Innovative Solutions & Support Inc 10-Q for FY2025 Q1

Innovative Solutions & Support Inc (IA)

10-Q 2025-02-14 For: 2024-12-31

Added on April 07, 2026

About this 10-Q

Innovative Solutions & Support Inc filed this 10-Q on February 14, 2025, covering the quarter ended December 31, 2024 (FY2025 Q1).

Headline figures

Quarter ended December 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $15.97M; up 71.6% from $9.31M a year earlier
Net income: $736.19K; down 30.4% from net income of $1.06M a year earlier
Diluted EPS: $0.04; down 33.3% from $0.06 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 (Unaudited)

	Condensed Consolidated Balance Sheets - December 31, 2024 (unaudited) and September 30, 2024	1

	Condensed Consolidated Statements of Operations - Three Months Ended December 31, 2024 and 2023 (unaudited)	2

	Condensed Consolidated Statements of Shareholders’ Equity - Three Months Ended December 31, 2024 and 2023 (unaudited)	3 - 4

	Condensed Consolidated Statements of Cash Flows - Three Months Ended December 31, 2024 and 2023 (unaudited)	5

	Notes to Condensed Consolidated Financial Statements (unaudited)	6 - 23

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	31

Item 4.	Controls and Procedures	32

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	32

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


	December 31,		September 30,
	2024		2024

ASSETS
Current assets
Cash and cash equivalents	$	604,561	$	538,977
Accounts receivable		7,716,632		12,612,482
Contract assets		3,410,340		1,680,060
Inventories		15,506,851		12,732,381
Prepaid inventory		5,251,653		5,960,404
Prepaid expenses and other current assets		1,565,883		1,161,394

Total current assets		34,055,920		34,685,698

Goodwill		5,213,104		5,213,104
Intangible assets, net		26,544,011		27,012,292
Property and equipment, net		13,449,044		13,372,298
Deferred income taxes		1,841,737		1,625,144
Other assets		150,119		473,725

Total assets	$	81,253,935	$	82,382,261

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities
Accounts payable		1,876,313		2,315,479
Accrued expenses		4,283,466		4,609,294
Contract liability		358,806		340,481

Total current liabilities		6,518,585		7,265,254

Long-term debt		26,512,491		28,027,002
Other liabilities		451,351		451,350

Total liabilities		33,482,427		35,743,606

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 December 31, 2024 and September 30, 2024		—		—
Common stock, $.001 par value: 75,000,000 shares authorized, 19,635,515 and 19,599,052 issued at December 31, 2024 and September 30, 2024, respectively		19,635		19,599
Additional paid-in capital		55,717,125		55,320,500
Retained earnings		13,403,285		12,667,093
Treasury stock, at cost, 2,096,451 shares at December 31, 2024 and at September 30, 2024, respectively		(21,368,537)		(21,368,537)

Total shareholders’ equity		47,771,508		46,638,655

Total liabilities and shareholders’ equity	$	81,253,935	$	82,382,261


	Three Months Ended December 31,
	2024		2023
Net Sales:
Product	$	9,984,234	$	4,424,108
Services		5,984,495		4,883,955
Total net sales		15,968,729		9,308,063

Cost of sales:
Product		6,262,690		1,781,345
Services		3,095,582		2,003,556
Total cost of sales		9,358,272		3,784,901

Gross profit		6,610,457		5,523,162

Operating expenses:
Research and development		1,107,736		901,144
Selling, general and administrative		4,158,903		3,006,819
Total operating expenses		5,266,639		3,907,963

Operating income		1,343,818		1,615,199

Interest expense		(427,149)		(360,013)
Interest income		5,250		79,479
Other income		6		17,699
Income before income taxes		921,925		1,352,364

Income tax expense (benefit)		185,733		295,014

Net income	$	736,192	$	1,057,350

Net income per common share:
Basic	$	0.04	$	0.06
Diluted	$	0.04	$	0.06

Weighted average shares outstanding:
Basic		17,514,193		17,451,362
Diluted		17,584,037		17,474,906


		Three Months Ended December 31, 2024

			Additional						Total
	Common		Paid-In		Retained		Treasury		shareholders’
	Stock		Capital		Earnings		Stock		equity
Balance, September 30, 2024	$	19,599	$	55,320,500	$	12,667,093	$	(21,368,537)	$	46,638,655

Share-based compensation		36		396,625		—		—		396,661
Net income		—		—		736,192		—		736,192

Balance, December 31, 2024	$	19,635	$	55,717,125	$	13,403,285	$	(21,368,537)	$	47,771,508


	For the Three Months Ended December 31,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	736,192	$	1,057,350
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,367,075		411,421
Share-based compensation expense
Stock options		36,078		105,285
Restricted stock awards and Market stock unit awards		360,583		100,431
Gain on disposal of property and equipment		—		(160,577)
Deferred income taxes		(216,593)		(676,483)
(Increase) decrease in:
Accounts receivable		4,895,851		4,160,121
Contract assets		(1,730,281)		(160,505)
Inventories		(2,065,720)		(1,660,222)
Prepaid inventories		—		560,047
Prepaid expenses and other current assets		(800,131)		153,373
Other non-current assets		2,973		(35,800)
Increase (decrease) in:
Accounts payable		(439,166)		208,523
Accrued expenses		(726,054)		(903,673)
Income taxes payable		402,326		971,497
Contract liabilities		18,325		84,947
Net cash provided by operating activities		1,841,458		4,215,735

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(261,364)		(182,918)
Proceeds from the sale of property and equipment		—		2,225,810
Net cash (used in) provided by investing activities		(261,364)		2,042,892

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of term note		—		(19,500,000)
Proceeds from line of credit note		—		19,402,560
Repayments of line of credit note		(1,514,510)		(8,791,046)
Net cash (used in) financing activities		(1,514,510)		(8,888,486)

Net increase (decrease) in cash and cash equivalents		65,584		(2,629,859)
Cash and cash equivalents, beginning of year		538,977		3,097,193

Cash and cash equivalents, end of year	$	604,561	$	467,334

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest		383,229		324,043

SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION
Transfer from prepaid inventory to inventory	$	708,751	$	—
Transfer from prepaid expenses to PP&E	$	119,647	$	—
Transfer from prepaid expenses to intangible assets, net	$	275,995	$	—


	Fair Value Measurement on December 31, 2024
	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	$	501,810	$	—	$	—


	Fair Value Measurement on September 30, 2024
	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	$	504,104	$	—	$	—


	Contract		Contract
	Assets		Liabilities
September 30, 2024	$	1,680,060	$	340,481
Amount transferred to receivables from contract assets		(1,029,584)		—
Contract asset additions		2,759,864		—
Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period		—		(297,610)
Increases due to invoicing prior to satisfaction of performance obligations		—		315,935
December 31, 2024	$	3,410,340	$	358,806


	Amounts Recognized as of
	Acquisition Date		Measurement		Purchase Price
	(as previously reported)		Period Adjustments		Allocation
Total consideration	$	14,060,000	$	—	$	14,060,000

Prepaid inventory ^(a)	$	3,191,000	$	—	$	3,191,000
Prepaid equipment and other current assets		160,000		—		160,000
Intangible assets ^(b)		9,570,000		—		9,570,000
Goodwill ^(c)		1,139,000		—		1,139,000
Net assets acquired	$	14,060,000	$	—	$	14,060,000


		Three Months Ended December 31,
	2023
Net sales	$	12,021,871
Net income	$	401,129


	As of December 31, 2024
	Gross Carrying		Accumulated		Accumulated		Net Carrying
	Value		Impairment		Amortization		Value
License agreement ^(a)	$	9,140,000	$	—	$	—	$	9,140,000
Customer relationships ^(a)		13,284,327		—		(1,809,762)		11,474,565
Backlog ^(b)		6,310,000		—		(394,375)		5,915,625
Licensing and certification rights ^(c)		696,506		(44,400)		(638,285)		13,821
Total	$	29,430,833	$	(44,400)	$	(2,842,422)	$	26,544,011


	As of September 30, 2024
	Gross Carrying		Accumulated		Accumulated		Net Carrying
	Value		Impairment		Amortization		Value
License agreement ^(a)	$	9,140,000	$	—	$	—	$	9,140,000
Customer relationships ^(a)		13,008,332		—		(1,459,861)		11,548,471
Backlog ^(b)		6,310,000		—		—		6,310,000
Licensing and certification rights ^(c)		696,506		(44,400)		(638,285)		13,821
Total	$	29,154,838	$	(44,400)	$	(2,098,146)	$	27,012,292


	December 31,		September 30,
	2024		2024
Raw materials	$	12,227,940	$	9,862,591
Work-in-process		1,590,822		1,357,504
Finished goods		1,688,089		1,512,286
	$	15,506,851	$	12,732,381


		Amortization Expense
2025 (nine months remaining)	$	2,218,895
2026		2,958,527
2027		2,958,527
2028		2,958,527
2029		1,381,027
Thereafter		4,914,687
Total	$	17,390,190


	Three Months Ending
	December 31, 2024
Warranty accrual, beginning of period	$	596,538
Accrued expense (Adjustment)		(20,000)
Warranty cost		(53,814)
Warranty accrual, end of period	$	522,724


Number of MSU's Granted	201,000
Grant Date	November 20, 2024
Grant Date Stock Price	$ 7.72
Expected Dividend Rate	0%
Expected Volatility	45%
Weighted average risk-free interest rate	4.27%
Contractual Term	4 years


		As of		As of
		December 31,		September 30,
	2024		2024
Cash and cash equivalents	$	604,561	$	538,977
Accounts receivable	$	7,716,632	$	12,612,482
Current assets	$	34,055,920	$	34,685,698
Current liabilities	$	6,518,585	$	7,265,254
Contract liability	$	358,806	$	340,481
Other non-current liabilities	$	26,963,842	$	28,478,352
Quick ratio ⁽¹⁾		1.28		1.81
Current ratio ⁽²⁾		5.22		4.77


		Three Months Ended
		December 31, 2024
Backlog, beginning of period	$	89,232,576
Plus: bookings during period, net		7,493,086
Less: sales recognized during period		(15,968,729)
Backlog, end of period	$	80,756,933



10.1**	Performance Stock Unit Award Agreement dated November 20, 2024 (1).

31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a), filed herewith.

31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a), filed herewith.

32.1*	Certification Pursuant to U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.

101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document.

101.SCH	Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.

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


	INNOVATIVE SOLUTIONS AND SUPPORT, INC.

Date: February 14, 2025	By:	/s/ Jeffrey DiGiovanni
		Jeffrey DiGiovanni
		Chief Financial Officer (on behalf of Registrant and as Principal Financial Officer and Principal Accounting Officer)


	By:	/s/ Shahram Askarpour
Date: February 14, 2025		Shahram Askarpour
		Chief Executive Officer (Principal Executive Officer)