded based on the ratio of actual costs incurred to total estimated costs expected to be incurred related to the contract under the cost-to-cost method. The percentage-of-completion method of accounting requires the Company to estimate the profit margin for each individual contract or contract segment and to apply that profit margin on a uniform basis as sales are recorded under the contract. The estimation of profit margin requires the Company to make projections of the total sales to be generated and the total costs that will be incurred under a contract. These projections require the Company to make numerous assumptions and estimates relating to items such as the complexity of design and related development costs, performance of subcontractors, availability and cost of materials, engineering productivity, prototype costs, overhead costs, and capital costs. These contracts sometimes include purchase options for additional quantities and for customer change orders for additional or revised product functionality. Revenues and costs related to profitable purchase options are included in the Company’s estimates only when the options are exercised, while revenues and costs related to unprofitable purchase options are included in the Company’s estimates when exercise is determined to be probable. Revenues related to change orders are included in profit estimates only if they can be estimated reliably and collectability is reasonably assured. Purchase options and change orders are accounted for either as an integral part of the original contract, or separately, depending upon the nature and value of the item, in the period in which any change order or purchase option becomes effective. Anticipated losses on contracts are recognized in full in the period in which losses become probable and estimable. Estimates of profit margins for contracts are reviewed by the Company on a quarterly basis. Assuming the initial estimates of revenues and costs under a contract are accurate, the percentage-of-completion method results in the profit margin being recorded evenly as revenue is recognized under the contracts. Changes in these underlying estimates due to revisions in revenue and cost estimates or the exercise of contract options may result in profit margins being recognized unevenly over a contract as such changes are accounted for on a cumulative basis in the period in which the estimates are revised. Significant changes in estimates related to accounting for long-term contracts may have a material effect on the Company’s results of operations in the period in which the revised estimates are made. Cumulative catch-up adjustments (loss contracts) if any, resulting from changes in estimates, are included in results of operations and disclosed in the notes to consolidated financial statements. Customer Service Revenue The Company enters into sales arrangement 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 for the fiscal years ended 2016, 2015 and 2014 are as follows: For the Fiscal Year Ended September 30, 2016 2015 2014 Customer Service Sales $ $ $ Customer Service Cost of Sales Gross Profit $ $ $ Income Taxes Income taxes are recorded in accordance with FASB ASC Topic 740, “ Income Taxes ” (“ASC Topic 740”), which utilizes a balance sheet approach to provide for income taxes. Under this method, the Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company’s assets, liabilities, and expected benefits of utilizing net operating loss (“NOL”) and tax credit carry-forwards. The impact on deferred taxes of changes in tax rates and laws, if any, are applied to the years during which temporary differences are expected to be settled and are reflected in the consolidated financial statements in the period of enactment. 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 carryback years, and tax planning strategies which are both prudent and feasible. The Company’s current balance of the deferred tax valuation allowance is recorded against the majority of its federal and state deferred tax assets. The remaining amount of the deferred tax assets recognized are attributable to tax planning strategies and the ability to carryback federal tax losses to claim a tax refund. 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 federal or 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 United States federal income tax return. The Company prepares and files tax returns based on the interpretation of tax laws and regulations, and records estimates based on these judgments and interpretations. In the normal course of business, the tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities, and the Company records a liability when it is probable that there will be an assessment. The Company adjusts the estimates periodically as a result of ongoing examinations by and settlements with the various taxing authorities, and changes in tax laws, regulations and precedent. The consolidated tax provision of any given year includes adjustments to prior years’ income tax accruals that are considered appropriate, and any related estimated interest. Management believes that it has made adequate accruals for income taxes. Differences between estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material effect on the Company’s consolidated financial position, but could possibly be material to its consolidated results of operations or cash flow of any one period. Engineering Development Total engineering development expense is comprised of both internally funded research and development (“R&D”) and product development and design charges related to specific customer EDC. Engineering development expense consists primarily of payroll-related expenses of employees engaged in EDC, 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 EDC are charged to cost of sales. Comprehensive Income Pursuant to FASB ASC Topic 220, “ Comprehensive Income ” (“ASC Topic 220”), the Company is required to classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of its condensed consolidated balance sheets. For fiscal 2016, 2015 and 2014 comprehensive income consisted of net income only, and there were no items of other comprehensive income for any of the periods presented. 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 September 30, 2016 and 2015, according to the valuation techniques the Company used to determine their fair values. Fair Value Measurement on September 30, 2016 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 $ $ — $ — Fair Value Measurement on September 30, 2015 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 $ $ — $ — Share-Based Compensation The Company accounts for share-based compensation under FASB ASC Topic 505-50, “ Equity-Based Payments to Non-Employees” (“ASC Topic 505-50”) and ASC Topic 718, “ Stock Compensation” (“ASC Topic 718”), which require the Company to measure the cost of employee or non-employee director services received in exchange for an award of equity instruments based on the grant-date fair value of the award using an option pricing model. The Company recognizes that cost recognized over the period during which an employee or non-employee director is required to provide service in exchange for the award. Warranty The Company offers warranties on some products of various lengths, however the standard warranty 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 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, demographic factors and other actuarial assumptions. The Company estimated the total medical claims incurred but not reported and the Company believes that it has adequate reserves for these claims at September 30, 2016. However, the actual value of such claims could be significantly affected if future occurrences and claims differ from these assumptions. At September 30, 2016, the estimated liability for medical claims incurred but not reported was $52,600. The Company has recorded the excess of funded premiums over estimated claims incurred but not reported of $253,000 as a current asset in the accompanying consolidated balance sheet. During the year ended September 30, 2016, the Company has used the excess of funded premiums to reduce amounts payable for claims incurred. Treasury Stock We account for treasury stock purchased under the cost method and include treasury stock as a component of stockholder’s equity. Treasury stock purchased with intent to retire (whether or not the retirement is actually accomplished) is charged to common stock. New Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company is currently evaluating the impacts of adoption of this guidance. In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which simplifies balance sheet presentation of deferred income taxes. Previous guidance required an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position; however, the new guidance requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The updated standard is effective for the Company beginning October 1, 2017, with early adoption permitted as of the beginning of any interim or annual reporting period. The Company early adopted this standard retrospectively and reclassified its current deferred tax assets to noncurrent deferred tax assets for all periods presented. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. In July 2015, the FASB issued guidance regarding Simplifying the Measurement of Inventory. This guidance requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market (market in this context is defined as one of three different measures). The guidance will not apply to inventories that are measured by using either the last-in, first-out (“LIFO”) method or the retail inventory method (“RIM”). The guidance is effective for the Company beginning October 1, 2017. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial statements disclosure. In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40) (ASU 2014-15). The objective of ASU 2014-15 is to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and provide related disclosures. Currently, GAAP does not provide guidance to evaluate whether there is substantial doubt regarding an organization’s ability to continue as a going concern. This ASU provides guidance to an organization’s management, with principles and definitions to reduce diversity in the timing and content of financial statement disclosures commonly provided by organizations. ASU 2014-15 is effective for periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (ASC Topic 606)” (“ASU 2014-09”). ASU 2014-09 will supersede existing revenue recognition guidance and require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standards were scheduled to be effective for reporting periods beginning after December 15, 2016, and early adoption is not permitted. However, on July 9, 2015, the FASB decided to delay the effective date of the new revenue standard by one year, but reporting entities may choose to adopt the standard as of the original effective date. Additionally, during 2016, the FASB issued ASU Nos. 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Gross versus Net), ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”, and ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,” all of which should be adopted concurrent with ASU 2014-09. Adoption of the new rules could affect the timing of revenue recognition for certain transactions. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring retrospective application of the new standard with the cumulative effect of applying the new standard as of the date of initial application recognized and disclosure of results under old standards. The FASB has recently issued an Exposure Draft of a proposed ASU that would delay by one year the effective date of this standard. The Company is currently evaluating the impacts of adoption and the implementation approach to be used. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.

Net Income Per Share

Net Income Per Share	12 Months Ended
	Sep. 30, 2016
Net Income Per Share
Net Income Per Share	4. Net Income Per Share For the Fiscal Year Ended September 30, 2016 2015 2014 Numerator: Net income (loss) $ $ ) $ Denominator: Basic weighted average shares Dilutive effect of share-based awards — Diluted weighted average shares Net income (loss) per common share: Basic $ $ ) $ Diluted $ $ ) $ Net income per share is calculated pursuant to ASC Topic 260, Earnings per Share (“ASC Topic 260”). Basic earnings per share (“EPS”) excludes potentially dilutive securities and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS is computed assuming the conversion or exercise of all dilutive securities such as employee stock options and restricted stock units (“RSUs”). The number of incremental shares from the assumed exercise of stock options and RSUs is calculated by using the treasury stock method. As of September 30, 2016 and 2015, there were 589,168 and 645,168 options to purchase common stock outstanding, respectively, and 67,115 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 fiscal 2016, 339,581 shares were excluded and for fiscal 2015 all options to purchase common stock were excluded from the calculation of earnings per share as their effect would be anti-dilutive. For fiscal year 2014, 55,666 options to purchase common stock were excluded from the computation of diluted earnings per share because the effect would be anti-dilutive.

Unbilled Receivables

Unbilled Receivables	12 Months Ended
	Sep. 30, 2016
Unbilled Receivables
Unbilled Receivables	5. Unbilled Receivables Unbilled receivables principally represent sales recorded under the percentage-of-completion method of accounting that have not been billed to customers in accordance with applicable contract terms. Unbilled receivables were $1.6 million and $3.9 million at September 30, 2016 and 2015, respectively, though fiscal 2015 is net of an impairment of $1.3 million. In January 2016, the Company negotiated and executed a new agreement with a certain customer to provide products and services with current technology resulting in an impairment of a fiscal 2015 unbilled receivable and the extinguishment of our obligation to deliver certain products under the original contract. The percentage-of-completion method of accounting for EDC revenue, requires estimates of profit margins for contracts be reviewed by the Company on a quarterly basis. If the initial estimates of revenues and costs under a contract are accurate, the percentage-of-completion method results in the profit margin being recorded evenly as revenue is recognized under the contract. Changes in these underlying estimates because of revisions in revenue and cost estimates or the exercise of contract options may result in profit margins being recognized unevenly over a contract because such changes are accounted for on a cumulative basis in the period in which the estimates are revised. Significant changes in estimates related to accounting for long-term contracts may have a material effect on the Company’s results of operations in the period in which the revised estimates are made. Net cumulative catch-up adjustments resulting from changes in estimates increased operating income by $58,000 during the fiscal year ended September 30, 2016 and reduced operating income by, $117,000 and $1.5 million during fiscal years ended September 30, 2015 and 2014, respectively.

Prepaid Expenses and Other Curr

Prepaid Expenses and Other Current Assets	12 Months Ended
	Sep. 30, 2016
Prepaid Expenses and Other Current Assets
Prepaid Expenses and Other Current Assets	6. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following: September 30, September 30, 2016 2015 Prepaid insurance $ $ Income tax refund receivable Other $ $

Property and Equipment

Property and Equipment	12 Months Ended
	Sep. 30, 2016
Property and Equipment
Property and Equipment	7. Property and Equipment Property and equipment, net consists of the following balances: September 30, September 30, 2016 2015 Computer equipment $ $ Corporate airplane Furniture and office equipment Manufacturing facility Equipment Land Less accumulated depreciation and amortization ) ) $ $ Depreciation related to property and equipment was approximately $0.5 million in fiscal 2016 and $0.6 million in each of fiscal years 2015 and 2014.

Other Assets

Other Assets	12 Months Ended
	Sep. 30, 2016
Other Assets
Other Assets	8. Other Assets Other assets consist of the following: September 30, September 30, 2016 2015 Intangible assets, net of accumulated amortization of $529,037 and $517,037 at September 30, 2016 and September 30, 2015 $ $ Other non-current assets $ $ Intangible assets consist of licensing and certification rights which are amortized over a defined number of units. No impairment charges were recorded in fiscal 2016, 2015 or 2014. Total intangible amortization expense was approximately $12,000 in fiscal year 2016, $17,000 in fiscal year 2015 and $5,000 in fiscal year 2014. The timing of future amortization expense is not determinable because the intangible assets are being amortized over a defined number of units. Other non-current assets as of September 30, 2016 and September 30, 2015 include the security deposit and advance payment of the last month’s rent due under an operating lease for the property located at 180 Gordon Drive, Exton, PA, and a deposit for medical claims required under the Company’s medical plan.

Accrued Expenses

Accrued Expenses	12 Months Ended
	Sep. 30, 2016
Accrued Expenses
Accrued Expenses	9. Accrued Expenses Accrued expenses consist of the following: September 30, September 30, 2016 2015 Warranty $ $ Salary, benefits and payroll taxes Professional fees Other $ $ Other accrued expense at September 30, 2016 and 2015 includes $0.1 million and $0.6 million of EDC program costs, respectively.

Warranty

Warranty	12 Months Ended
	Sep. 30, 2016
Warranty
Warranty	10. Warranty The Company provides for the estimated cost of product warranties at the time revenue is recognized. Warranty cost is recorded as cost of sales and the reserve balance is recorded as an accrued expense in the financial statements. While the Company engages in extensive product quality programs and processes, the Company’s warranty obligation is affected by product failure rates and by the related material, labor, and delivery costs incurred in correcting a product failure. If actual product failure rates, material, or labor costs differ from the Company’s estimates, further revisions to the estimated warranty liability would be recorded. Warranty cost and accrual information for fiscal years ended September 30, 2016 and 2015: 2016 2015 Warranty accrual as of October 1, $ $ Accrued expense for fiscal year Warranty cost incurred for fiscal year ) ) Warranty accrual as of September 30, $ $

Income Taxes

Income Taxes	12 Months Ended
	Sep. 30, 2016
Income Taxes
Income Taxes	11. Income Taxes The components of income taxes are as follows: For the Fiscal Year Ended September 30, 2016 2015 2014 Current provision (benefit): Federal $ $ ) $ State ) ) Total current provision (benefit) ) Deferred provision (benefit): Federal ) State ) Total deferred provision (benefit) ) Total current and deferred provision (benefit) $ $ $ ) Following is a reconciliation of the statutory federal rate to the Company’s effective income tax rate: For the Fiscal Year Ended September 30, 2016 2015 2014 U.S. Federal statutory tax rate % % % State income taxes, net of federal benefit % % % Permanent items )% )% % Research and development tax credits )% % % Valuation allowance )% )% % Change in unrecognized tax benefits )% )% )% 123R cancellations and forfeitures % )% )% Effective income tax rate % )% % On December 19, 2014, the Tax Increase Prevention Act of 2014 was enacted, which retroactively extended the U.S. R&D Tax Credit through December 31, 2014. As a result, the Company’s effective income tax rate in fiscal year 2015 reflects an R&D Tax Credit for nine months from the fiscal year ended September 30, 2014 and three months ended December 31, 2014. On December 18, 2015, the Protecting Americans from Tax Hikes (PATH) Act was enacted, which retroactively and permanently extended the U.S. R&D Tax Credit. As a result, the Company’s effective income tax rate in fiscal year 2016 reflects an R&D Tax Credit for twelve months from the fiscal year ended September 30, 2015. The deferred tax effect of temporary differences giving rise to the Company’s deferred tax assets and liabilities consists of the components below: As of September 30, 2016 2015 Non Current Non Current Deferred tax assets: Reserves and accruals $ $ Research and development credit NOL carryforward - state Depreciation ) ) Stock options Other — Less: Valuation allowance ) ) Total deferred tax assets Deferred tax liabilities: Depreciation ) ) Total deferred tax liabilities ) ) Net deferred tax (liability) asset $ ) $ At September 30, 2016, the Company had state NOL carryforwards of $20.1 million, which begin to expire in varying amounts after the fiscal year ending September 30, 2026. In addition, the Company has federal R&D Tax Credit carryforwards of approximately $1,262,000, which begin to expire in varying amounts after fiscal year ending September 30, 2030, and state R&D Tax Credit carryforwards of $480,000 (net of federal impact), which begin to expire in varying amounts after the fiscal year ending September 30, 2023. Deferred tax assets are reduced by valuation allowances if, based on the consideration of all available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. Significant weight is given to evidence that can be verified objectively, and significant management judgment is required in determining any valuation allowances recorded against net deferred tax assets. The Company evaluates deferred income taxes on a quarterly basis to determine if valuation allowances are required by considering available evidence, including historical and projected taxable income and tax planning strategies which are both prudent and feasible. ASC Topic 740 requires the consideration of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Significant management judgment is required in determining any valuation allowance recorded against net deferred tax assets. At September 30, 2015, the Company had a valuation allowance of $5,372,000 due to the uncertainty on the Company’s ability to generate sufficient future taxable income to realize the majority of its federal and state deferred tax assets. At September 30, 2016, the valuation allowance was determined to be $5,298,000, a net decrease of $74,000 with the remaining amount of recognized deferred tax assets attributable to tax planning strategies. 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 federal or 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 Company will continue to maintain the balance of the valuation allowance until an appropriate level of profitability is sustained to warrant a conclusion that it is no longer more likely than not that a portion of these net deferred tax assets will not be realized in future periods. There is currently no assurance of such future income before taxes. The Company believes that its estimate of future taxable income is inherently uncertain, and if its current or future operations generate losses, further adjustments to the valuation allowance are possible. Following is a reconciliation of beginning and ending balances of total amounts of gross unrecognized tax benefits: For the Fiscal Year Ended September 30, 2016 2015 2014 Balance at beginning of year $ $ $ Unrecognized tax benefits related to prior years ) — Unrecognized tax benefits related to current year Decrease in unrecognized tax benefits due to the lapse of applicable statute of limitations ) ) — Balance at end of year $ $ $ The total liabilities associated with the unrecognized tax benefits that, if recognized, would impact the Company’s effective tax rate were $615,000, $615,000 and $526,000 at September 30, 2016, 2015 and 2014, respectively. It is not anticipated that the balance of unrecognized tax benefits at September 30, 2016 will change significantly over the next twelve months. The balance of unrecognized tax benefits as reflected in the table above at September 30, 2016 are recorded on the balance sheet as a reduction to deferred tax assets. The Company’s policy is to recognize interest accrued and, if applicable, penalties related to unrecognized tax benefits in income tax expense for all periods presented. At September 30, 2016, the Company currently has no unrecognized tax benefits against which interest has been accrued, and there is no accrual recorded for penalties. For the fiscal year ended September 30, 2016, 2015 and 2014, the Company recognized (benefit) expense of $(3,000), $(2,000) and $0, respectively, for interest (net of federal impact) within income tax expense. The Company is subject to income taxes in the U.S. federal and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of related tax laws and regulations and require significant judgment to apply. The Company’s federal income tax returns for the fiscal years ended September 30, 2013 and thereafter are open years subject to examination by the Internal Revenue Service (“IRS”). The Company files income tax returns in various state jurisdictions, as appropriate, with varying statutes of limitation. During fiscal year 2012, the IRS examined the Company’s income tax return for the year ended September 30, 2010, and no adjustments resulted from this examination. There are no state income tax examinations in process at this time.

Savings Plan

Savings Plan	12 Months Ended
	Sep. 30, 2016
Savings Plan
Savings Plan	12. Savings Plan The Company sponsors a voluntary defined contribution savings plan covering all employees. The Company made contributions of $127,000, $104,000 and $163,000 for the fiscal years ended September 30, 2016, 2015 and 2014, respectively.

Share-Based Compensation

Share-Based Compensation	12 Months Ended
	Sep. 30, 2016
Share-Based Compensation
Share-Based Compensation	13. Share-Based Compensation The Company accounts for share-based compensation under the provisions of ASC Topic 505-50 and ASC Topic 718 by using the fair value method for expensing stock options and stock awards. Total share-based compensation expense was $251,000, $466,000 and $810,000 for the fiscal years ended September 30, 2016, 2015 and 2014, respectively. The income tax impact recognized as a (charge) credit to additional paid in capital in the statement of shareholders’ equity related to share-based compensation arrangements was ($8,000), ($54,000) and $(253,000) for the fiscal years ended September 30, 2016, 2015 and 2014, respectively. Compensation expense related to share-based awards is recorded as a component of selling, general and administrative expenses. By unanimous consent of the Company’s Board of Directors on January 25, 2013, the applicable option exercise price of each outstanding option to purchase common stock was reduced by $1.50 per share pursuant to the terms of the 1998 Plan or the 2009 Plan (each as defined below), as applicable, to offset the dilutive impact of the special cash dividend paid by the Company on December 27, 2012 to common shareholders of record on December 17, 2012. As required by ASC Topic 718, the Company recorded an expense of $22,000 related to the vested outstanding options as a result of this one-time reduction to the option exercise price in the quarter ended March 31, 2013. For non-vested options, the Company added the additional compensation cost of $59,000 to the remaining unrecognized compensation cost for the original share options, granted under the 2009 Plan, and will expense the total amount ratably over the remaining vesting period of the options in accordance with the guidance provided by ASC Topic 718. The Company has three share-based compensation plans, the 1998 Stock Option Plan (the “1998 Plan”), the 2003 Restricted Stock Plan (the “Restricted Plan”) and the 2009 Stock-Based Incentive Compensation Plan (the “2009 Plan”), each of which the shareholders approved. The 1998 Plan expired on November 13, 2008. The last awards under the Restricted Plan were made in 2010, and no further shares remain to be awarded under the Restricted Plan. 1998 Stock Option Plan The 1998 Plan allowed the granting of incentive and nonqualified stock options to employees, officers, directors and independent contractors, and consultants. No stock options were granted to independent contractors or consultants under this plan. Incentive stock options granted under the 1998 Plan have exercise prices that are at least equal to the fair value of the common stock on grant date. Nonqualified stock options granted under the plan have exercise prices that are less than, equal to or greater than the fair value of the common stock on the date of grant. The Company reserved 3,389,000 shares of common stock for awards under the plan. On November 13, 2008, the 1998 Plan expired and no additional shares were granted under the 1998 Plan after that date. Following is a summary of option activity under the 1998 Plan for fiscal years ended September 30, 2016, 2015, and 2014 and changes during the periods then ended: Weighted Average Aggregate Exercise Intrinsic Options Price Value Outstanding at September 30, 2013 $ $ — Granted — — — Exercised ) Cancelled ) — Outstanding at September 30, 2014 $ — Granted — — — Exercised — — — Cancelled ) — Outstanding at September 30, 2015 $ $ — Granted — — — Exercised — — — Cancelled ) — Outstanding at September 30, 2016 $ $ — Vested $ $ — Options exercisable at September 30, 2016 $ $ — In fiscal 2016 and 2015 and 2014, no options were granted under the 1998 Plan. Therefore, there is no weighted-average grant date fair value and no intrinsic value attributable to individual options granted. 12,000 options under the 1998 Plan were exercised in fiscal 2014, and no options were exercised during fiscal years 2016 and 2015. The following table summarizes information about stock options under the 1998 Plan at September 30, 2016: Options Outstanding Options Exercisable Range of Exercise Outstanding Weighted- Weighted- As of September Weighted- $ 0.00 - $ 5.00 — — $ — — $ — $ 5.01 - $ 10.00 $ 10.01 - $ 15.00 — — — — — $ $ Fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. Options are exercisable over a maximum term of ten years from date of grant and vest typically over periods of three to five years from the grant date. The expected term of options represents the period of time that options granted are expected to be outstanding and is based on historical experience. Expected volatility is based on historical volatility of the Company’s stock price. The risk free interest rate is based on U.S. Treasuries with maturities consistent with the expected life of the options in effect at the time of grant. Compensation expense for employee stock options includes an estimate for forfeitures, and is recognized ratably over the vesting term. Because no options were granted from the 1998 Plan in fiscal 2016, 2015 and 2014, the data for expected dividend, expected volatility, weighted average risk-free interest rate and expected lives is not applicable. Total compensation expense associated with stock option awards to employees under the 1998 Plan was $0 for fiscal years ended September 30, 2016, 2015 and 2014. At September 30, 2016, there is no unrecognized compensation expense related to non-vested stock options under the 1998 Plan that is expected to be recognized during fiscal 2017. 2009 Stock-Based Incentive Compensation Plan The 2009 Plan authorizes the grant of stock appreciation rights, restricted stock, options, RSUs and other equity-based awards (collectively referred to as “Awards”). Options granted under the 2009 Plan may be either “incentive stock options” as defined in section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or nonqualified stock options, as determined by the Compensation Committee of the Company’s Board of Directors (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 other similar corporate transaction or event, the maximum number of shares of common stock available for Awards under the 2009 Plan shall be 1,200,000, all of which may be issued pursuant to Awards of incentive stock options. In addition, the Plan provides that no more than 300,000 shares of common stock per year may be awarded to any employee as a performance-based Award under Section 162(m) of the Code. At September 30, 2016 there were 257,264 shares of common stock available for awards under the plan. If any Award is forfeited, or if any option terminates, expires or lapses without being exercised, 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 2009 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 type of shares of common stock covered by Awards then outstanding under the 2009 Plan, the number and type of shares of common stock available under the 2009 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, provided that no adjustment may be made that would adversely affect the status of any Award that is intended to be a performance-based Award under Section 162(m) of the Code, unless otherwise determined by the Compensation Committee. 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, provided that no adjustment may be made that would adversely affect the status of any Award that is intended to be a performance-based Award under Section 162(m) of the Code, unless otherwise determined by the Compensation Committee. Following is a summary of option activity under the 2009 Plan for the fiscal years ended September 30, 2016, 2015 and 2014, and changes during the periods then ended: Weighted Average Aggregate Exercise Intrinsic Options Price Value Outstanding at September 30, 2013 $ $ — Granted — — — Exercised ) Cancelled ) — Outstanding at September 30, 2014 $ $ Granted — — — Exercised ) Cancelled ) — Outstanding at September 30, 2015 $ — Granted Exercised — — — Cancelled ) — Outstanding at September 30, 2016 $ $ — Vested and expected to vest $ $ — Options exercisable at September 30, 2016 $ $ — The following table summarizes information about stock options under the 2009 Plan at September 30, 2016: Options Outstanding Options Exercisable Range of Exercise Outstanding Weighted- Weighted- As of September Weighted- $ 0.00 - $ 5.00 $ $ Fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. Options are exercisable over a maximum term of ten years from date of grant and vest typically over periods of three to five years from the grant date. The expected term of options represents the period of time that options granted are expected to be outstanding and is based on historical experience and the expected turnover rate of the employees receiving the options. Expected volatility is based on historical volatility of the Company’s stock. The risk free interest rate is based on U.S. Treasuries with maturities consistent with the expected life of the options in effect at the time of grant. Compensation expense for employee stock options includes an estimate for forfeitures and is recognized ratably over the vesting term. The Company did not grant any options in fiscal years 2016, 2015 and 2014, and therefore did not record any compensation expense related to the 2009 Plan during such periods. Total compensation expense associated with stock option awards to employees under the 2009 Plan was $68,000, $316,000 and $660,000 for fiscal years ended September 30, 2016, 2015 and 2014, respectively. Total share-based compensation expense associated with the annual grant of stock awards to non-employee directors under the 2009 Plan was $178,000, $192,000 and $200,000 for the fiscal years ended September 30, 2016, 2015 and 2014, respectively. At September 30, 2016, no unrecognized compensation expense, net of forfeitures, related to non-vested stock options under the 2009 Plan, will be recognized. Restricted Stock Units During fiscal 2016, the Company’s Board of Directors (the “Board”) approved grants of RSUs to the non-employee directors on the Board as compensation for their services during calendar year 2016. Under the terms of the awards, at the conclusion of the vesting period on January 2, 2017, the grants of RSUs will be settled in shares of the Company’s common stock at a rate of one share of stock for each unit, provided that if a director resigns from the Board prior to January 1, 2017, such director shall only receive a pro rata portion of such award for time served. As of September 30, 2016, there were 67,115 unvested restricted stock units outstanding under the 2009 Plan, all of which were issued during the fiscal year ended September 30, 2016. There were no such awards outstanding as of September 30, 2015 or 2014, and no such activity under the 2009 Plan during the fiscal years ended September 30, 2015 or 2014.

Commitments and Contingencies

Commitments and Contingencies	12 Months Ended
	Sep. 30, 2016
Commitments and Contingencies.
Commitments and Contingencies	14. Commitments and Contingencies Operating Leases Rent expense under operating leases totaled $83,000, $73,000 and $69,000 for the years ended September 30, 2016, 2015 and 2014, respectively. Future minimum lease payments under non-cancelable operating leases are $77,000 and $40,000 for the years ended September 30, 2017 and 2018, respectively. Purchase Obligations A “purchase obligation” is defined as an agreement to purchase goods or services that is enforceable and legally binding on the Company and that specifies all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions, and the approximate timing of the transaction. These amounts are comprised primarily of open purchase order commitments entered in the ordinary course of business with vendors and subcontractors pertaining to fulfillment of the Company’s current order backlog. The purchase obligations on open purchase orders were $0.9 million, $0.5 million and $2.1 million as of September 30, 2016, 2015 and 2014, respectively. Product Liability The Company has product liability insurance of $50,000,000. The Company has not experienced any material product liability claims. Legal Proceedings In the ordinary course of business, the Company is at times subject to various legal proceedings and claims. Except as set forth below with respect to the Delta matter, IS&S does not believe any such matters that are currently pending will have a material effect on its results of operations or financial position. The Company previously announced that Delta Airlines (“Delta”) purported to terminate its contract with the Company to develop, manufacture and install new cockpit displays and certain navigation capabilities on Delta’s fleet of approximately 182 MD88 and MD90 aircraft. The Company initiated and engaged in a non-binding mediation with Delta on February 25, 2015. The mediation session did not resolve the dispute. On February 25, 2015, the Company filed a complaint against Delta in the United States District Court for the Eastern District of Pennsylvania for breach of contract. The Company has alleged in the case, captioned Innovative Solutions & Support, Inc. v. Delta Airlines, Inc. E.D. Pa. Civ. No. 15-959, that Delta’s purported termination of the contract was wrongful and in breach of the terms of the contract, and is seeking monetary damages. On March 20, 2015, Delta answered the Company’s complaint and filed counterclaims against the Company for breach of contract and breach of the duty of good faith and fair dealing, also seeking monetary damages. The parties have completed discovery and have each filed motions for summary judgment, which motions the court has not yet ruled on. The outcome of the litigation is not determinable at this time. The Company had $3.6 million of unbilled receivables and $0.2 million of inventory on its balance sheet relating to the Delta program at September 30, 2016 both of which are fully reserved.

Related Party Transactions

Related Party Transactions	12 Months Ended
	Sep. 30, 2016
Related Party Transactions
Related Party Transactions	15. Related Party Transactions The Company incurred legal fees of $122,000, $114,000 and $99,000 for the fiscal years ended September 30, 2016, 2015 and 2014, respectively with a law firm which is a shareholder of the Company. For the years ended September 30, 2016, 2015 and 2014, respectively, the Company incurred service fees of $22,000, $11,000, and $6,000 with a commercial graphics firm controlled by an individual who is married to a shareholder and a daughter of the Company’s Chairman and Chief Executive Officer.

Quarterly Financial Data (unaud

Quarterly Financial Data (unaudited)	12 Months Ended
	Sep. 30, 2016
Quarterly Financial Data (unaudited)
Quarterly Financial Data (unaudited)	16. Quarterly Financial Data (unaudited) Summarized quarterly results of operations of the Company for the years ended September 30, 2016 and September 30, 2015 are presented below: Fiscal Year Ended September 30, 2016 First Quarter Second Quarter Third Quarter Fourth Quarter Net sales $ $ $ $ Cost of sales Gross profit Operating (loss) income ) Net (loss) income ) Net income (loss) per common share Basic $ ) $ $ $ Diluted $ ) $ $ $ Fiscal Year Ended September 30, 2015 First Quarter Second Quarter Third Quarter Fourth Quarter Net sales $ $ $ $ Cost of sales Gross profit Operating income (loss) ) ) ) Net income (loss) ) ) ) Net income (loss) per common share Basic $ $ ) $ ) $ ) Diluted $ $ ) $ ) $ ) Quarterly and full fiscal year EPS are calculated independently based on the weighted average number of shares outstanding during each period. As a result, the sum of each quarter’s per share amount may not equal the total per share amount for the respective year.

Business Segments

Business Segments	12 Months Ended
	Sep. 30, 2016
Business Segments
Business Segments	17. Business Segments The Company operates in one business segment which designs, manufactures and sells flat panel displays, flight information computers, and advanced monitoring systems to the DoD, the Department of Interior (“DOI”), other government agencies, commercial air transport carriers, and corporate/general aviation markets. The Company currently derives virtually all of its revenues from the sale of this equipment and related EDC. Most of the Company’s sales, operating results, and identifiable assets are in the United States. During fiscal 2016, 2015 and 2014, IS&S derived 95%, 98% and 88%, respectively, of its total revenues from the sale of FPDS. During fiscal 2016, 2015 and 2014, the Company derived 5%, 2% and 12%, respectively, of total revenues from the sale of air data systems related products. During fiscal 2016, 2015 and 2014, the Company derived 4%, 27% and 32%, respectively, of total revenues from the sale of EDC services. Geographic Data Most of the Company’s sales, operating results and identifiable assets are in the United States. In fiscal years 2016, 2015 and 2014, net sales outside the United States amounted to $8.2 million, $6.6 million and $12.0 million, respectively. Product Data The Company’s current product line includes FPDS, flight management systems, and air data systems and components. During fiscal 2016, 2015 and 2014, the Company derived 95%, 98% and 88%, respectively, of its revenue from sales of FPDS. The remaining revenue for each of the fiscal years was from sales of air data systems and components.

Summary of Significant Accoun24

Summary of Significant Accounting Policies (Policies)	12 Months Ended
	Sep. 30, 2016
Summary of Significant Accounting Policies
Principles of Consolidation	Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All inter-company 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, long term contracts, allowances for doubtful accounts, inventory obsolescence, product warranty cost liabilities, income taxes, engineering and material costs on EDC programs, percentage of completion on EDC contracts, recoverability of long-lived assets and contingencies. Estimates and assumptions are reviewed periodically and the effects of changes, if any, are reflected in the Consolidated Statement of Income in the period they are determined.
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 September 30, 2016 and 2015 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 market and consist of the following: September 30, September 30, 2016 2015 Raw materials $ $ Work-in-process Finished goods $ $
Property and Equipment	Property and Equipment Property and equipment are stated at cost. Depreciation is provided using an accelerated method over estimated useful lives of the assets (the lesser of three to seven years or over the lease term), except for the manufacturing facility and the corporate airplane. The building is being depreciated on a straight-line basis over 39 years. During fiscal 2016, no depreciation was provided for the airplane because it had been depreciated to its estimated salvage value. Major additions and improvements are capitalized, while maintenance and repairs that do not improve or extend the life of assets are charged to expense as incurred.
Long-Lived Assets	Long-Lived Assets The Company assesses the impairment of long-lived assets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360-10, “ Property, Plant and Equipment.” This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In addition, long-lived assets to be disposed of should be reported at the lower of the carrying amount or fair value less cost to sell. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to estimated future cash flows expected to result from use of the asset. If the carrying amount of the asset exceeds the estimated expected undiscounted future cash flows, the Company measures the amount of the impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows. No impairment charges were recorded in fiscal years 2016, 2015 or 2014.
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, and advanced monitoring systems that measure and display critical flight information, including data relative to aircraft separation, airspeed, altitude, and engine and fuel data measurements. The Company’s sales arrangements may include multiple deliverables as defined in FASB ASC Topic 605-25 “ Multiple-Element Arrangements ” (“ASC Topic 605-25”), which typically include design and engineering services, and the production and delivery of the flat panel display and related components. The Company includes any design and engineering development services elements in EDC sales and any functional upgrade and product elements in product sales in the accompanying Consolidated Statement of Income. To the extent that an arrangement contains software elements that are essential to the functionality of tangible products sold in the arrangement, the Company recognizes revenue for the deliverables in accordance with the guidance included in FASB Accounting Standards Update 2009-14, “ Revenue Arrangements That Include Software Elements ” (“ASU 2009-14”); FASB ASU 2009-13, “ Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force” (“ASU 2009-13”); and FASB ASC Topic 605, “Revenue Recognition” (“ASC Topic 605”). To the extent that an arrangement contains software components, which include functional upgrades that the Company sells on a standalone basis and which it has deemed outside the scope of the exception defined by ASU 2009-14, the Company recognizes software revenue in accordance with FASB ASC Topic 985, “ Software ” (“ASC Topic 985”). Multiple Element Arrangements The Company identifies all goods and/or services that are to be delivered separately under a sales arrangement and allocates sales to each deliverable (if more than one) based on that deliverable’s fair value. The Company then considers the appropriate recognition method for each deliverable. The Company’s multiple element arrangements can include defined design and development activities and/or functional upgrades, and product sales. The Company utilizes the selling price hierarchy that has been established by ASU 2009-13, which requires that the selling price for each deliverable be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. To the extent that an arrangement includes a deliverable for which estimated selling price is used, the Company determines the best estimate of selling price by applying the same pricing policies and methodologies that it would use to determine the price to sell the deliverable on a standalone basis. To the extent that an arrangement contains defined design and EDC activities as identified deliverables in addition to products (resulting in a multiple element arrangement), the Company recognizes as EDC sales amounts earned during the design and development phase of the contract following the guidance included in FASB ASC Topic 605-35, “ Construction-Type and Production-Type Contracts ” (“ASC Topic 605-35”) under the percentage of completion method. To the extent that multiple element arrangements include product sales, sales are generally recognized once revenue recognition criteria for the product deliverables have been met based on the provisions of ASC Topic 605. Single Element Arrangements Products To the extent that a single element arrangement provides for product sales and repairs, the Company recognizes sales when revenue recognition criteria for the product deliverables have been met based on the provisions of ASC Topic 605. In addition, the Company also receives orders for equipment and parts, and in general, recognizes revenue upon shipment to customers. The Company may offer its customers extended warranties for additional fees, which it records as deferred revenue and recognizes as sales on a straight-line basis over the warranty periods. Engineering Development Contracts The Company may enter into contracts to perform specified design and EDC services related to its products. The Company recognizes revenue from these arrangements as EDC sales, following the guidance included in ASC Topic 605-35, and considers the nature of these contracts (including term, size of contract, and level of effort) when determining the appropriate accounting treatment for a particular contract. Certain of these contracts are accounted for under the percentage-of-completion method of accounting when the Company determines that progress toward completion is reasonably and reliably estimable, and the contract is long-term in nature. The Company uses the completed contract method for all other contracts. Sales and profit margins under the percentage-of-completion method are recorded based on the ratio of actual costs incurred to total estimated costs expected to be incurred related to the contract under the cost-to-cost method. The percentage-of-completion method of accounting requires the Company to estimate the profit margin for each individual contract or contract segment and to apply that profit margin on a uniform basis as sales are recorded under the contract. The estimation of profit margin requires the Company to make projections of the total sales to be generated and the total costs that will be incurred under a contract. These projections require the Company to make numerous assumptions and estimates relating to items such as the complexity of design and related development costs, performance of subcontractors, availability and cost of materials, engineering productivity, prototype costs, overhead costs, and capital costs. These contracts sometimes include purchase options for additional quantities and for customer change orders for additional or revised product functionality. Revenues and costs related to profitable purchase options are included in the Company’s estimates only when the options are exercised, while revenues and costs related to unprofitable purchase options are included in the Company’s estimates when exercise is determined to be probable. Revenues related to change orders are included in profit estimates only if they can be estimated reliably and collectability is reasonably assured. Purchase options and change orders are accounted for either as an integral part of the original contract, or separately, depending upon the nature and value of the item, in the period in which any change order or purchase option becomes effective. Anticipated losses on contracts are recognized in full in the period in which losses become probable and estimable. Estimates of profit margins for contracts are reviewed by the Company on a quarterly basis. Assuming the initial estimates of revenues and costs under a contract are accurate, the percentage-of-completion method results in the profit margin being recorded evenly as revenue is recognized under the contracts. Changes in these underlying estimates due to revisions in revenue and cost estimates or the exercise of contract options may result in profit margins being recognized unevenly over a contract as such changes are accounted for on a cumulative basis in the period in which the estimates are revised. Significant changes in estimates related to accounting for long-term contracts may have a material effect on the Company’s results of operations in the period in which the revised estimates are made. Cumulative catch-up adjustments (loss contracts) if any, resulting from changes in estimates, are included in results of operations and disclosed in the notes to consolidated financial statements. Customer Service Revenue The Company enters into sales arrangement 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 for the fiscal years ended 2016, 2015 and 2014 are as follows: For the Fiscal Year Ended September 30, 2016 2015 2014 Customer Service Sales $ $ $ Customer Service Cost of Sales Gross Profit $ $ $
Income Taxes	Income Taxes Income taxes are recorded in accordance with FASB ASC Topic 740, “ Income Taxes ” (“ASC Topic 740”), which utilizes a balance sheet approach to provide for income taxes. Under this method, the Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company’s assets, liabilities, and expected benefits of utilizing net operating loss (“NOL”) and tax credit carry-forwards. The impact on deferred taxes of changes in tax rates and laws, if any, are applied to the years during which temporary differences are expected to be settled and are reflected in the consolidated financial statements in the period of enactment. 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 carryback years, and tax planning strategies which are both prudent and feasible. The Company’s current balance of the deferred tax valuation allowance is recorded against the majority of its federal and state deferred tax assets. The remaining amount of the deferred tax assets recognized are attributable to tax planning strategies and the ability to carryback federal tax losses to claim a tax refund. 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 federal or 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 United States 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 Total engineering development expense is comprised of both internally funded research and development (“R&D”) and product development and design charges related to specific customer EDC. Engineering development expense consists primarily of payroll-related expenses of employees engaged in EDC, 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 EDC are charged to cost of sales.
Comprehensive Income	Comprehensive Income Pursuant to FASB ASC Topic 220, “ Comprehensive Income ” (“ASC Topic 220”), the Company is required to classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of its condensed consolidated balance sheets. For fiscal 2016, 2015 and 2014 comprehensive income consisted of net income only, and there were no items of other comprehensive income for any of the periods presented.
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 September 30, 2016 and 2015, according to the valuation techniques the Company used to determine their fair values. Fair Value Measurement on September 30, 2016 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 $ $ — $ — Fair Value Measurement on September 30, 2015 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 $ $ — $ —
Share-Based Compensation	Share-Based Compensation The Company accounts for share-based compensation under FASB ASC Topic 505-50, “ Equity-Based Payments to Non-Employees” (“ASC Topic 505-50”) and ASC Topic 718, “ Stock Compensation” (“ASC Topic 718”), which require the Company to measure the cost of employee or non-employee director services received in exchange for an award of equity instruments based on the grant-date fair value of the award using an option pricing model. The Company recognizes that cost recognized over the period during which an employee or non-employee director is required to provide service in exchange for the award.
Warranty	Warranty The Company offers warranties on some products of various lengths, however the standard warranty 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 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, demographic factors and other actuarial assumptions. The Company estimated the total medical claims incurred but not reported and the Company believes that it has adequate reserves for these claims at September 30, 2016. However, the actual value of such claims could be significantly affected if future occurrences and claims differ from these assumptions. At September 30, 2016, the estimated liability for medical claims incurred but not reported was $52,600. The Company has recorded the excess of funded premiums over estimated claims incurred but not reported of $253,000 as a current asset in the accompanying consolidated balance sheet. During the year ended September 30, 2016, the Company has used the excess of funded premiums to reduce amounts payable for claims incurred.
Treasury Stock	Treasury Stock We account for treasury stock purchased under the cost method and include treasury stock as a component of stockholder’s equity. Treasury stock purchased with intent to retire (whether or not the retirement is actually accomplished) is charged to common stock.
New Accounting Pronouncements	New Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company is currently evaluating the impacts of adoption of this guidance. In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which simplifies balance sheet presentation of deferred income taxes. Previous guidance required an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position; however, the new guidance requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The updated standard is effective for the Company beginning October 1, 2017, with early adoption permitted as of the beginning of any interim or annual reporting period. The Company early adopted this standard retrospectively and reclassified its current deferred tax assets to noncurrent deferred tax assets for all periods presented. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. In July 2015, the FASB issued guidance regarding Simplifying the Measurement of Inventory. This guidance requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market (market in this context is defined as one of three different measures). The guidance will not apply to inventories that are measured by using either the last-in, first-out (“LIFO”) method or the retail inventory method (“RIM”). The guidance is effective for the Company beginning October 1, 2017. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial statements disclosure. In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40) (ASU 2014-15). The objective of ASU 2014-15 is to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and provide related disclosures. Currently, GAAP does not provide guidance to evaluate whether there is substantial doubt regarding an organization’s ability to continue as a going concern. This ASU provides guidance to an organization’s management, with principles and definitions to reduce diversity in the timing and content of financial statement disclosures commonly provided by organizations. ASU 2014-15 is effective for periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (ASC Topic 606)” (“ASU 2014-09”). ASU 2014-09 will supersede existing revenue recognition guidance and require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standards were scheduled to be effective for reporting periods beginning after December 15, 2016, and early adoption is not permitted. However, on July 9, 2015, the FASB decided to delay the effective date of the new revenue standard by one year, but reporting entities may choose to adopt the standard as of the original effective date. Additionally, during 2016, the FASB issued ASU Nos. 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Gross versus Net), ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”, and ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,” all of which should be adopted concurrent with ASU 2014-09. Adoption of the new rules could affect the timing of revenue recognition for certain transactions. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring retrospective application of the new standard with the cumulative effect of applying the new standard as of the date of initial application recognized and disclosure of results under old standards. The FASB has recently issued an Exposure Draft of a proposed ASU that would delay by one year the effective date of this standard. The Company is currently evaluating the impacts of adoption and the implementation approach to be used. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.

Summary of Significant Accoun25

Summary of Significant Accounting Policies (Tables)	12 Months Ended
	Sep. 30, 2016
Summary of Significant Accounting Policies
Schedule of inventories	September 30, September 30, 2016 2015 Raw materials $ $ Work-in-process Finished goods $ $
Schedule of customer service revenue and cost of sales	For the Fiscal Year Ended September 30, 2016 2015 2014 Customer Service Sales $ $ $ Customer Service Cost of Sales Gross Profit $ $ $
Schedule of financial assets and liabilities accounted for at fair value on a recurring basis	Fair Value Measurement on September 30, 2016 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 $ $ — $ — Fair Value Measurement on September 30, 2015 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 $ $ — $ —

Net Income Per Share (Tables)

Net Income Per Share (Tables)	12 Months Ended
	Sep. 30, 2016
Net Income Per Share
Schedule of net income per share	For the Fiscal Year Ended September 30, 2016 2015 2014 Numerator: Net income (loss) $ $ ) $ Denominator: Basic weighted average shares Dilutive effect of share-based awards — Diluted weighted average shares Net income (loss) per common share: Basic $ $ ) $ Diluted $ $ ) $

Prepaid Expenses and Other Cu27

Prepaid Expenses and Other Current Assets (Tables)	12 Months Ended
	Sep. 30, 2016
Prepaid Expenses and Other Current Assets
Schedule of prepaid expenses and other current assets	September 30, September 30, 2016 2015 Prepaid insurance $ $ Income tax refund receivable Other $ $

Property and Equipment (Tables)

Property and Equipment (Tables)	12 Months Ended
	Sep. 30, 2016
Property and Equipment
Schedule of property and equipment, net	September 30, September 30, 2016 2015 Computer equipment $ $ Corporate airplane Furniture and office equipment Manufacturing facility Equipment Land Less accumulated depreciation and amortization ) ) $ $

Other Assets (Tables)

Other Assets (Tables)	12 Months Ended
	Sep. 30, 2016
Other Assets
Schedule of other assets	September 30, September 30, 2016 2015 Intangible assets, net of accumulated amortization of $529,037 and $517,037 at September 30, 2016 and September 30, 2015 $ $ Other non-current assets $ $

Accrued Expenses (Tables)

Accrued Expenses (Tables)	12 Months Ended
	Sep. 30, 2016
Accrued Expenses
Schedule of accrued expenses	September 30, September 30, 2016 2015 Warranty $ $ Salary, benefits and payroll taxes Professional fees Other $ $

Warranty (Tables)

Warranty (Tables)	12 Months Ended
	Sep. 30, 2016
Warranty
Schedule of warranty cost and accrual information	2016 2015 Warranty accrual as of October 1, $ $ Accrued expense for fiscal year Warranty cost incurred for fiscal year ) ) Warranty accrual as of September 30, $ $

Income Taxes (Tables)

Income Taxes (Tables)	12 Months Ended
	Sep. 30, 2016
Income Taxes
Schedule of components of income taxes	For the Fiscal Year Ended September 30, 2016 2015 2014 Current provision (benefit): Federal $ $ ) $ State ) ) Total current provision (benefit) ) Deferred provision (benefit): Federal ) State ) Total deferred provision (benefit) ) Total current and deferred provision (benefit) $ $ $ )
Schedule of reconciliation of the statutory federal rate to the Company's effective income tax rate	For the Fiscal Year Ended September 30, 2016 2015 2014 U.S. Federal statutory tax rate % % % State income taxes, net of federal benefit % % % Permanent items )% )% % Research and development tax credits )% % % Valuation allowance )% )% % Change in unrecognized tax benefits )% )% )% 123R cancellations and forfeitures % )% )% Effective income tax rate % )% %
Schedule of deferred tax assets and liabilities	As of September 30, 2016 2015 Non Current Non Current Deferred tax assets: Reserves and accruals $ $ Research and development credit NOL carryforward - state Depreciation ) ) Stock options Other — Less: Valuation allowance ) ) Total deferred tax assets Deferred tax liabilities: Depreciation ) ) Total deferred tax liabilities ) ) Net deferred tax (liability) asset $ ) $
Schedule of reconciliation of beginning and ending balances of total amounts of gross unrecognized tax benefits	For the Fiscal Year Ended September 30, 2016 2015 2014 Balance at beginning of year $ $ $ Unrecognized tax benefits related to prior years ) — Unrecognized tax benefits related to current year Decrease in unrecognized tax benefits due to the lapse of applicable statute of limitations ) ) — Balance at end of year $ $ $

Share-Based Compensation (Table

Share-Based Compensation (Tables)	12 Months Ended
	Sep. 30, 2016
1998 Plan
Share-based compensation
Summary of option activity	Weighted Average Aggregate Exercise Intrinsic Options Price Value Outstanding at September 30, 2013 $ $ — Granted — — — Exercised ) Cancelled ) — Outstanding at September 30, 2014 $ — Granted — — — Exercised — — — Cancelled ) — Outstanding at September 30, 2015 $ $ — Granted — — — Exercised — — — Cancelled ) — Outstanding at September 30, 2016 $ $ — Vested $ $ — Options exercisable at September 30, 2016 $ $ —
Summary of information about stock options	Options Outstanding Options Exercisable Range of Exercise Outstanding Weighted- Weighted- As of September Weighted- $ 0.00 - $ 5.00 — — $ — — $ — $ 5.01 - $ 10.00 $ 10.01 - $ 15.00 — — — — — $ $
2009 Plan
Share-based compensation
Summary of option activity	Weighted Average Aggregate Exercise Intrinsic Options Price Value Outstanding at September 30, 2013 $ $ — Granted — — — Exercised ) Cancelled ) — Outstanding at September 30, 2014 $ $ Granted — — — Exercised ) Cancelled ) — Outstanding at September 30, 2015 $ — Granted Exercised — — — Cancelled ) — Outstanding at September 30, 2016 $ $ — Vested and expected to vest $ $ — Options exercisable at September 30, 2016 $ $ —
Summary of information about stock options	Options Outstanding Options Exercisable Range of Exercise Outstanding Weighted- Weighted- As of September Weighted- $ 0.00 - $ 5.00 $ $

Quarterly Financial Data (una34

Quarterly Financial Data (unaudited) (Tables)	12 Months Ended
	Sep. 30, 2016
Quarterly Financial Data (unaudited)
Summary of quarterly results of operations of the Company	Fiscal Year Ended September 30, 2016 First Quarter Second Quarter Third Quarter Fourth Quarter Net sales $ $ $ $ Cost of sales Gross profit Operating (loss) income ) Net (loss) income ) Net income (loss) per common share Basic $ ) $ $ $ Diluted $ ) $ $ $ Fiscal Year Ended September 30, 2015 First Quarter Second Quarter Third Quarter Fourth Quarter Net sales $ $ $ $ Cost of sales Gross profit Operating income (loss) ) ) ) Net income (loss) ) ) ) Net income (loss) per common share Basic $ $ ) $ ) $ ) Diluted $ $ ) $ ) $ )

Background (Details)

Background (Details)	12 Months Ended
	Sep. 30, 2016segment
Background
Number of business segments	1

Concentrations (Details)

Concentrations (Details) $ in Millions	12 Months Ended
	Sep. 30, 2016USD ($)customeritem	Sep. 30, 2015USD ($)customeritem	Sep. 30, 2014USD ($)customer
Concentration of Credit Risk
Number of Banks | item	2
Provision for loss on unbilled receivables		$ 1.3
Net sales | Major Customers
Concentrations
Concentration of risk (as a percent)	51.00%	57.00%	59.00%
Number of major customers | customer	5	5	5
Number of major annual customers | customer	3	2	3
Accounts receivable and unbilled receivables	$ 1.6	$ 3.5	$ 7.9
Net sales | Major Customers | Sierra Nevada
Concentrations
Concentration of risk (as a percent)	13.00%
Net sales | Major Customers | Jet2
Concentrations
Concentration of risk (as a percent)	12.00%
Net sales | Major Customers | DHL
Concentrations
Concentration of risk (as a percent)	11.00%
Net sales | Major Customers | Pilatus
Concentrations
Concentration of risk (as a percent)		20.00%	17.00%
Net sales | Major Customers | Eclipse
Concentrations
Concentration of risk (as a percent)		15.00%	14.00%
Net sales | Major Customers | Fed Ex
Concentrations
Concentration of risk (as a percent)			12.00%
Net sales | Major Customers | Government contractors and Agencies
Concentrations
Concentration of risk (as a percent)	32.00%	30.00%	39.00%
Net sales | Major Products | Air data systems and components
Concentrations
Concentration of risk (as a percent)	5.00%	2.00%	12.00%
Net sales | Major Products | FPDS
Concentrations
Concentration of risk (as a percent)	95.00%	98.00%	88.00%
Inventory | Supplier Concentration Risk
Concentrations
Concentration of risk (as a percent)	25.00%	43.00%
Number of major suppliers | item	1	1
Delta
Concentration of Credit Risk
Provision for loss on unbilled receivables		$ 1.3	$ 3.7

Summary of Significant Accoun37

Summary of Significant Accounting Policies (Details)	12 Months Ended
	Sep. 30, 2016USD ($)item	Sep. 30, 2015USD ($)	Sep. 30, 2014USD ($)
Property and Equipment
Depreciation	$ 500,000	$ 600,000	$ 600,000
Long-Lived Assets
Impairment charges	0	0	0
Inventories valuation
Raw materials	2,966,891	3,346,778
Work-in-process	500,869	745,311
Finished goods	178,068	505,227
Inventory, Net, Total	$ 3,645,828	4,597,316
Revenue Recognition
Minimum number of deliverable for allocating revenue to each deliverable | item	1
Customer Service Revenue
Customer Service Sales	$ 3,597,828	2,612,626	2,432,675
Customer Service Cost of Sales	1,271,022	1,096,332	1,152,549
Gross Profit	$ 2,326,806	$ 1,516,294	$ 1,280,126
Property and equipment except corporate airplane and manufacturing facility | Minimum
Property and Equipment
Estimated useful lives	3 years
Property and equipment except corporate airplane and manufacturing facility | Maximum
Property and Equipment
Estimated useful lives	7 years
Corporate airplane
Property and Equipment
Depreciation	$ 0
Manufacturing facility
Property and Equipment
Estimated useful lives	39 years

Summary of Significant Accoun38

Summary of Significant Accounting Policies - Fair Value (Details) - USD ($)	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Warranty
Standard Product Warranty Accrual, Length of Warranty Period	24 months
Self Insurance Reserves
Estimated liability for medical claims incurred but not reported	$ 52,600
Excess of funded premiums over estimated claims incurred but not reported	253,000
Fair value on a recurring basis | Quoted Price in Active Markets for Identical Assets (Level 1) | Money market funds
Assets
Cash and cash equivalents	$ 17,424,641	$ 14,410,806

Net Income Per Share (Details)

Net Income Per Share (Details) - USD ($)	3 Months Ended								12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Numerator:
Net income (loss)	$ 397,129	$ 226,797	$ 1,578,313	$ (215,438)	$ (2,563,812)	$ (3,531,973)	$ (364,091)	$ 593,742	$ 1,986,801	$ (5,866,134)	$ 200,268
Denominator:
Basic weighted average shares									16,927,055	16,924,189	16,927,879
Dilutive effect of share-based awards									112,241		221,227
Diluted weighted average shares									17,039,296	16,924,189	17,149,106
Net income (loss) per common share:
Basic (in dollars per share)	$ 0.02	$ 0.01	$ 0.09	$ (0.01)	$ (0.15)	$ (0.21)	$ (0.02)	$ 0.04	$ 0.12	$ (0.35)	$ 0.01
Diluted (in dollars per share)	$ 0.02	$ 0.01	$ 0.09	$ (0.01)	$ (0.15)	$ (0.21)	$ (0.02)	$ 0.03	$ 0.12	$ (0.35)	$ 0.01
Options to purchase common stock outstanding (in shares)	589,168				645,168				589,168	645,168
Anti-dilutive options to purchase common stock excluded from the computation of diluted earnings per share (in shares)									339,581		55,666
RSU
Net income (loss) per common share:
Restricted stock units outstanding ( in shares)	67,115				0				67,115	0

Unbilled Receivables (Details)

Unbilled Receivables (Details) - USD ($)	3 Months Ended								12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Unbilled receivables
Unbilled receivables, net	$ 1,597,672				$ 3,920,209				$ 1,597,672	$ 3,920,209
Provision for loss on unbilled receivables					1,300,000					1,300,000
Change in operating income resulting from revised estimates	$ 546,460	$ 232,344	$ 1,973,116	$ (308,733)	$ (2,884,231)	$ (264,862)	$ (637,965)	$ 166,315	2,443,187	(3,620,743)	$ (142,868)
Contracts accounted for under percentage of completion
Unbilled receivables
Change in operating income resulting from revised estimates									$ 58,000	$ (117,000)	$ (1,500,000)

Prepaid Expenses and Other Cu41

Prepaid Expenses and Other Current Assets (Details) - USD ($)	Sep. 30, 2016	Sep. 30, 2015
Prepaid Expenses and Other Current Assets
Prepaid insurance	$ 386,212	$ 290,543
Income tax refund receivable	106,932	386,869
Other	354,063	544,305
Total	$ 847,207	$ 1,221,717

Property and Equipment (Details

Property and Equipment (Details) - USD ($)	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Property and equipment
Property and equipment, gross	$ 18,645,760	$ 18,375,537
Less accumulated depreciation and amortization	(11,683,198)	(11,280,207)
Property and equipment, net	6,962,562	7,095,330
Depreciation	500,000	600,000	$ 600,000
Computer equipment
Property and equipment
Property and equipment, gross	2,208,398	2,270,799
Corporate airplane
Property and equipment
Property and equipment, gross	3,194,571	3,128,504
Depreciation	0
Furniture and office equipment
Property and equipment
Property and equipment, gross	1,052,284	1,056,486
Manufacturing facility
Property and equipment
Property and equipment, gross	5,733,313	5,733,313
Equipment
Property and equipment
Property and equipment, gross	5,435,949	5,165,190
Land
Property and equipment
Property and equipment, gross	$ 1,021,245	$ 1,021,245

Other Assets (Details)

Other Assets (Details) - USD ($)	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Other Assets
Intangible assets, net of accumulated amortization of $529,037 and $517,037 at September 30, 2016 and September 30, 2015	$ 71,200	$ 83,200
Other non-current assets	85,748	85,748
Total other assets	156,948	168,948
Accumulated amortization of intangible assets	529,037	517,037
Impairment charges	0	0	$ 0
Total intangible amortization expense	$ 12,000	$ 17,000	$ 5,000

Accrued Expenses (Details)

Accrued Expenses (Details) - USD ($)	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Accrued Expenses
Warranty	$ 1,009,368	$ 878,901	$ 777,599
Salary, benefits and payroll taxes	267,323	537,451
Professional fees	308,905	353,012
Other	304,312	799,167
Total accrued expenses	1,889,908	2,568,531
EDC program costs	$ 100,000	$ 600,000

Warranty (Details)

Warranty (Details) - USD ($)	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Warranty cost and accrual information
Warranty accrual, beginning of period	$ 878,901	$ 777,599
Accrued expense for fiscal year	409,013	290,910
Warranty cost incurred for fiscal year	(278,546)	(189,608)
Warranty accrual, end of period	$ 1,009,368	$ 878,901

Income Taxes (Details)

Income Taxes (Details) - USD ($)	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Current provision (benefit):
Federal	$ 77,244	$ (375,936)	$ 614,729
State	(2,930)	(10,146)	363
Total current provision (benefit)	74,314	(386,082)	615,092
Deferred provision (benefit):
Federal	493,989	2,598,050	(857,049)
State	27	91,510	(41,665)
Total deferred provision (benefit)	494,016	2,689,560	(898,714)
Total current and deferred provision (benefit)	$ 568,330	$ 2,303,478	$ (283,622)
Reconciliation of the statutory federal rate to the Company's effective income tax rate
U.S. Federal statutory tax rate (as a percent)	34.00%	34.00%	34.00%
State income taxes, net of federal benefit (as a percent)	0.20%	0.00%	29.60%
Permanent items (as a percent)	(0.20%)	(2.50%)	123.90%
Research and development tax credits (as a percent)	(12.60%)	17.40%	190.40%
Valuation allowance (as a percent)	(2.90%)	(110.00%)	283.90%
Change in unrecognized tax benefits (as a percent)	(0.10%)	(2.60%)	(41.50%)
123R cancellations and forfeitures	3.80%	(1.00%)	(280.00%)
Effective income tax rate (as a percent)	22.20%	(64.70%)	340.30%

Income Taxes - Deferred tax ass

Income Taxes - Deferred tax assets and liabilities component (Details) - USD ($)	Sep. 30, 2016	Sep. 30, 2015
Non current deferred tax assets:
Reserves and accruals	$ 2,539,117	$ 3,321,257
Research and development credit	1,742,627	1,472,421
NOL carryforward - state	1,206,476	1,200,156
Depreciation	(725,018)	(741,736)
Stock options	603,881	678,316
Other		897
Gross non current deferred tax assets	5,367,083	5,931,311
Less : Valuation allowance	(5,297,757)	(5,371,528)
Total deferred tax assets	69,326	559,783
Non current deferred tax liabilities:
Depreciation	(137,027)	(133,468)
Total deferred tax liabilities	(137,027)	(133,468)
Net deferred tax liability	$ (67,701)
Net deferred tax asset		$ 426,315

Income Taxes - Net operating lo

Income Taxes - Net operating loss (Details) $ in Millions	Sep. 30, 2016USD ($)
State
Operating loss carryforward
Net operating loss	$ 20.1

Income Taxes - Tax carryforward

Income Taxes - Tax carryforward and reconciliation of unrecognized tax benefit (Details) - USD ($)	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Tax credit carryforward
Valuation allowance	$ 5,298,000	$ 5,372,000
Decrease in valuation allowance	74,000
Reconciliation of beginning and ending balances of total amounts of gross unrecognized tax benefits
Balance at beginning of year	615,000	526,000	$ 492,000
Unrecognized tax benefits related to prior years	(2,000)		1,500
Unrecognized tax benefits related to current year	26,000	125,000	32,500
Decrease in unrecognized tax benefits due to the lapse of applicable statute of limitations	(24,000)	(36,000)
Balance at end of year	615,000	615,000	526,000
Unrecognized tax benefits , if recognized, would impact effective tax rate	615,000	615,000	526,000
Unrecognized tax benefits against accrued interest	0
Accrual recorded for penalties	0
(Benefit) expense for interest (net of federal impact) recognized	(3,000)	$ (2,000)	$ 0
Adjustments resulting from IRS examination	0
R&D | Federal
Tax credit carryforward
Tax Credit carryforwards	1,262,000
R&D | State
Tax credit carryforward
Tax Credit carryforwards	$ 480,000

Savings Plan (Details)

Savings Plan (Details) - USD ($)	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Savings Plan
Contributions made to defined contribution savings plan	$ 127,000	$ 104,000	$ 163,000

Share-Based Compensation - Stoc

Share-Based Compensation - Stock option plan (Details)	Jan. 25, 2013$ / shares	Mar. 31, 2013USD ($)	Sep. 30, 2016USD ($)item	Sep. 30, 2015USD ($)	Sep. 30, 2014USD ($)
Share-based compensation
Share-based compensation expense			$ 251,000	$ 466,000	$ 810,000
Income tax effect recognized as a charge to additional paid-in capital related to share-based compensation			$ (8,000)	(54,000)	(253,000)
Number of share-based compensation plans maintained by the company | item			3
Options
Share-based compensation
Reduction in applicable option exercise price of each outstanding option (in dollars per share) | $ / shares	$ 1.50
1998 Plan
Share-based compensation
Share-based compensation expense			$ 0	0	0
1998 Plan | Options
Share-based compensation
Unrecognized compensation cost, related to non-vested stock options			0
2009 Plan
Share-based compensation
Share-based compensation expense			68,000	$ 316,000	$ 660,000
2009 Plan | Options
Share-based compensation
Share-based compensation expense		$ 22,000
Unrecognized compensation cost, related to non-vested stock options		$ 59,000	$ 0

Share-Based Compensation - 1998

Share-Based Compensation - 1998 Stock-Based Incentive Compensation Plan (Details) - USD ($)	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Share-based compensation
Share-based compensation expense	$ 251,000	$ 466,000	$ 810,000
Options
Outstanding at the beginning of the period (in shares)	645,168
Outstanding at the end of the period (in shares)	589,168	645,168
1998 Plan
Share-based compensation
Number of shares of common stock reserved for awards	3,389,000
Share-based compensation expense	$ 0	$ 0	$ 0
1998 Plan | Options
Share-based compensation
Unrecognized compensation cost, related to non-vested stock options	$ 0
Options
Outstanding at the beginning of the period (in shares)	53,000	62,000	144,500
Granted (in shares)	0	0	0
Exercised (in shares)			(12,000)
Cancelled (in shares)	(23,000)	(9,000)	(70,500)
Outstanding at the end of the period (in shares)	30,000	53,000	62,000
Vested and expected to vest (in shares)	30,000
Options exercisable at the end of the period (in shares)	30,000
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 8.83	$ 9.91	$ 12.79
Granted (in dollars per share)	0	0	0
Exercised (in dollars per share)			7.40
Cancelled (in dollars per share)	12.17	16.25	16.25
Outstanding at the end of the period (in dollars per share)	6.27	8.83	$ 9.91
Vested and expected to vest (in dollars per share)	6.27
Options exercisable at the end of the period (in dollars per share)	6.27
Aggregate Intrinsic Value
Exercised (in dollars)			$ 8,604
Intrinsic value of options granted (in dollars per share)	$ 0	$ 0	$ 0

Share-Based Compensation - Summ

Share-Based Compensation - Summary of information about stock options 1998 plan (Details) - 1998 Plan - Options	12 Months Ended
	Sep. 30, 2016$ / sharesshares
Information about stock options, by exercise price range
Options outstanding at the end of the period (in shares) | shares	30,000
Options Outstanding - Weighted-Average Remaining Contractual Life	1 year 4 months 22 days
Options Outstanding - Weighted-Average Exercise Price (in dollars per share)	$ 6.27
Options exercisable at the end of the period (in shares) | shares	30,000
Options Exercisable - Weighted-Average Exercise Price (in dollars per share)	$ 6.27
Range of Exercise Price - $0.00 - $5.00
Information about stock options, by exercise price range
Exercise price, low end of range (in dollars per share)	0
Exercise price, high end of range (in dollars per share)	5
Range of Exercise Price - $5.01 - $10.00
Information about stock options, by exercise price range
Exercise price, low end of range (in dollars per share)	5.01
Exercise price, high end of range (in dollars per share)	$ 10
Options outstanding at the end of the period (in shares) | shares	30,000
Options Outstanding - Weighted-Average Remaining Contractual Life	1 year 4 months 22 days
Options Outstanding - Weighted-Average Exercise Price (in dollars per share)	$ 6.27
Options exercisable at the end of the period (in shares) | shares	30,000
Options Exercisable - Weighted-Average Exercise Price (in dollars per share)	$ 6.27
Range of Exercise Price - $10.01 - $15.00
Information about stock options, by exercise price range
Exercise price, low end of range (in dollars per share)	10.01
Exercise price, high end of range (in dollars per share)	$ 15

Share-Based Compensation - Fair

Share-Based Compensation - Fair Value assumptions for 1998 stock option plan (Details) - USD ($)	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Share-based compensation
Share-based compensation expense	$ 251,000	$ 466,000	$ 810,000
1998 Plan
Share-based compensation
Share-based compensation expense	0	$ 0	$ 0
1998 Plan | Options
Share-based compensation
Unrecognized compensation cost, related to non-vested stock options	$ 0
1998 Plan | Options | Minimum
Share-based compensation
Vesting period	3 years
1998 Plan | Options | Maximum
Share-based compensation
Expiration term	10 years
Vesting period	5 years

Share-Based Compensation - 2009

Share-Based Compensation - 2009 Stock-Based Incentive Compensation Plan (Details) - USD ($)	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Options
Outstanding at the beginning of the period (in shares)	645,168
Outstanding at the end of the period (in shares)	589,168	645,168
2009 Plan
Share-based compensation
Number of shares of common stock reserved for awards	1,200,000
Number of shares of common stock available for awards under the plan	257,264
2009 Plan | Options
Options
Outstanding at the beginning of the period (in shares)	592,168	625,168	680,334
Granted (in shares)	67,115
Exercised (in shares)		(20,000)	(44,666)
Cancelled (in shares)	(33,000)	(13,000)	(10,500)
Outstanding at the end of the period (in shares)	626,283	592,168	625,168
Vested and expected to vest (in shares)	626,283
Options exercisable at the end of the period (in shares)	559,168
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 3.35	$ 3.28	$ 3.32
Granted (in dollars per share)	2.81
Exercised (in dollars per share)		1.95	3.78
Cancelled (in dollars per share)	3.78	2.37	3.78
Outstanding at the end of the period (in dollars per share)	3.27	$ 3.35	$ 3.28
Vested and expected to vest (in dollars per share)	3.27
Options exercisable at the end of the period (in dollars per share)	$ 3.32
Aggregate Intrinsic Value
Granted (in dollars)	$ 25,504
Exercised (in dollars)		$ 15,200	$ 178,823
Outstanding at the end of the period (in dollars)			$ 3,153,696
2009 Plan | Performance-based Award | Employee
Share-based compensation
Maximum award (in shares)	300,000

Share-Based Compensation - Su56

Share-Based Compensation - Summary of information about stock options 2009 plan (Details) - 2009 Plan - Range of Exercise Price - $0.00 - $5.00 - Options	12 Months Ended
	Sep. 30, 2016$ / sharesshares
Information about stock options, by exercise price range
Exercise price, low end of range (in dollars per share)	$ 0
Exercise price, high end of range (in dollars per share)	$ 5
Options outstanding at the end of the period (in shares) | shares	626,283
Options Outstanding - Weighted-Average Remaining Contractual Life	5 years 2 months 12 days
Options Outstanding - Weighted-Average Exercise Price (in dollars per share)	$ 3.27
Options exercisable at the end of the period (in shares) | shares	559,168
Options Exercisable - Weighted-Average Exercise Price (in dollars per share)	$ 3.32

Share-Based Compensation - Fa57

Share-Based Compensation - Fair Value assumptions for 2009 stock option plan (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2013	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Share-based compensation
Share-based compensation expense		$ 251,000	$ 466,000	$ 810,000
2009 Plan
Share-based compensation
Share-based compensation expense		68,000	316,000	660,000
2009 Plan | Non-employee director
Share-based compensation
Share-based compensation expense		178,000	$ 192,000	$ 200,000
2009 Plan | Options
Share-based compensation
Share-based compensation expense	$ 22,000
Unrecognized compensation cost, related to non-vested stock options	$ 59,000	$ 0
2009 Plan | Options | Minimum
Share-based compensation
Vesting period		3 years
2009 Plan | Options | Maximum
Share-based compensation
Expiration term		10 years
Vesting period		5 years

Share-Based Compensation -Fair

Share-Based Compensation -Fair Value of 2009 stock option plan and Restricted Stock Units (Details) - USD ($)	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Share-based compensation
Share-based compensation expense	$ 251,000	$ 466,000	$ 810,000
RSU
Share-based compensation
Restricted stock units outstanding ( in shares)	67,115	0
2009 Plan
Share-based compensation
Share-based compensation expense	$ 68,000	$ 316,000	660,000
2009 Plan | Non-employee director
Share-based compensation
Share-based compensation expense	$ 178,000	$ 192,000	$ 200,000
2009 Plan | RSU | Non-employee director
Share-based compensation
Restricted stock units outstanding ( in shares)	67,115	0	0
2009 Plan | RSU | Director
Share-based compensation
Shares settled in pro rata basis	1

Commitments and Contingencies -

Commitments and Contingencies - Operating leases and purchase obligations (Details) - USD ($)	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Operating Leases
Rent expense under operating leases	$ 83,000	$ 73,000	$ 69,000
Operating leases
Future minimum lease payments due in year two	77,000
Future minimum lease payments due in year three	40,000
Purchase obligations
Purchase obligations on open purchase orders	900,000	$ 500,000	$ 2,100,000
Product Liability
Product liability insurance	$ 50,000,000

Commitments and Contingencies60

Commitments and Contingencies - Legal proceedings (Details)	Sep. 30, 2016USD ($)item	Sep. 30, 2015USD ($)
Legal Proceedings
Unbilled receivables, net of progress payments	$ 1,597,672	$ 3,920,209
Inventory	$ 3,645,828	$ 4,597,316
Delta
Legal Proceedings
Number of aircraft | item	182
Unbilled receivables, net of progress payments	$ 3,600,000
Inventory	$ 200,000

Related Party Transactions (Det

Related Party Transactions (Details) - USD ($)	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Shareholder
Related Party Transactions
Legal fees	$ 122,000	$ 114,000	$ 99,000
Individual married to a shareholder and a daughter of Company's Chairman and Chief Executive Officer
Related Party Transactions
Service fees	$ 22,000	$ 11,000	$ 6,000

Quarterly Financial Data (una62

Quarterly Financial Data (unaudited) (Details) - USD ($)	3 Months Ended								12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Quarterly Financial Data (unaudited)
Net sales	$ 6,220,551	$ 6,504,592	$ 8,660,982	$ 6,583,578	$ 3,137,089	$ 4,919,690	$ 5,286,050	$ 6,724,255	$ 27,969,703	$ 20,067,084	$ 44,095,023
Cost of sales	2,835,905	2,621,016	2,757,635	3,267,767	2,482,200	2,988,045	3,702,654	3,962,450	11,482,323	13,135,349	30,508,823
Gross profit	3,384,646	3,883,576	5,903,347	3,315,811	654,889	1,931,645	1,583,396	2,761,805	16,487,380	6,931,735	13,586,200
Operating (loss) income	546,460	232,344	1,973,116	(308,733)	(2,884,231)	(264,862)	(637,965)	166,315	2,443,187	(3,620,743)	(142,868)
Net income (loss)	$ 397,129	$ 226,797	$ 1,578,313	$ (215,438)	$ (2,563,812)	$ (3,531,973)	$ (364,091)	$ 593,742	$ 1,986,801	$ (5,866,134)	$ 200,268
Net income (loss) per common share:
Basic (in dollars per share)	$ 0.02	$ 0.01	$ 0.09	$ (0.01)	$ (0.15)	$ (0.21)	$ (0.02)	$ 0.04	$ 0.12	$ (0.35)	$ 0.01
Diluted (in dollars per share)	$ 0.02	$ 0.01	$ 0.09	$ (0.01)	$ (0.15)	$ (0.21)	$ (0.02)	$ 0.03	$ 0.12	$ (0.35)	$ 0.01

Business Segments (Details)

Business Segments (Details) $ in Millions	12 Months Ended
	Sep. 30, 2016USD ($)segment	Sep. 30, 2015USD ($)	Sep. 30, 2014USD ($)
Business segments
Number of business segments | segment	1
Outside the United States
Geographic Data
Net sales from outside the United States | $	$ 8.2	$ 6.6	$ 12
FPDS | Net sales
Business segments
Sales percentage	95.00%	98.00%	88.00%
Air data systems and components | Net sales
Business segments
Sales percentage	5.00%	2.00%	12.00%
EDC services | Net sales
Business segments
Sales percentage	4.00%	27.00%	32.00%