Innovative Solutions & Support Inc 10-Q for FY2022 Q3

Innovative Solutions & Support Inc (IA)

10-Q 2022-08-12 For: 2022-06-30

Added on April 07, 2026

About this 10-Q

Innovative Solutions & Support Inc filed this 10-Q on August 12, 2022, covering the quarter ended June 30, 2022 (FY2022 Q3).

Headline figures

Quarter ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $6.93M; up 12.2% from $6.18M a year earlier
Diluted EPS: $0.08; down 50.0% from $0.16 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, 2022 (unaudited) and September 30, 2021	1

	Condensed Consolidated Statements of Operations – Three and Nine Months Ended June 30, 2022 and 2021 (unaudited)	2

	Condensed Consolidated Statements of Shareholders’ Equity – Three and Nine Months Ended June 30, 2022 and 2021 (unaudited)	3 - 4

	Condensed Consolidated Statements of Cash Flows – Nine Months Ended June 30, 2022 and 2021 (unaudited)	5

	Notes to Condensed Consolidated Financial Statements (unaudited)	6 - 20

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21 - 29

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29

Item 4.	Controls and Procedures	29

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3.	Defaults upon Senior Securities	31

Item 4.	Mine Safety Disclosures	31

Item 5.	Other Information	31

Item 6.	Exhibits	32

SIGNATURES		33


	June 30,		September 30,
	2022		2021
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	14,541,901	$	8,265,606
Accounts receivable		3,003,362		4,046,337
Inventories		4,905,034		4,545,392
Prepaid expenses and other current assets		778,850		833,076
Assets held for sale		1,558,475		—
Total current assets		24,787,622		17,690,411
Property and equipment, net		6,381,461		8,143,483
Deferred income taxes		278,085		1,063,822
Other assets		168,900		188,284

Total assets	$	31,616,068	$	27,086,000

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	752,479	$	623,620
Accrued expenses		1,683,430		1,431,115
Contract liability		329,116		417,504

Total current liabilities		2,765,025		2,472,239

Other liabilities		18,407		28,680

Total liabilities		2,783,432		2,500,919

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, 2022 and September 30, 2021		—		—
Common stock, $.001 par value: 75,000,000 shares authorized, 19,372,664 and 19,342,823 issued at June 30, 2022 and September 30, 2021		19,373		19,343
Additional paid-in capital		52,142,818		51,817,095
(Accumulated deficit)		(1,961,018)		(5,882,820)
Treasury stock, at cost, 2,096,451 shares at June 30, 2021 and September 30, 2021		(21,368,537)		(21,368,537)

Total shareholders’ equity		28,832,636		24,585,081
Total liabilities and shareholders’ equity	$	31,616,068	$	27,086,000


	Three Months Ended June 30,				Nine Months Ended June 30,
	2022		2021		2022		2021
Net Sales:
Product	$	6,935,976	$	5,981,462	$	20,279,371	$	15,886,967
Engineering development contracts		—		198,721		198,203		284,713
Total net sales		6,933,976		6,180,183		20,477,574		16,171,680

Cost of sales:
Product		2,879,462		2,764,765		8,253,981		7,270,708
Engineering development contracts		—		60,916		16,748		77,656
Total cost of sales		2,879,462		2,825,681		8,270,729		7,348,364

Gross profit		4,056,514		3,354,502		12,206,845		8,823,316

Operating expenses:
Research and development		676,381		646,795		2,062,937		1,936,747
Selling, general and administrative		1,694,233		1,512,138		5,226,015		4,847,410
Total operating expenses		2,370,614		2,158,933		7,288,952		6,784,157

Operating income		1,685,900		1,195,569		4,917,893		2,039,159

Interest income		10,429		107		10,871		1,138
Other income		21,608		17,231		49,401		50,994
Income before income taxes		1,717,937		1,212,907		4,978,165		2,091,291

Income tax expense (benefit)		358,763		(1,473,014)		1,056,363		(1,443,352)

Net income	$	1,359,174	$	2,685,921	$	3,921,802	$	3,534,643

Net income per common share:
Basic	$	0.08	$	0.16	$	0.23	$	0.21
Diluted	$	0.08	$	0.16	$	0.23	$	0.21

Weighted average shares outstanding:
Basic		17,261,349		17,230,387		17,253,822		17,222,312
Diluted		17,265,798		17,231,438		17,255,305		17,223,908


	Nine Months Ended June 30, 2022
			Additional
	Common		Paid-In		(Accumulated		Treasury
	Stock		Capital		Deficit)		Stock		Total
Balance, September 30, 2021	$	19,343	$	51,817,095	$	(5,882,820)	$	(21,368,537)	$	24,585,081

Share-based compensation		—		45,591		—		—		45,591
Net income		—		—		1,133,058		—		1,133,058

Balance, December 31, 2021	$	19,343	$	51,862,686	$	(4,749,762)	$	(21,368,537)	$	25,763,730

Issuance of stock to directors		25		159,970		—		—		159,995
Share-based compensation		—		44,594		—		—		44,594
Net income		—		—		1,429,570		—		1,429,570

Balance, March 31, 2022	$	19,368	$	52,067,250	$	(3,320,192)	$	(21,368,537)	$	27,397,889

Issuance of stock to directors		2		13,329		—		—		13,331
Share-based compensation		—		45,088		—		—		45,088
Exercise of stock options		3		17,151		—		—		17,154
Net income		—		—		1,359,174		—		1,359,174

Balance, June 30, 2022	$	19,373	$	52,142,818	$	(1,961,018)	$	(21,368,537)	$	28,832,636


	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


	For the Nine Months Ended June 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	3,921,802	$	3,534,643
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		278,164		334,250
Share-based compensation expense
Stock options		135,273		135,269
Stock awards		173,326		159,980
Loss on disposal of property and equipment		357		—
Excess and obsolete inventory cost		—		(195,762)
Deferred income taxes		785,737		(1,461,617)
(Increase) decrease in:
Accounts receivable		1,042,975		75,383
Inventories		(264,789)		(351,714)
Prepaid expenses and other current assets		69,344		(22,219)
Increase (decrease) in:
Accounts payable		128,859		145,150
Accrued expenses		357,566		206,627
Income taxes payable		(119,855)		17,784
Contract liability		(88,388)		1,215,329
Net cash provided by operating activities		6,420,371		3,793,103

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(161,230)		(324,025)
Net cash used in investing activities		(161,230)		(324,025)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options		17,154		17,010
Dividend paid		—		(19,788,092)
Net cash provided by (used in) financing activities		17,154		(19,771,082)

Net increase (decrease) in cash and cash equivalents		6,276,295		(16,302,004)
Cash and cash equivalents, beginning of year		8,265,606		23,784,867

Cash and cash equivalents, end of year	$	14,541,901	$	7,482,863

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes	$	390,481	$	481


	Fair Value Measurement on June 30, 2022
	Quoted Price in		Significant Other		Significant
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
Assets
Cash and cash equivalents:
Money market funds	$	10,945,240	$	—	$	—

	Fair Value Measurement on September 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	$	6,051,902	$	—	$	—


	Contract
	Liabilities
September 30, 2021	$	417,504
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		(316,320)
Increases due to invoicing prior to satisfaction of performance obligations		227,932
June 30, 2022	$	329,116


	For the Three Months Ended June 30,				For the Nine Months Ended June 30,
	2022		2021		2022		2021
Customer Service Sales	$	1,338,893	$	980,845	$	3,784,493	$	3,010,720
Customer Service Cost of Sales		369,562		408,161		1,112,298		1,079,462
Gross Profit	$	961,331	$	572,684	$	2,672,195	$	1,931,258


	Three Months Ending		Nine Months Ending
	June 30, 2022		June 30, 2022
Warranty accrual, beginning of period	$	585,867	$	589,260
Accrued expense		50,399		115,043
Warranty cost		(35,645)		(103,682)
Warranty accrual, end of period	$	600,621	$	600,621


Classification on the Consolidated Balance Sheet on June 30, 2022
Assets
Operating leases	Other assets	$	32,189

Liabilities
Operating leases- current	Accrued expenses	$	13,782
Operating leases – noncurrent	Other liabilities	$	18,407
Total lease liabilities		$	32,189


	Twelve Months
	Ending	Operating
	June 30,	Leases
	2023	$	14,676
	2024		14,676
	2025		6,115
Total minimum lease payments		$	35,467
Amount representing interest			(3,278)
Present value of minimum lease payments			32,189
Current portion			(13,782)
Long-term portion of lease obligations		$	18,407


	June 30,		September 30,
	2022		2021
Raw materials	$	4,116,347	$	3,729,692
Work-in-process		670,883		629,814
Finished goods		117,804		185,886
	$	4,905,034	$	4,545,392


	June 30,		September 30,
	2022		2021
Computer equipment	$	2,307,139	$	2,309,053
Corporate airplanes		2,406,468		5,601,039
Furniture and office equipment		976,993		970,725
Manufacturing facility		5,889,491		5,889,491
Equipment		5,624,966		5,545,529
Land		1,021,245		1,021,245
		18,226,302		21,337,082
Less: accumulated depreciation and amortization		(11,844,841)		(13,193,599)
	$	6,381,461	$	8,143,483


	Three Months Ended		Nine Months Ended

	June 30, 2022
Backlog, beginning of period	$	7,542,868	$	9,121,585
Bookings, net		11,979,618		23,942,499
Recognized in revenue		(6,935,976)		(20,477,574)
Backlog, end of period	$	12,586,510	$	12,586,510

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⁾

104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

	INNOVATIVE SOLUTIONS AND SUPPORT, INC.

Date: August 12, 2022	By:	/s/ MICHAEL LINACRE
		MICHAEL LINACRE
		CHIEF FINANCIAL OFFICER


	By:	/s/ SHAHRAM ASKARPOUR
Date: August 12, 2022		SHAHRAM ASKARPOUR
		CHIEF EXECUTIVE OFFICER