GENCOR INDUSTRIES INC

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Gencor Industries, Inc. and its subsidiaries (collectively, the “Company”) is a diversified, heavy machinery manufacturer for the production of highway construction materials and environmental control machinery and equipment. The Company’s core products include asphalt plants, combustion systems, fluid heat transfer systems and asphalt pavers. The Company’s products are manufactured at three facilities in the United States.

These consolidated financial statements include the accounts of Gencor Industries, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Accounting Pronouncements and Policies

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2023-07,

Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

(“ASU

2023-07”)

, to enhance disclosures about significant segment expenses for public entities reporting segment information under Accounting Standards Codification (“ASC”),

Segment Reporting (Topic 280)

(“ASC Topic 280”). The amendments require public entities to disclose significant expense categories for each reportable segment, other segment items, the title and position of the chief operating decision-maker, and interim disclosures of certain segment-related information previously required only on an annual basis. The amendments clarify that entities reporting single segments must disclose both the new and existing segment disclosures under ASC Topic 280, and a public entity is permitted to disclose multiple measures of segment profit or loss if certain criteria are met. ASU

2023-07

is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company adopted ASU

2023-07

during the year ended September 30, 2025. The adoption of this standard impacted footnote disclosures but did not have a material impact on the Company’s consolidated financial statements. Refer to Notes 1 and 12 to the consolidated financial statements for required disclosures.

In December 2023, the FASB issued ASU

2023-09,

Income Taxes (Topic 740): Improvements to Income Tax Disclosures

(“ASU

2023-09”),

to enhance transparency into income tax disclosures. The amendments require annual disclosure of certain information relating to the rate reconciliation, income taxes paid by jurisdiction, income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign, income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign jurisdictions. The amendments also eliminate certain requirements relating to unrecognized tax benefits and certain deferred tax disclosure relating to subsidiaries and corporate joint ventures. ASU

2023-09

is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025. Early adoption is permitted. The Company is currently evaluating the impact of ASU

2023-09

on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU

2024-03,

Income Statement—Reporting Comprehensive Income—Expense Disaggregation

Disclosures

(“ASU

2024-03”),

which requires entities to (i) disclose amounts of (a) purchase of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and, (e) depreciation, depletion, and amortization recognized as part of

oil-and

gas-producing

activities, (ii) include certain amounts that are already required to be disclosed under current GAAP in the same disclosures as other disaggregation requirements, (iii) disclose a qualitative description of the amounts remaining in relevant expense captions that are not necessarily disaggregated quantitatively, and (iv) disclose the total amount of selling expenses, in annual reporting periods, and an entity’s definition of selling expense. ASU

2024-03 is

effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted.

The Company is currently evaluating the impact of ASU

2024-03 on

its consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU

2025-05,

Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets

(“ASU

2025-05”).

ASU

2025-05

amends ASC,

Financial Instruments – Credit Losses (Topic 326)

(“ASC Topic 326”) to simplify how entities measure credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC,

Revenue from Contracts with Customers (Topic 606)

(“ASC Topic 606”). This update allows entities to assume that current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when estimating expected credit losses. ASU

2025-05

is effective for interim and annual periods beginning after December 15, 2025. Early adoption is permitted. The Company adopted ASU

2025-05

during the fourth quarter of fiscal 2025 by electing the practical expedient under ASU

2025-05

for estimating expected credit losses on current accounts receivable and current contract assets. As a result, the Company assumes that current conditions as of September 30, 2025, will remain unchanged for the remaining life of these assets. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

No other accounting pronouncements recently issued or newly effective have had, or are expected to have, a material impact on the Company’s consolidated financial statements.

Use of Estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Net Income per Share

The consolidated financial statements include basic and diluted net income per common share information. Basic net income per common share is based on the weighted-average number of shares outstanding. Diluted net income per common share is based on the sum of the weighted-average number of shares outstanding plus common stock equivalents. The weighted-average number of shares outstanding includes both common stock and Class B common stock. There were no equity compensation plans and arrangements previously approved by security holders as of September 30, 2025 and 2024 and there are no common stock equivalents as of September 30, 2025 and September 30, 2024.

The following presents the calculation of the basic and diluted net income per common share for the years ended September 30, 2025 and 2024:

Cash Equivalents

Cash equivalents consist of short-term certificates of deposit and deposits in money market accounts with original maturities of three months or less.

Marketable Securities and Fair Value Measurements

Marketable debt and equity securities are categorized as trading securities and are thus marked to market and stated at fair value. Fair value is determined using the quoted closing or latest bid prices for Level 1 investments and market standard valuation methodologies for Level 2 investments. Realized gains and losses on investment transactions are determined by specific identification and are recognized as incurred in the consolidated income statements. Net changes in unrealized gains and losses are reported in the consolidated income statements in the current period.

Fair Value Measurements

The fair value of financial instruments is presented based upon a hierarchy of levels that prioritizes the inputs of valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The fair value of exchange-traded funds, government securities, and cash and money funds, are substantially based on quoted market prices (Level 1). Corporate bonds are valued using market standard valuation methodologies, including: discounted cash flow methodologies, and matrix pricing or other similar techniques. The inputs to these market standard valuation methodologies include, but are not limited to: interest rates, credit standing of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, maturity, estimated duration and assumptions regarding liquidity and estimated future cash flows. In addition to bond characteristics, the valuation methodologies incorporate market data, such as actual trades completed, bids and actual dealer quotes, where such information is available. Accordingly, the estimated fair values are based on available market information and judgments about financial instruments (Level 2). Fair values of the Level 2 investments are provided by the Company’s professional investment management firms. From time to time the Company may transfer cash between its marketable securities portfolio and operating cash and cash equivalents.

The following table sets forth by level, within the fair value hierarchy, the Company’s assets measured at fair value as of September 30, 2025:

Net unrealized gains and losses reported during fiscal 2025 on trading securities still held as of September 30, 2025, were $1,327,000. There wereno transfers of investments between Level 1 and Level 2 during the year ended September 30, 2025. During the quarter ended June 30, 2025, $15,000,000 was transferred from the Company’s operating cash account to the investment portfolio.

The following table sets forth by level, within the fair value hierarchy, the Company’s assets measured at fair value as of September 30, 2024:

Net unrealized gains and losses reported during fiscal 2024 on trading securities still held as of September 30, 2024, were $2,412,000. There wereno transfers of investments between Level 1 and Level 2 during the year ended September 30, 2024.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, customer deposits and accrued expenses approximate fair value because of the short-term nature of these items.

Foreign Currency Transactions

Gains and losses resulting from foreign currency transactions are included in income and were not significant during the years ended September 30, 2025 and 2024.

Risk Management

Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash and cash equivalents, marketable securities, and accounts receivable. The Company maintains its cash accounts in various domestic financial institutions which may from time to time exceed federally insured limits. Operating cash is retained in overnight sweep accounts which allow for offsets to treasury service charges. The marketable securities include investments in cash and money funds, mutual funds, exchange traded funds (“ETF’s”), corporate bonds, government securities and equities through professional investment management firms. Investment securities are exposed to various risks, such as interest rate, market and credit risks.

The Company’s customers are not concentrated in any specific geographic region, but are concentrated primarily in the road and highway construction industry. The Company extends limited credit on parts sales to its customers based upon their credit-worthiness. Generally, the Company requires a significant

up-front

deposit before beginning manufacturing on complete asphalt plant and component orders, and requires full payment subject to hold-back provisions prior to shipment. The Company establishes an allowance for credit losses based upon the credit risk of specific customers, historical trends, and other pertinent information.

Inventories

Inventories are valued at the lower of cost or net realizable value, with cost being determined under the First In, First Out (“FIFO”) method and net realizable value defined as the estimated selling price of goods less reasonable costs of completion and delivery. Appropriate consideration is given to obsolescence, excessive levels, physical deterioration, possible alternative uses and other factors in determining net realizable value. The cost of work in process and finished goods includes materials, direct labor, variable costs and overhead. The Company evaluates the need to record inventory adjustments on all inventories, including raw materials, work in process, finished goods, spare parts and used equipment. Used equipment acquired by the Company on

trade-in

from customers is carried at estimated net realizable value. Unless specific circumstances warrant different treatment regarding inventory obsolescence, an allowance is established to reduce the cost basis of inventories

three

tofour years old by 50%, the cost basis of inventories

four

tofive years old by 75%, and the cost basis of inventories greater than five years old tozero. Inventory is typically reviewed for obsolescence on an annual basis computed as of September 30, the Company’s fiscal year end. If significant known changes in trends, technology or other specific circumstances that warrant consideration occur during the year, then the impact on obsolescence is considered at that time.

Changes in the allowance for slow-moving and obsolete inventories for the years ended September 30, 2025 and 2024 consisted of the following:

Property and Equipment

Property and equipment are stated at cost (see Note 4). Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the related assets, as follows:

Impairments

Property and equipment, and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis. No such impairment losses were recorded during the years ended September 30, 2025 and 2024.

Revenues and Expenses

The Company accounts for revenues and related expenses under the provisions of ASU

2014-09,

Revenue from Contracts with Customers (Topic 606)

(“ASU

2014-09”).

The following table disaggregates the Company’s net revenue by major source for the years ended September 30, 2025 and 2024:

Revenues from contracts with customers for the design, manufacture and sale of custom equipment are recognized over time when the performance obligation is satisfied by transferring control of the equipment. Control of the equipment transfers over time, as the equipment is unique to the specific contract and thus does not create an asset with an alternative use to the Company. Revenues and costs are recognized in proportion to actual labor costs incurred, as compared with total estimated labor costs expected to be incurred, during the entire contract. All incremental costs related to obtaining a contract are expensed as incurred, as the amortization period is less than

one year

. Changes to total estimated contract costs or losses, if any,

are

recognized in the period in which they are determined.

Contract assets (excluding accounts receivable) under contracts with customers represent revenue recognized in excess of amounts billed on equipment sales recognized over time. These contract assets were $12,208,000 and $9,339,000 at September 30, 2025 and 2024, respectively, and are included in current assets on the Company’s consolidated balance sheets. The Company anticipates that all of the contract assets at September 30, 2025 will be billed and collected withinone year.

Revenues from all other contracts for the design and manufacture of equipment, for service and for parts sales, net of any discounts and return allowances, are recorded at a point in time when control of the goods or services has been transferred. Control of the goods or service typically transfers at time of shipment or upon completion of the service.

Payment for equipment under contract with customers is typically due prior to shipment. Payment for services under contract with customers is due as services are completed. Accounts receivable related to contracts with customers for equipment sales were $80,000 and $163,000 at September 30, 2025 and September 30, 2024, respectively.

Product warranty costs are estimated using historical experience and known issues and are charged to production costs as revenue is recognized.

Changes in the accrual for warranty and related costs for the years ended September 30, 2025 and 2024 consisted of the following:

Provisions for estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. Returns and allowances, which reduce product revenue, are estimated using historical experience.

Under certain contracts with customers, recognition of a portion of the consideration received may be deferred and recorded as a contract liability if the Company has to satisfy a future obligation, such as to provide installation assistance. There were no contract liabilities other than customer deposits at September 30, 2025 and 2024. Customer deposits related to contracts with customers were $3,889,000 and $5,018,000 at September 30, 2025 and 2024, respectively, and are included in current liabilities on the Company’s consolidated balance sheets.

The Company records revenues earned for shipping and handling as freight revenue at the time of shipment, regardless of whether or not it is identified as a separate performance obligation. The cost of shipping and handling is classified as production costs concurrently with the revenue recognition.

All product engineering and development costs, and selling, general and administrative expenses are charged to operations as incurred. Provision is made for any anticipated contract losses in the period that the loss becomes evident.

The allowance for credit losses is determined by performing a specific review of all account balances greater than 90 days past due and other higher risk amounts to determine collectability, and also adjusting for any known customer payment issues with account balances in the

less-than-90-day

past due aging category. Account balances are charged off against the allowance for credit losses when they are determined to be uncollectible. Any recoveries of account balances previously considered in the allowance for credit losses reduce future additions to the allowance for credit losses. The allowance for credit losses also includes an estimate for returns and allowances. Provisions for estimated returns and allowances and other adjustments, are provided for in the same period the related sales are recorded. Returns and allowances, which reduce product revenue, are estimated using known issues and historical experience.

Changes in the allowance for credit losses for the years ended September 30, 2025 and 2024 consisted of the following:

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and primarily consist of taxes currently due, plus deferred taxes (see Note 6 – Income Taxes).

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns using current tax rates. The Company and its domestic subsidiaries file a consolidated federal income tax return.

Deferred tax assets and liabilities are measured using the rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse and the credits are expected to be used. The effect on deferred tax assets and liabilities of the change in tax rates is recognized in income in the period that includes the enactment date. All available evidence, both positive and negative, is considered to determine whether, based on the weight of that evidence, the Company is more likely than not to realize the benefit of a deferred tax asset and whether a valuation allowance is needed for some portion or all of a deferred tax asset. No such valuation allowances were recorded as of September 30, 2025 and 2024.

The Company’s income tax provision is based on management’s estimate of the effective tax rate for the full year. The tax provision in any period will be affected by, among other things, permanent, as well as temporary differences in the deductibility of certain items, in addition to changes in tax legislation. As a result, the Company may experience significant fluctuations in the effective book tax rate (that is, its tax expense divided by

pre-tax

book income) from period to period. The Company’s effective tax rates for fiscal 2025 and 2024 reflect the impact of the reduced rates under the U.S. Tax Cuts and Jobs Act which was signed into law on December 22, 2017.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing and the business interest expense limitation. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented after. The legislation did not have a material impact on our fiscal 2025 effective tax rate or consolidated financial statements and is not expected to have a material impact in fiscal 2026. We continue to review the OBBBA tax provisions to assess impacts to the consolidated financial statements.

Comprehensive Income

For the years ended September 30, 2025 and 2024, other comprehensive income is equal to net income.

Reporting Segments and Geographic Areas

The Company has one reporting segment, equipment for the highway construction industry. Based on evaluation of the criteria of ASC Topic 280 including the nature of products and services, the nature of the production processes, the type of customers and the methods used to distribute products and services, the Company determined that its operating segments meet the requirements for aggregation. The chief operating decision maker (“CODM”), who is the Company’s President, measures financial performance as a single enterprise and allocates resources across the Company to maximize profitability, and not on geography, legal entity, or end market basis. The Company designs, manufactures and sells asphalt plants and pavers, combustion systems and fluid heat transfer systems, for the highway construction industry and environmental and petrochemical markets. The Company’s products are manufactured at three facilities in the United States. The Company also services and sells spare parts for its equipment.

For fiscal 2025 and 2024, total long-term assets of $16,055,000 and $15,279,000, respectively, were attributed to the United States. Net revenue is attributed to geographic areas based on the final destination of products shipped. Net revenue by geographic location for fiscal 2025 and 2024 is as follows:

Customers with 10% (or greater) of Net Revenues

For the year ended September 30, 2025, no customer accounted for 10.0% or more of net revenue. One customer accounted for 11.3% of net revenue for the year ended September 30, 2024.

Subsequent Events

Management has evaluated events occurring from September 30, 2025 through the date these consolidated financial statements were filed with

the

Securities and Exchange Commission for proper recording and disclosure herein. The Company did not identify any subsequent events that would have required adjustment to or disclosure in the consolidated financial statements.

NOTE 2 – INVENTORIES

Inventories are valued at the lower of cost or net realizable value.

Net inventories as of September 30, 2025 and 2024 consisted of the following:

Slow-moving and obsolete inventory reserves were $15,569,000 and $13,331,000 at September 30, 2025 and 2024, respectively.

NOTE 3 – CONTRACT ASSETS

Contract assets reflect costs and estimated earnings in excess of billings on uncompleted contracts and consisted of the following as of September 30, 2025 and 2024:

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment as of September 30, 2025 and 2024 consisted of the following:

Property and equipment at September

0, 2025 and September 30, 2024 includes approximately $25,187,000 and $23,365,000, respectively, of fully depreciated assets which remained in service during fiscal 2025 and 2024. Also, included in property and equipment as of September 30, 2025 and 2024 is approximately $2,842,000 and $1,327,000, respectively, of assets not yet placed in operation and, therefore, not subject to depreciation during the years ended September 30, 2025 and 2024, respectively.

NOTE 5 - ACCRUED EXPENSES

Accrued expenses as of September 30, 2025 and 2024 consisted of the following:

NOTE 6 - INCOME TAXES

The provision for income tax expense as of September 30, 2025 and 2024 consisted of the following:

A reconciliation of the federal statutory tax rate to the total tax provision is as follows:

Deferred income tax assets and liabilities as of September 30, 2025 and 2024 consisted of the following:

Total income taxes paid in fiscal 2025 and 2024 were $4,076,000 and $7,860,000, respectively.

GAAP prescribes a comprehensive model for the financial recognition, measurement, classification, and disclosure of

uncertain tax positions. GAAP contains a

two-step

approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, based on the technical merits of the position. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement.

Significant judgment is required in evaluating the Company’s uncertain tax position and determining the Company’s provision for taxes. Although the Company believes the reserves of unrecognized tax benefits (“UTBs”) are reasonable, no assurance can be given that the final outcome of these matters will not be different from that which is reflected in the Company’s historical income tax provision and accruals. The Company adjusts these reserves in light of changing facts and circumstances. As of September 30, 2025 and 2024, the Company had UTBs of $1,983,000 and $1,376,000, respectively. The Company accrued $607,000 of UTB’s in the year ended September 30, 2025. The Company accrued $1,200,000 of UTB’s in the year ended September 30, 2024.

A reconciliation of the beginning and ending amount of our unrecognized tax benefits for the years ended September 30, 2025 and 2024 is as follows:

The Company recognizes interest and penalties accrued related to UTBs as a component of income tax expense. There wereno additional accruals of interest expense nor penalties of significance during fiscal years ended September 30, 2025 and 2024. It is reasonably possible that the amount of the UTBs with respect to certain unrecognized tax positions will increase or decrease during the next 12 months. The Company does not expect the change to have a material effect on its results of operations or its financial position. The only expected potential reason for change would be the ultimate results stemming from any examinations by taxing authorities. If recognized, the entire amount of UTBs would have an impact on the Company’s effective income tax rate.

The effective income tax rate for fiscal 2025 was 22.5% versus 29.8% in fiscal 2024.

In fiscal 2025, the Company generated $354,000 of federal research and development tax credits (“R&D Credits”), all of which were used in fiscal 2025. There were

no R&D Credits generated in fiscal 2024 and there wereno carryforwards of R&D Credits as of September 30, 2025 or September 30, 2024.

The Company files U.S. federal income tax returns, as well as income tax returns in multiple state jurisdictions. No income tax returns are currently under examination by taxing authorities The Company’s U.S. federal income tax returns filed for tax years prior to fiscal year ended September 30, 2022 are generally no longer subject to examination by taxing authorities due to the expiration of the statute of limitations. With a few exceptions, the Company is no longer subject to state and local income tax examinations for periods prior to fiscal 2021.

NOTE 7 - RETIREMENT BENEFITS

The Company has a voluntary 401(k) employee benefit plan, which covers all eligible, domestic employees. The Company makes discretionary matching contributions subject to a maximum level, in accordance with the terms of the plan. The Company charged approximately $359,000 and $373,000 to expense under the provisions of the plan during the years ended September 30, 2025 and 2024, respectively.

NOTE 8 - LONG-TERM DEBT AND ARRANGEMENTS WITH FINANCIAL INSTITUTIONS

The Company hadno long-term debt outstanding at September 30, 2025 or 2024. The Company does not currently require a credit facility.

In April 2020, a financial institution issued an irrevocable standby letter of credit (“letter of credit”) on behalf of the Company for the benefit of one of the Company’s insurance carriers. The maximum amount that can be drawn by the beneficiary under the letter of credit is $150,000. The letter of credit expires in February 2026, unless terminated earlier, and can be extended, as provided by the agreement. The Company intends to renew the letter of credit for as long as the Company does business with the beneficiary insurance carrier. The letter is collateralized by restricted cash of the same amount on any outstanding drawings. To date, no amounts have been drawn under the letter of credit.

NOTE 9 - LEASES

The Company leases certain equipment under

non-cancelable

operating leases. Future minimum rental payments under these leases at September 30, 2025 are immaterial. Total rental expense for the fiscal years ended September 30, 2025 and 2024 was $64,000 and $47,000, respectively.

On August 28, 2020, the Company entered into athree-year operating lease for property related to the manufacturing and warehousing. The lease term was for the period beginning on September 1, 2020 through August 31, 2023. In accordance with ASU

Leases (Topic 842),

(“ASU

2016-02”)

the Company recorded a

right-of-use

(“ROU”) asset totaling $970,000 and related lease liabilities at inception. In March 2023, the Company extended the lease term through August 31, 2024. In accordance with ASU

the Company recorded a ROU asset totaling $352,000 and related lease liabilities upon extension. In March 2024, the Company extended the lease term through August 31, 2025. In accordance with ASU

the Company recorded a ROU asset totaling $361,000 and related lease liabilities upon extension. In March 2025, the Company extended the lease term through

August 31, 2026

. In accordance with ASU

the Company recorded a ROU asset totaling $370,000 and related lease liabilities upon extension.

For the year ended September 30, 2025, operating lease costs were $449,000 and cash payments related to these operating leases were $418,000. For the year ended September 30, 2024, operating lease costs were $432,000 and cash payments related to these operating leases were $463,000.

Other information concerning the Company’s operating lease accounted for under ASC 842 guidelines as of September 30, 2025 and September 30, 2024, is as follows:

Future annual minimum lease payments as of September 30, 2025 are as follows:

NOTE 10 - COMMITMENTS AND CONTINGENCIES

Litigation

The Company is involved in legal proceedings arising out of the normal course of business, none of which we believe will have a material adverse effect on our business, financial condition or results of operations. Claims made in the ordinary course of business may be covered in whole or in part by insurance.

NOTE 11 – SHAREHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

Shareholders’ Equity

Under the Company’s Certificate of Incorporation, as amended, certain rights of the holders of the Company’s common stock are modified by shares of Class B common stock for as long as such shares shall remain outstanding. During that period, holders of common stock will have the right to elect approximately 25% of the Company’s Board of Directors, and conversely, holders of Class B common stock will be entitled to elect approximately 75% of the Company’s Board of Directors. During the period when shares of common stock and Class B common stock are outstanding, certain matters submitted to a vote of shareholders will also require approval of the holders of common stock and Class B common stock, each voting separately as a class. Common stock and Class B common stock shareholders have equal rights with respect to dividends, preferences, and rights, including rights in liquidation.

Stock-Based Compensation

There were no equity compensation plans and arrangements previously approved by security holders as of September 30, 2025 and 2024.

NOTE 12 – SEGMENT INFORMATION

The Company conducts business as a single operating segment which is based upon the Company’s organizational and management structure, as well as information used by the CODM to allocate resources and other factors. The accounting policies of the segment are the same as those described in Note 1.

The key measure of segment profitability that the CODM uses to allocate resources and assess performance is consolidated net income, as reported on the consolidated income statements. The CODM utilizes consolidated net income, as well as net revenues and gross profit, and compares actual results to forecasted amounts. These segment (and consolidated) measures of profitability are shown in the consolidated income statements.

Asset information provided to the CODM is consistent with that reported on the consolidated balance sheets with particular emphasis on the Company’s available liquidity, including its cash and cash equivalents, marketable securities and inventory, reduced by current liabilities. Information relating to the Company’s products and services and geographical distribution of revenues is disclosed in Note 1.