Innovative Solutions & Support Inc 10-Q for FY2021 Q3

Innovative Solutions & Support Inc (IA)

10-Q 2021-08-13 For: 2021-06-30

Added on April 07, 2026

About this 10-Q

Innovative Solutions & Support Inc filed this 10-Q on August 13, 2021, covering the quarter ended June 30, 2021 (FY2021 Q3).

Headline figures

Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $6.18M; up 3.8% from $5.95M a year earlier
Diluted EPS: $0.16; up 128.6% from $0.07 a year earlier

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PENNSYLVANIA		23-2507402
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

720 Pennsylvania Drive, Exton, Pennsylvania		19341
(Address of Principal Executive Offices)		(Zip Code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		ISSC		NASDAQ Stock Market LLC


☐ Large accelerated filer	☐ Accelerated filer

☐ Non-accelerated filer	☒ Smaller reporting company

☐ Emerging growth company


		Page No.
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets – June 30, 2021 (unaudited) and September 30, 2020	1

	Condensed Consolidated Statements of Operations – Three and Nine Months Ended June 30, 2021 and 2020 (unaudited)	2

	Condensed Consolidated Statements of Shareholders’ Equity – Three and Nine Months Ended June 30, 2021 and 2020 (unaudited)	3 - 4

	Condensed Consolidated Statements of Cash Flows – Nine Months Ended June 30, 2021 and 2020 (unaudited)	5

	Notes to Condensed Consolidated Financial Statements (unaudited)	6 - 22

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23 - 31

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32

Item 4.	Controls and Procedures	32

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3.	Defaults upon Senior Securities	33

Item 4.	Mine Safety Disclosures	33

Item 5.	Other Information	33

Item 6.	Exhibits	34

SIGNATURES		35


	June 30,		September 30,
	2021		2020
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	7,482,863	$	12,603,967
Restricted Cash		—		11,180,900
Accounts receivable		4,293,727		4,369,111
Inventories		4,838,811		4,291,335
Prepaid expenses and other current assets		697,329		675,109
Total current assets		17,312,730		33,120,422
Property and equipment, net		8,220,942		8,175,872
Non-current deferred income taxes		1,331,928		—
Other assets		151,364		249,543

Total assets	$	27,016,964	$	41,545,837

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	936,042	$	790,892
Dividends payable		—		11,180,900
Accrued expenses		1,543,487		1,361,960
Contract liability		1,528,694		313,365

Total current liabilities		4,008,223		13,647,117
Non-current deferred income taxes		—		129,689

Total liabilities		4,008,223		13,776,806

Commitments and contingencies (See Note 6)

Shareholders' equity
Preferred stock, 10,000,000 shares authorized, $.001 par value, of which 200,000 shares are authorized as Class A Convertible stock. No shares issued and outstanding at June 30, 2021 and September 30, 2020		—		—
Common stock, $.001 par value: 75,000,000 shares authorized, 19,342,823 and 19,310,835 issued at June 30, 2021 and September 30, 2020		19,343		19,311
Additional paid-in capital		51,771,014		51,458,787
(Accumulated deficit)		(7,413,079)		(2,340,530)
Treasury stock, at cost, 2,096,451 shares at June 30, 2021 and September 30, 2020		(21,368,537)		(21,368,537)

Total shareholders' equity		23,008,741		27,769,031
Total liabilities and shareholders' equity	$	27,016,964	$	41,545,837


	Three Months Ended June 30,				Nine Months Ended June 30,
	2021		2020		2021		2020
Net Sales:
Product	$	5,981,462	$	5,445,748	$	15,886,967	$	14,550,124
Engineering development contracts		198,721		507,941		284,713		750,058
Total net sales		6,180,183		5,953,689		16,171,680		15,300,182

Cost of sales:
Product		2,764,765		2,486,353		7,270,708		6,795,530
Engineering development contracts		60,916		72,663		77,656		213,161
Total cost of sales		2,825,681		2,559,016		7,348,364		7,008,691

Gross profit		3,354,502		3,394,673		8,823,316		8,291,491

Operating expenses:
Research and development		646,795		870,805		1,936,747		2,249,439
Selling, general and administrative		1,512,138		1,279,422		4,847,410		4,514,085
Total operating expenses		2,158,933		2,150,227		6,784,157		6,763,524

Operating income		1,195,569		1,244,446		2,039,159		1,527,967

Interest income		107		7,767		1,138		152,358
Other income		17,231		16,261		50,994		44,760
Income before income taxes		1,212,907		1,268,474		2,091,291		1,725,085

Income tax (benefit) expense		(1,473,014)		8,616		(1,443,352)		(300,786)

Net income	$	2,685,921	$	1,259,858	$	3,534,643	$	2,025,871

Net income per common share:
Basic	$	0.16	$	0.07	$	0.21	$	0.12
Diluted	$	0.16	$	0.07	$	0.21	$	0.12

Weighted average shares outstanding:
Basic		17,230,387		16,952,973		17,222,312		16,931,049
Diluted		17,231,438		17,087,275		17,223,908		17,097,414


	Nine Months Ended June 30, 2021
			Additional
	Common		Paid-In		(Accumulated		Treasury
	Stock		Capital		Deficit)		Stock		Total

Balance, September 30, 2020	$	19,311	$	51,458,787	$	(2,340,530)	$	(21,368,537)	$	27,769,031

Share-based compensation		—		45,591		—		—		45,591
Dividends declared		—		—		(8,607,192)		—		(8,607,192)
Net income		—		—		240,145		—		240,145

Balance, December 31, 2020	$	19,311	$	51,504,378	$	(10,707,577)	$	(21,368,537)	$	19,447,575


Issuance of stock to directors		27		159,953		—		—		159,980
Share-based compensation		—		44,594		—		—		44,594
Net income		—		—		608,577		—		608,577

Balance, March 31, 2021	$	19,338	$	51,708,925	$	(10,099,000)	$	(21,368,537)	$	20,260,726

Share-based compensation		—		45,084		—		—		45,084
Exercise of stock options		5		17,005		—		—		17,010
Net income		—		—		2,685,921		—		2,685,921

Balance, June 30, 2021	$	19,343	$	51,771,014	$	(7,413,079)	$	(21,368,537)	$	23,008,741


	Nine Months Ended June 30, 2020
			Additional
	Common		Paid-In		Retained		Treasury
	Stock		Capital		Earnings		Stock		Total

Balance, September 30, 2019	$	19,006	$	51,987,096	$	5,570,587	$	(21,368,537)	$	36,208,152

Net income		—		—		327,908		—		327,908

Balance, December 31, 2019	$	19,006	$	51,987,096	$	5,898,495	$	(21,368,537)	$	36,536,060

Issuance of stock to directors		73		159,919		—		—		159,992
Exercise of stock options		2		8,820		—		—		8,822
Net income		—		—		438,105		—		438,105

Balance, March 31, 2020	$	19,081	$	52,155,835	$	6,336,600	$	(21,368,537)	$	37,142,979

Net income		—		—		1,259,858		—		1,259,858

Balance, June 30, 2020	$	19,081	$	52,155,835	$	7,596,458	$	(21,368,537)	$	38,402,837


	For the Nine Months Ended June 30,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	3,534,643	$	2,025,871
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		334,250		301,550
Share-based compensation expense
Stock options		135,269		—
Stock awards		159,980		159,992
Excess and obsolete inventory cost		(195,762)		—
Deferred income taxes		(1,461,617)		38
(Increase) decrease in:
Accounts receivable		75,383		(1,516,119)
Contract asset		—		80,182
Inventories		(351,714)		(238,648)
Prepaid expenses and other current assets		(22,219)		(164,156)
Income taxes receivable		—		(303,280)
Increase (decrease) in:
Accounts payable		145,150		(129,993)
Accrued expenses		206,627		333,674
Income taxes payable		17,784		-
Contract liability		1,215,329		77,110
Net cash provided by operating activities		3,793,103		626,221

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(324,025)		(67,624)
Net cash (used in) investing activities		(324,025)		(67,624)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options		17,010		8,822
Dividend paid		(19,788,092)		—
Net cash (used in) provided by financing activities		(19,771,082)		8,822
Net (decrease) increase in cash and cash equivalents and restricted cash		(16,302,004)		567,419
Cash and cash equivalents and restricted cash, beginning of year		23,784,867		22,416,830

Cash and cash equivalents and restricted cash, end of year	$	7,482,863	$	22,984,249

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes	$	481	$	2,456


	Fair Value Measurement on June 30, 2021
	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	$	6,051,871	$	—	$	—

	Fair Value Measurement on September 30, 2020
	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	$	11,607,293	$	—	$	—


	Contract
	Liabilities

September 30, 2020	$	313,365
Amount transferred to receivables from contract assets		—
Contract asset additions		—
Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period		(305,494)
Increases due to invoicing prior to satisfaction of performance obligations		1,520,823
June 30, 2021	$	1,528,694


	For the Three Months Ended June 30,				For the Nine Months Ended June 30,
	2021		2020		2021		2020

Customer Service Sales	$	980,845	$	906,662	$	3,010,720	$	3,302,346
Customer Service Cost of Sales		408,161		320,428		1,079,462		1,072,397
Gross Profit	$	572,684	$	586,234	$	1,931,258	$	2,229,949


	June 30,		September 30,
	2021		2020

Raw materials	$	4,013,201	$	3,378,246
Work-in-process		581,568		656,382
Finished goods		244,042		256,707
	$	4,838,811	$	4,291,335


	Three Months Ending		Nine Months Ending
	June 30, 2021		June 30, 2021

Warranty accrual, beginning of period	$	578,172	$	547,743
Accrued expense		63,874		137,740
Warranty cost		(56,799)		(100,236)
Warranty accrual, end of period	$	585,247	$	585,247


Classification on the Consolidated Balance Sheet on June 30, 2021
Assets
Operating leases	Other assets	$	2,241

Liabilities
Operating leases- current	Accrued expenses	$	2,241
Operating leases – noncurrent	Other liabilities	$	0
Total lease liabilities		$	2,241


	June 30,		September 30,
	2021		2020

Computer equipment	$	2,310,994	$	2,302,978
Corporate airplanes		5,601,039		5,601,039
Furniture and office equipment		970,725		1,031,099
Manufacturing facility		5,883,691		5,733,313
Equipment		5,557,190		5,723,355
Land		1,021,245		1,021,245
		21,344,884		21,413,029
Less: accumulated depreciation and amortization		(13,123,942)		(13,237,157)
	$	8,220,942	$	8,175,872


	Twelve Months
	Ending	Operating
	June 30,	Leases
	2022		2,446
Total minimum lease payments		$	2,446
Amount representing interest			(205)
Present value of minimum lease payments			2,241
Current portion			(2,241)
Long-term portion of lease obligations		$	—


	Three Months Ended		Nine Months Ended

	June 30, 2021
Backlog, beginning of period	$	6,651,411	$	3,640,637
Bookings, net		8,982,646		21,984,917
Recognized in revenue		(6,180,183)		(16,171,680)
Backlog, end of period	$	9,453,874	$	9,453,874

31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) ⁽¹⁾

31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) ⁽¹⁾

32.1	Certification Pursuant to U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ⁽²⁾

101.INS	XBRL Instance Document ⁽¹⁾

101.SCH	XBRL Taxonomy Extension Scheme Document ⁽¹⁾

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document ⁽¹⁾

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document ⁽¹⁾

101.LAB	XBRL Taxonomy Extension Label Linkbase Document ⁽¹⁾

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document ⁽¹⁾


	INNOVATIVE SOLUTIONS AND SUPPORT, INC.

Date: August 13, 2021	By:	/s/ RELLAND WINAND
		RELLAND WINAND
		CHIEF FINANCIAL OFFICER