Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Dec. 31, 2013 | Jan. 31, 2014 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'INNOVATIVE SOLUTIONS & SUPPORT INC | ' |
Entity Central Index Key | '0000836690 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Dec-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--09-30 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 16,894,531 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q1 | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2013 | Sep. 30, 2013 |
Current Assets | ' | ' |
Cash and cash equivalents | $15,827,439 | $16,386,207 |
Accounts receivable, net | 4,759,853 | 4,489,434 |
Unbilled receivables | 7,314,710 | 6,539,442 |
Inventories | 4,975,541 | 4,377,513 |
Deferred income taxes | 2,297,334 | 2,002,679 |
Prepaid expenses and other current assets | 513,274 | 642,210 |
Total current assets | 35,688,151 | 34,437,485 |
Property and equipment, net | 7,527,584 | 7,320,495 |
Non-current deferred income taxes | 24,447 | 650,998 |
Other assets | 231,981 | 221,533 |
Total Assets | 43,472,163 | 42,630,511 |
Current Liabilities | ' | ' |
Accounts payable | 2,288,971 | 2,372,137 |
Accrued expenses | 3,703,053 | 3,672,909 |
Deferred revenue | 245,727 | 447,525 |
Total current liabilities | 6,237,751 | 6,492,571 |
Non-current deferred income taxes | 132,401 | 132,202 |
Other liabilities | 11,579 | 11,491 |
Total Liabilities | 6,381,731 | 6,636,264 |
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, 2013 and September 30, 2013 | ' | ' |
Common stock, $.001 par value: 75,000,000 shares authorized, 18,644,893 and 18,632,328 issued at December 31, 2013 and September 30, 2013, respectively | 18,645 | 18,632 |
Additional paid-in capital | 49,968,147 | 49,880,571 |
Retained earnings | 7,493,230 | 6,484,634 |
Treasury stock, at cost, 1,756,807 and 1,756,807 shares at December 31, 2013 and September 30, 2013, respectively | -20,389,590 | -20,389,590 |
Total Shareholders' Equity | 37,090,432 | 35,994,247 |
Total Liabilities and Shareholders' Equity | $43,472,163 | $42,630,511 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Dec. 31, 2013 | Sep. 30, 2013 |
Preferred Stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred Stock, par value (in dollars per share) | $0.00 | $0.00 |
Preferred Stock, shares issued | 0 | 0 |
Preferred Stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 18,644,893 | 18,632,328 |
Treasury stock, shares | 1,756,807 | 1,756,807 |
Class A Convertible stock | ' | ' |
Preferred Stock, shares authorized | 200,000 | 200,000 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $) | 3 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Net sales: | ' | ' |
Product | $7,738,614 | $4,739,448 |
Engineering development contracts | 3,367,197 | 1,797,286 |
Total net sales | 11,105,811 | 6,536,734 |
Cost of sales: | ' | ' |
Product | 3,798,857 | 2,160,448 |
Engineering development contracts | 3,526,518 | 1,336,034 |
Total cost of sales | 7,325,375 | 3,496,482 |
Gross profit | 3,780,436 | 3,040,252 |
Operating expenses: | ' | ' |
Research and development | 626,921 | 850,852 |
Selling, general and administrative | 1,744,891 | 1,804,809 |
Total operating expenses | 2,371,812 | 2,655,661 |
Operating income | 1,408,624 | 384,591 |
Interest income | 10,467 | 17,572 |
Other income | 5,666 | 11,545 |
Income before income taxes | 1,424,757 | 413,708 |
Income tax expense | 416,161 | 96,119 |
Net income | $1,008,596 | $317,589 |
Net income per common share: | ' | ' |
Basic (in dollars per share) | $0.06 | $0.02 |
Diluted (in dollars per share) | $0.06 | $0.02 |
Cash dividends per share (in dollars per share): | ' | $1.50 |
Weighted average shares outstanding: | ' | ' |
Basic (in shares) | 16,888,086 | 16,608,507 |
Diluted (in shares) | 17,094,346 | 16,608,513 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' |
Net income | $1,008,596 | $317,589 |
Adjustments to reconcile net income to net cash (used in) operating activities: | ' | ' |
Depreciation and amortization | 129,484 | 119,159 |
Share-based compensation expense: | ' | ' |
Stock options | 184,224 | 133,691 |
Nonvested stock awards | 50,029 | 50,018 |
Tax adjustment from share-based compensation | -146,664 | -10,304 |
Excess and obsolete inventory cost | 25,000 | ' |
Deferred income taxes | 332,096 | 53,869 |
(Increase) decrease in: | ' | ' |
Accounts receivable | -270,419 | -260,114 |
Unbilled receivables | -775,268 | -1,412,335 |
Inventories | -623,028 | 333,853 |
Prepaid expenses and other current assets | 128,936 | -225,749 |
Other non-current assets | -10,448 | ' |
Increase (decrease) in: | ' | ' |
Accounts payable | -83,166 | -360,176 |
Accrued expenses | 124,502 | -57,963 |
Income taxes payable | -94,272 | -77,447 |
Deferred revenue | -201,798 | -265,020 |
Net cash used in operating activities | -222,196 | -1,660,929 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' |
Purchases of property and equipment | -336,572 | -43,231 |
Net cash used in investing activities | -336,572 | -43,231 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' |
Purchase of treasury stock | ' | -695 |
Dividend paid | ' | -25,007,519 |
Proceeds from exercise of stock options | ' | 762,759 |
Net cash used in financing activities | ' | -24,245,455 |
Net decrease in cash and cash equivalents | -558,768 | -25,949,615 |
Cash and cash equivalents, beginning of year | 16,386,207 | 42,977,501 |
Cash and cash equivalents, end of period | 15,827,439 | 17,027,886 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ' | ' |
Cash paid for income tax | $325,000 | $130,000 |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 3 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
Summary of Significant Accounting Policies | ' | ||||||||||
Summary of Significant Accounting Policies | ' | ||||||||||
1. Summary of Significant Accounting Policies | |||||||||||
Description of the Company | |||||||||||
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, primary flight guidance and cockpit display systems for retrofit applications and original equipment manufacturers (“OEMs”). The Company supplies integrated Flight Management Systems (“FMS”) and advanced Global Positioning System (“GPS”) receivers that enable reduced carbon footprint navigation. The Company also continues to position itself as a system integrator, which provides the Company with the potential to generate more substantive orders over a broader product base. The strategy, as both a manufacturer and integrator, is designed to leverage the latest technologies developed for the computer and telecommunications industries into advanced and cost-effective solutions for the general aviation, 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, foreign militaries, and various OEMs. | |||||||||||
Basis of Presentation | |||||||||||
The accompanying unaudited condensed consolidated financial statements are presented pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) in accordance with the disclosure requirements for the quarterly report on Form 10-Q and, therefore, do not include all of the information and footnotes required by generally accepted accounting principles in the United States (“GAAP”) for complete annual financial statements. In the opinion of Company management, the unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary to state fairly the results for the interim periods presented. The condensed consolidated balance sheet as of September 30, 2013 is derived from audited financial statements. Operating results for the three months ended December 31, 2013, are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2014. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2013. | |||||||||||
The Company’s condensed consolidated financial statements include the accounts of its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. | |||||||||||
Use of Estimates | |||||||||||
Preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used in accounting for, among other items, long term contracts allowance for doubtful accounts, inventory obsolescence, product warranty cost liability, income taxes, engineering and material costs on Engineering Development Contracts (“EDC”) programs, percentage of completion on EDC, recoverability of long-lived assets, stock-based compensation expense, and contingencies. Actual results could differ materially from those estimates. | |||||||||||
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 December 31, 2013 and September 30, 2013 consist of funds invested in money market funds with financial institutions. | |||||||||||
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 corporate airplane and manufacturing facility, which are depreciated using the straight-line method over estimated useful lives of ten years and thirty-nine years, respectively. During fiscal 2014, no depreciation was provided for the airplane since 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” (“ASC Topic 360-10”). 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 must 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 during the three months ended December 31, 2013 or 2012. | |||||||||||
Revenue Recognition | |||||||||||
The Company enters into sales arrangements with customers that, in general, provide for the Company to design, develop, manufacture, and deliver air data equipment, engine display systems, large flat-panel display systems, and advanced monitoring systems that measure and display critical flight information, including data relative to aircraft separation, airspeed, altitude, as well as 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 services elements in EDC sales and any functional upgrade and product elements in product sales on 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 Accounting Standards Update 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 are sold on a standalone basis and which the Company has deemed outside the scope of the exception defined by ASU 2009-14, the Company recognizes software revenue in accordance with 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 such a sales arrangement and allocates sales to each deliverable (if more than one) based on that deliverable’s selling price. 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, along with 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 would be used 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”). 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. The Company includes any design and engineering services elements in EDC sales, and any functional upgrade and product elements in “product” sales on the accompanying consolidated statement of income. | |||||||||||
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 receives orders for equipment and parts. Generally, revenue from the sale of such products is recognized upon shipment to the customer. | |||||||||||
The Company offers its customers extended warranties for additional fees. These warranty sales are recorded as deferred revenue and recognized as sales on a straight-line basis over the warranty period. | |||||||||||
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 revenue, 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 reasonable and reliably estimable, and the contract is long-term in nature. The Company uses the completed contract method for all others 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 (for development effort). | |||||||||||
The percentage-of-completion method of accounting requires the Company to estimate the profit margin for each individual contract, and to apply that profit margin on a uniform basis as sales are recorded under the contract. The estimation of profit margins 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 and cost, overhead, and capital costs. These contracts sometimes include purchase options for additional quantities and customer change orders for additional or revised product functionality. Sales and costs related to profitable purchase options are included in the Company’s estimates only when the options are exercised, while sales and costs related to unprofitable purchase options are included in the Company’s estimates when exercise is determined to be probable. Sales related to change orders are included in profit estimates only if they can be reliably estimated 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. Anticipated losses on contracts are recognized in full in the period in which losses become probable and estimable. | |||||||||||
For contracts for which uncertainty regarding the performance against certain contract terms remains and in which no loss is expected, the Company uses the zero profit margin approach to applying the percentage of completion method following the guidance included in FASB ASC Topic 605-35. | |||||||||||
The Company typically reviews estimates of profit margins for contracts on a quarterly basis. If the initial estimates of sales 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 sales and cost estimates or to 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 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 estimate is made. Cumulative catch-up adjustments resulting from changes in estimates are disclosed in the notes to consolidated financial statements. | |||||||||||
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 losses (“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. At the end of each interim reporting period, the Company prepares an estimate of the annual effective income tax rate, and applies that annual effective income tax rate to ordinary year-to-date pre-tax income for the interim period. Specific tax items discrete to a particular quarter are recorded in income tax expense for that quarter. The estimated annual effective tax rate used in providing for income taxes on a year-to-date basis may change in subsequent interim periods. | |||||||||||
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 objectively verified, 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. 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 carry-forwards, taxable income in carry-back years, and tax planning strategies which are both prudent and feasible. The current balance of the deferred tax valuation allowance relates principally to NOL of certain state taxing jurisdictions. 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. There is currently no assurance of such future income before 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 because 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 adequate accruals have been made 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 adverse 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 | |||||||||||
The Company invests a large percentage of its sales in engineering development, both research and development (“R&D”) and EDC. At December 31, 2013, approximately 40% of the Company’s employees were engineers engaged in various engineering development projects. IS&S invests a large percentage of its sales in EDC and R&D projects to allow its customers to benefit from the latest technological advancements. Total engineering development expense is comprised of both design and EDC related to specific customer contracts and R&D. EDC expense consists primarily of payroll-related expenses of employees engaged in EDC projects, 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. EDC and design charges related to specific customer arrangements are charged to cost of sales-EDC based on the method of contract accounting (either percentage of completion or completed contract) applicable to such contracts. | |||||||||||
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 the balance sheet 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 the three months ending December 31, 2013 and 2012, comprehensive income consisted of net income only. There were no items of other comprehensive income or accumulated other comprehensive income balances in the equity accounts for any of the periods presented. | |||||||||||
Fair Value of Financial Instruments | |||||||||||
The net carrying amounts of cash and cash equivalents, accounts receivable, cash overdraft, 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 December 31, 2013 and September 30, 2013, according to the valuation techniques the Company used to determine their fair values. | |||||||||||
Fair Value Measurement on December 31, 2013 | |||||||||||
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 | $ | 14,396,556 | $ | — | $ | — | |||||
Fair Value Measurement on September 30, 2013 | |||||||||||
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 | $ | 14,396,014 | $ | — | $ | — | |||||
Stock-Based Compensation | |||||||||||
The Company accounts for stock-based compensation under FASB ASC Topic 505-50, “Equity-Based Payments to Non-Employees” (“ASC Topic 505-50”) and FASB 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. That cost is recognized over the period during which an employee is required to provide service in exchange for the award. | |||||||||||
Warranty | |||||||||||
The Company offers warranties of various lengths on some products. At the time of shipment, the Company establishes a reserve for estimated costs of warranties based upon 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 each 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. Although 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. | |||||||||||
Concentrations | |||||||||||
Major Customers and Products | |||||||||||
For the three months ended December 31, 2013, four customers — the DoD, Pilatus Aircraft Limited (“Pilatus”), Eclipse Aerospace, Inc. (“Eclipse”) and FedEx Corp. (“FedEx”), accounted for 22%, 13%, 12%, and 11% of net sales, respectively. For the three months ended December 31, 2012, two customers - Eclipse and American Airlines, Inc. (“AAI”) accounted for 29% and 13% of net sales, respectively. | |||||||||||
On November 29, 2011, AMR Corporation, the parent company of AAI and certain of its other U.S. based subsidiaries filed voluntary petitions for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York (the “Bankruptcy”). AAI continued to purchase and pay for products from the Company in the ordinary course of business after November 29, 2011. For the three months ended December 31, 2013 and 2012, AAI accounted for approximately 4% and 13%, respectively, of net sales. As of September 30, 2013, the Company had pre-Bankruptcy outstanding accounts receivable of $760,000 from AAI. The Bankruptcy Court recently approved the merger of AAI and U.S. Airways which was consummated on December 9, 2013. Shortly thereafter, the Company collected the full $760,000. | |||||||||||
Major Suppliers | |||||||||||
The Company currently buys several components from sole source suppliers. Although there are a limited number of manufacturers of particular components, management believes other suppliers could provide similar components on comparable terms. | |||||||||||
For the three months ended December 31, 2013, the Company had one supplier which accounted for greater than 10% of the Company’s total inventory related purchases. For the three months ended December 31, 2012, the Company had one supplier which accounted for greater than 10% 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 primary consideration. Cash balances are maintained with two banks. Certain 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 has no reserve for doubtful accounts as of December 31, 2013 and September 30, 2013 because of the favorable history of collections and a specific analysis of amounts outstanding. | |||||||||||
Recent Accounting Pronouncements | |||||||||||
In July 2013, the FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit when a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU 2013-11”). ASU 2013-11 provides that a liability related to an unrecognized tax benefit should be offset against a deferred tax asset for a NOL carryforward, a similar tax loss or a tax credit carryforward if such liability is to be settled by reducing an available tax carryforward in the event the uncertain tax position is disallowed. ASU 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013 for public entities, with early adoption permitted. The adoption of ASU 2013-11 did not have a material impact on the Company’s consolidated financial statements as of December 31, 2013. | |||||||||||
Supplemental_Balance_Sheet_Dis
Supplemental Balance Sheet Disclosures | 3 Months Ended | |||||||
Dec. 31, 2013 | ||||||||
Supplemental Balance Sheet Disclosures | ' | |||||||
Supplemental Balance Sheet Disclosures | ' | |||||||
2. SupplementalBalance Sheet Disclosures | ||||||||
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, net of customer payments, were $7.3 million and $6.5 million at December 31, 2013 and September 30, 2013, respectively. | ||||||||
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 due to revisions in revenue and cost estimates or the exercise of contract options may result in profit margins being recognized unevenly over the life of 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. Cumulative catch-up adjustments resulting from changes in estimates reduced operating income by $183,000 and $0 for the three months ended December 31, 2013 and 2012, respectively. | ||||||||
Inventories | ||||||||
Inventories are stated at the lower of cost (first-in, first-out) or market, net of reserve for excess and obsolete inventory, and consist of the following: | ||||||||
December 31, | September 30, | |||||||
2013 | 2013 | |||||||
Raw materials | $ | 3,624,157 | $ | 3,126,592 | ||||
Work-in-process | 1,123,403 | 857,602 | ||||||
Finished goods | 227,981 | 393,319 | ||||||
$ | 4,975,541 | $ | 4,377,513 | |||||
Prepaid expenses and other current assets | ||||||||
Prepaid expenses and other current assets consist of the following: | ||||||||
December 31, | September 30, | |||||||
2013 | 2013 | |||||||
Prepaid insurance | $ | 186,743 | $ | 350,913 | ||||
Other | 326,531 | 291,297 | ||||||
$ | 513,274 | $ | 642,210 | |||||
Property and equipment | ||||||||
Property and equipment, net consists of the following balances: | ||||||||
December 31, | September 30, | |||||||
2013 | 2013 | |||||||
Land | $ | 1,021,245 | $ | 1,021,245 | ||||
Computer equipment | 2,237,025 | 2,173,266 | ||||||
Corporate airplane | 3,128,504 | 3,128,504 | ||||||
Furniture and office equipment | 1,054,347 | 1,062,296 | ||||||
Manufacturing facility | 5,649,070 | 5,631,001 | ||||||
Equipment | 4,897,120 | 4,678,678 | ||||||
Total | 17,987,311 | 17,694,990 | ||||||
Less: Accumulated depreciation and amortization | (10,459,727 | ) | (10,374,495 | ) | ||||
$ | 7,527,584 | $ | 7,320,495 | |||||
Depreciation and amortization related to property and equipment was approximately $129,000 and $106,000 for the three months ended December 31, 2013 and 2012, respectively. The Corporate airplane is primarily utilized in support of product development and has been depreciated to its estimated salvage value. | ||||||||
Other assets | ||||||||
Other assets consist of the following: | ||||||||
December 31, | September 30, | |||||||
2013 | 2013 | |||||||
Intangible assets, net of accumulated amortization of $495,037 at December 31, 2013 and September 30, 2013 | $ | 105,200 | $ | 105,200 | ||||
Other non-current assets | 126,781 | 116,333 | ||||||
$ | 231,981 | $ | 221,533 | |||||
Intangible assets consist of licensing and certification rights which are amortized over a defined number of units. No impairment charges were recorded for the three months ended December 31, 2013 and 2012. Total amortization expense was approximately $0 and $13,000 for the three months ended December 31, 2013 and 2012, respectively. 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 consist primarily of deposits for leased facilities and inventory deliveries not expected to be applied in the next twelve months. | ||||||||
Accrued expenses | ||||||||
Accrued expenses consist of the following: | ||||||||
December 31, | September 30, | |||||||
2013 | 2013 | |||||||
Warranty | $ | 756,544 | $ | 701,456 | ||||
Salary, benefits and payroll taxes | 459,288 | 679,325 | ||||||
Professional fees | 357,633 | 393,570 | ||||||
Income taxes payable | 243,633 | 337,993 | ||||||
EDC program costs | 1,153,618 | 560,428 | ||||||
Litigation claims | 481,060 | 656,865 | ||||||
Other | 251,277 | 343,272 | ||||||
$ | 3,703,053 | $ | 3,672,909 | |||||
Other accrued expenses consist primarily of accruals for payments to consultants and sub-contractors for services completed as of December 31, 2013 and September 30, 2013. | ||||||||
Warranty cost and accrual information for the three months ended December 31, 2013 is highlighted below: | ||||||||
Warranty Accrual at September 30, 2013 | $ | 701,456 | ||||||
Accrued expense | 116,260 | |||||||
Warranty cost | (61,172 | ) | ||||||
Warranty Accrual at December 31, 2013 | $ | 756,544 | ||||||
Income_Taxes
Income Taxes | 3 Months Ended |
Dec. 31, 2013 | |
Income Taxes | ' |
Income Taxes | ' |
3. Income Taxes | |
The income tax expense for the three months ended December 31, 2013 was approximately $416,000 compared to approximately $96,000 for the three months ended December 31, 2012. | |
The effective tax rate for the three months ended December 31, 2013 was 29%. The effective tax rate differs from the statutory rate for the three months ended December 31, 2013, primarily because of the Domestic Production Activities Deduction, and the federal Research and Development Tax Credit (“R&D Tax Credit”). | |
The effective tax rate for the three months ended December 31, 2012 was 23%. The effective tax rate differs from the statutory rate for the three months ended December 31, 2012, primarily because of the decrease in the liability recorded for uncertain tax positions resulting from the lapse of applicable statutes of limitation and the Domestic Production Activities Deduction. | |
On January 2, 2013, the American Taxpayer Relief Act of 2012 (the “Tax Relief Act”) was enacted, which retroactively reinstated and extended the R&D Tax Credit from January 1, 2012 to December 31, 2013. The current year estimated annual effective income tax rate reflects the benefit from the Federal R&D Tax Credit for only the three months ended December 31, 2013 as permitted by ASC Topic 740, because the R&D Tax Credit expired as of December 31, 2013. | |
At December 31, 2013, the balance of the deferred tax valuation allowance relates principally to NOLs of certain state taxing jurisdictions. The Company will continue to maintain the balance of the valuation allowance until the Company generates a sufficient level of profitability in certain jurisdictions to warrant a conclusion that it is no longer more likely than not that these net state 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 therefore, further adjustments to the valuation allowance are possible. | |
Shareholders_Equity_and_Shareb
Shareholders' Equity and Share-based Payments | 3 Months Ended |
Dec. 31, 2013 | |
Shareholders' Equity and Share-based Payments | ' |
Shareholders' Equity and Share-based Payments | ' |
4. Shareholders’ Equity and Share-based Payments | |
At December 31, 2013, the Company’s Amended and Restated Articles of Incorporation provides the Company authority to issue 75,000,000 shares of common stock and 10,000,000 shares of preferred stock. | |
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 non-vested stock awards. | |
Total share-based compensation expense was approximately $234,000 and $184,000 for the three months ended December 31, 2013 and 2012, respectively. The income tax effect recognized as a credit (charge) to additional paid-in capital related to share-based compensation arrangements was ($147,000) and ($10,000) for the three months ended December 31, 2013 and 2012, respectively. Compensation expense related to share-based awards is recorded as a component of general and administrative expense. | |
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 maintains 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”). The Company’s shareholders approved each of these plans. The 1998 Plan expired on November 13, 2008, and there are no further shares of common stock to be awarded under the Restricted Plan. | |
1998 Stock Option Plan | |
The 1998 Plan authorized grants 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 the 1998 Plan. Total compensation expense under the 1998 Plan was approximately $0 and $10,000 for the three months ended December 31, 2013 and 2012, respectively. | |
Incentive stock options granted under the 1998 Plan have exercise prices that must be at least equal to fair value of the common stock on the grant date. Nonqualified stock options granted under the 1998 Plan have exercise prices that may be 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 1998 Plan. On November 13, 2008, the 1998 Plan expired, and no additional shares were granted under the Plan after that date. | |
Restricted Plan | |
The Restricted Plan for non-employee directors was approved by shareholders at the Company’s February 26, 2004 Annual Meeting of Shareholders. It authorized an annual award of non-vested shares of common stock having a fair market value of $40,000 at close of business on October 1 of each year for all eligible non-employee directors. The shares of common stock were awarded in four quarterly installments during the fiscal year provided the director was still serving on the board on the quarterly issue date. The last awards under the Restricted Plan were made in 2010, and there are no further shares to award under the Restricted Plan. However, the Company continued to make an annual grant of restricted shares to non-employee directors under the 2009 Plan. | |
There was no compensation expense under the Restricted Plan for the three months ended December 31, 2013 and 2012, respectively. | |
2009 Stock Option Plan | |
The 2009 Plan authorizes the grant of Stock Appreciation Rights (“SARs”), Restricted Stock, Options, and other equity-based awards under the 2009 Plan (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 is 1,200,000, all of which may be issued pursuant to Awards of incentive stock options. In addition, the 2009 Plan provides that no more than 300,000 shares of common stock may be awarded to any employee as a performance-based Award under Section 162(m) of the Code. At December 31, 2013, there were 346,220 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 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 adjust proportionately and equitably 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 affect adversely 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 affect adversely 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. | |
Total compensation expense associated with stock option awards to employees under the 2009 Plan was $184,000, and $124,000 for the three months ended December 31, 2013, and 2012, respectively. Total share-based compensation expense under the 2009 Plan associated with the grant of stock awards to non-employee members of the Board of Directors on a quarterly basis as compensation was $50,000 for the three months ended December 2013 and 2012. | |
Stock repurchase program | |
On April 29, 2013 the Company’s Board of Directors approved a new share repurchase program to acquire up to 250,000 shares of the Company’s outstanding common stock until May 1, 2014. Under the new share repurchase program, the Company may purchase shares of its common stock through open market transactions, in privately negotiated block purchases, or in other private transactions (either solicited or unsolicited). The timing and amount of repurchase transactions under this program will depend on market conditions, and corporate and regulatory considerations. The program may be discontinued or suspended at any time. During the three months ended December 31, 2013, the Company did not make any other purchases of shares of the Company’s common under the new share repurchase plan. As of December 31, 2013, the number of shares that may yet be purchased under the new share repurchased program was 250,000 shares. | |
During the three months ended December 31, 2012 the Company purchased 175 shares of common stock under the previous share repurchase program (which expired on February 10, 2013) at a total cost of $696 and at an average market price of $3.96 per share, financed with available cash. | |
Earnings_Per_Share
Earnings Per Share | 3 Months Ended | |||||||
Dec. 31, 2013 | ||||||||
Earnings Per Share | ' | |||||||
Earnings Per Share | ' | |||||||
5. Earnings Per Share | ||||||||
For the three months ended December 31, | ||||||||
2013 | 2012 | |||||||
Numerator: | ||||||||
Net income | $ | 1,008,596 | $ | 317,589 | ||||
Denominator: | ||||||||
Basic weighted average shares | 16,888,086 | 16,608,507 | ||||||
Dilutive effect of share-based awards | 206,260 | 6 | ||||||
Diluted weighted average shares | 17,094,346 | 16,608,513 | ||||||
Earnings per common share: | ||||||||
Basic EPS | $ | 0.06 | $ | 0.02 | ||||
Diluted EPS | $ | 0.06 | $ | 0.02 | ||||
Earnings per share (“EPS”) is calculated pursuant to FASB ASC Topic 260, Earnings Per Share. (“ASC Topic 260”). Basic 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. | ||||||||
The number of incremental shares from the assumed exercise of stock options is calculated by using the treasury stock method. As of December 31, 2013 and 2012, there were 779,834 and 651,600 options to purchase common stock 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 the three months ended December 31, 2013 and 2012, 84,598 and 800,645 weighted dilutive shares outstanding were excluded from the computation of diluted EPS because the effect would be anti-dilutive. | ||||||||
Contingencies
Contingencies | 3 Months Ended |
Dec. 31, 2013 | |
Contingencies | ' |
Contingencies | ' |
6. Contingencies | |
On September 26, 2011, Farhad Daghigh, a former employee of the Company, filed a lawsuit against the Company in the Court of Common Pleas of Chester County (“the Court”) alleging breach of contract and violation of the Pennsylvania Wage Payment and Collection Law and claiming unpaid sales commissions, prejudgment interest, and liquidated damages totaling approximately $583,000 for the fiscal years ended 2007, 2008, 2009 and 2010, plus attorneys’ fees and costs. In June 2013, following a trial without a jury, the Court found in favor of the plaintiff. In December 2013, the parties agreed to settle the matter. Under the terms of the settlement the Company is required to pay the plaintiff $540,000 between December 2013 and the end of March 2014. | |
On January 17, 2007 the Company filed suit in the Court of Common Pleas for Delaware County, Pennsylvania against Strathman Associates, a former software consultant for IS&S, alleging that Strathman had improperly used IS&S trade secret and proprietary information in assisting J2 and Kollsman in developing the J2/Kollsman Air Data Computer. The case has not been resolved as of December 31, 2013. | |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 3 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
Summary of Significant Accounting Policies | ' | ||||||||||
Basis of Presentation | ' | ||||||||||
Basis of Presentation | |||||||||||
The accompanying unaudited condensed consolidated financial statements are presented pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) in accordance with the disclosure requirements for the quarterly report on Form 10-Q and, therefore, do not include all of the information and footnotes required by generally accepted accounting principles in the United States (“GAAP”) for complete annual financial statements. In the opinion of Company management, the unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary to state fairly the results for the interim periods presented. The condensed consolidated balance sheet as of September 30, 2013 is derived from audited financial statements. Operating results for the three months ended December 31, 2013, are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2014. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2013. | |||||||||||
The Company’s condensed consolidated financial statements include the accounts of its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. | |||||||||||
Use of Estimates | ' | ||||||||||
Use of Estimates | |||||||||||
Preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used in accounting for, among other items, long term contracts allowance for doubtful accounts, inventory obsolescence, product warranty cost liability, income taxes, engineering and material costs on Engineering Development Contracts (“EDC”) programs, percentage of completion on EDC, recoverability of long-lived assets, stock-based compensation expense, and contingencies. Actual results could differ materially from those estimates. | |||||||||||
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 December 31, 2013 and September 30, 2013 consist of funds invested in money market funds with financial institutions. | |||||||||||
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 corporate airplane and manufacturing facility, which are depreciated using the straight-line method over estimated useful lives of ten years and thirty-nine years, respectively. During fiscal 2014, no depreciation was provided for the airplane since 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” (“ASC Topic 360-10”). 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 must 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 during the three months ended December 31, 2013 or 2012. | |||||||||||
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 air data equipment, engine display systems, large flat-panel display systems, and advanced monitoring systems that measure and display critical flight information, including data relative to aircraft separation, airspeed, altitude, as well as 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 services elements in EDC sales and any functional upgrade and product elements in product sales on 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 Accounting Standards Update 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 are sold on a standalone basis and which the Company has deemed outside the scope of the exception defined by ASU 2009-14, the Company recognizes software revenue in accordance with 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 such a sales arrangement and allocates sales to each deliverable (if more than one) based on that deliverable’s selling price. 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, along with 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 would be used 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”). 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. The Company includes any design and engineering services elements in EDC sales, and any functional upgrade and product elements in “product” sales on the accompanying consolidated statement of income. | |||||||||||
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 receives orders for equipment and parts. Generally, revenue from the sale of such products is recognized upon shipment to the customer. | |||||||||||
The Company offers its customers extended warranties for additional fees. These warranty sales are recorded as deferred revenue and recognized as sales on a straight-line basis over the warranty period. | |||||||||||
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 revenue, 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 reasonable and reliably estimable, and the contract is long-term in nature. The Company uses the completed contract method for all others 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 (for development effort). | |||||||||||
The percentage-of-completion method of accounting requires the Company to estimate the profit margin for each individual contract, and to apply that profit margin on a uniform basis as sales are recorded under the contract. The estimation of profit margins 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 and cost, overhead, and capital costs. These contracts sometimes include purchase options for additional quantities and customer change orders for additional or revised product functionality. Sales and costs related to profitable purchase options are included in the Company’s estimates only when the options are exercised, while sales and costs related to unprofitable purchase options are included in the Company’s estimates when exercise is determined to be probable. Sales related to change orders are included in profit estimates only if they can be reliably estimated 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. Anticipated losses on contracts are recognized in full in the period in which losses become probable and estimable. | |||||||||||
For contracts for which uncertainty regarding the performance against certain contract terms remains and in which no loss is expected, the Company uses the zero profit margin approach to applying the percentage of completion method following the guidance included in FASB ASC Topic 605-35. | |||||||||||
The Company typically reviews estimates of profit margins for contracts on a quarterly basis. If the initial estimates of sales 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 sales and cost estimates or to 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 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 estimate is made. Cumulative catch-up adjustments resulting from changes in estimates are disclosed in the notes to consolidated financial statements. | |||||||||||
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 losses (“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. At the end of each interim reporting period, the Company prepares an estimate of the annual effective income tax rate, and applies that annual effective income tax rate to ordinary year-to-date pre-tax income for the interim period. Specific tax items discrete to a particular quarter are recorded in income tax expense for that quarter. The estimated annual effective tax rate used in providing for income taxes on a year-to-date basis may change in subsequent interim periods. | |||||||||||
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 objectively verified, 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. 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 carry-forwards, taxable income in carry-back years, and tax planning strategies which are both prudent and feasible. The current balance of the deferred tax valuation allowance relates principally to NOL of certain state taxing jurisdictions. 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. There is currently no assurance of such future income before 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 because 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 adequate accruals have been made 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 adverse 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 | |||||||||||
The Company invests a large percentage of its sales in engineering development, both research and development (“R&D”) and EDC. At December 31, 2013, approximately 40% of the Company’s employees were engineers engaged in various engineering development projects. IS&S invests a large percentage of its sales in EDC and R&D projects to allow its customers to benefit from the latest technological advancements. Total engineering development expense is comprised of both design and EDC related to specific customer contracts and R&D. EDC expense consists primarily of payroll-related expenses of employees engaged in EDC projects, 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. EDC and design charges related to specific customer arrangements are charged to cost of sales-EDC based on the method of contract accounting (either percentage of completion or completed contract) applicable to such contracts. | |||||||||||
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 the balance sheet 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 the three months ending December 31, 2013 and 2012, comprehensive income consisted of net income only. There were no items of other comprehensive income or accumulated other comprehensive income balances in the equity accounts 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, cash overdraft, 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 December 31, 2013 and September 30, 2013, according to the valuation techniques the Company used to determine their fair values. | |||||||||||
Fair Value Measurement on December 31, 2013 | |||||||||||
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 | $ | 14,396,556 | $ | — | $ | — | |||||
Fair Value Measurement on September 30, 2013 | |||||||||||
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 | $ | 14,396,014 | $ | — | $ | — | |||||
Stock-Based Compensation | ' | ||||||||||
Stock-Based Compensation | |||||||||||
The Company accounts for stock-based compensation under FASB ASC Topic 505-50, “Equity-Based Payments to Non-Employees” (“ASC Topic 505-50”) and FASB 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. That cost is recognized over the period during which an employee is required to provide service in exchange for the award. | |||||||||||
Warranty | ' | ||||||||||
Warranty | |||||||||||
The Company offers warranties of various lengths on some products. At the time of shipment, the Company establishes a reserve for estimated costs of warranties based upon 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 each 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. Although 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. | |||||||||||
Concentrations | ' | ||||||||||
Concentrations | |||||||||||
Major Customers and Products | |||||||||||
For the three months ended December 31, 2013, four customers — the DoD, Pilatus Aircraft Limited (“Pilatus”), Eclipse Aerospace, Inc. (“Eclipse”) and FedEx Corp. (“FedEx”), accounted for 22%, 13%, 12%, and 11% of net sales, respectively. For the three months ended December 31, 2012, two customers - Eclipse and American Airlines, Inc. (“AAI”) accounted for 29% and 13% of net sales, respectively. | |||||||||||
On November 29, 2011, AMR Corporation, the parent company of AAI and certain of its other U.S. based subsidiaries filed voluntary petitions for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York (the “Bankruptcy”). AAI continued to purchase and pay for products from the Company in the ordinary course of business after November 29, 2011. For the three months ended December 31, 2013 and 2012, AAI accounted for approximately 4% and 13%, respectively, of net sales. As of September 30, 2013, the Company had pre-Bankruptcy outstanding accounts receivable of $760,000 from AAI. The Bankruptcy Court recently approved the merger of AAI and U.S. Airways which was consummated on December 9, 2013. Shortly thereafter, the Company collected the full $760,000. | |||||||||||
Major Suppliers | |||||||||||
The Company currently buys several components from sole source suppliers. Although there are a limited number of manufacturers of particular components, management believes other suppliers could provide similar components on comparable terms. | |||||||||||
For the three months ended December 31, 2013, the Company had one supplier which accounted for greater than 10% of the Company’s total inventory related purchases. For the three months ended December 31, 2012, the Company had one supplier which accounted for greater than 10% 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 primary consideration. Cash balances are maintained with two banks. Certain 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 has no reserve for doubtful accounts as of December 31, 2013 and September 30, 2013 because of the favorable history of collections and a specific analysis of amounts outstanding. | |||||||||||
Recent Accounting Pronouncements | ' | ||||||||||
Recent Accounting Pronouncements | |||||||||||
In July 2013, the FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit when a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU 2013-11”). ASU 2013-11 provides that a liability related to an unrecognized tax benefit should be offset against a deferred tax asset for a NOL carryforward, a similar tax loss or a tax credit carryforward if such liability is to be settled by reducing an available tax carryforward in the event the uncertain tax position is disallowed. ASU 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013 for public entities, with early adoption permitted. The adoption of ASU 2013-11 did not have a material impact on the Company’s consolidated financial statements as of December 31, 2013. | |||||||||||
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Tables) | 3 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
Summary of Significant Accounting Policies | ' | ||||||||||
Schedule of financial assets and liabilities accounted for at fair value on a recurring basis | ' | ||||||||||
Fair Value Measurement on December 31, 2013 | |||||||||||
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 | $ | 14,396,556 | $ | — | $ | — | |||||
Fair Value Measurement on September 30, 2013 | |||||||||||
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 | $ | 14,396,014 | $ | — | $ | — | |||||
Supplemental_Balance_Sheet_Dis1
Supplemental Balance Sheet Disclosures (Tables) | 3 Months Ended | |||||||
Dec. 31, 2013 | ||||||||
Supplemental Balance Sheet Disclosures | ' | |||||||
Schedule of inventories | ' | |||||||
December 31, | September 30, | |||||||
2013 | 2013 | |||||||
Raw materials | $ | 3,624,157 | $ | 3,126,592 | ||||
Work-in-process | 1,123,403 | 857,602 | ||||||
Finished goods | 227,981 | 393,319 | ||||||
$ | 4,975,541 | $ | 4,377,513 | |||||
Schedule of prepaid expenses and other current assets | ' | |||||||
December 31, | September 30, | |||||||
2013 | 2013 | |||||||
Prepaid insurance | $ | 186,743 | $ | 350,913 | ||||
Other | 326,531 | 291,297 | ||||||
$ | 513,274 | $ | 642,210 | |||||
Schedule of property and equipment, net | ' | |||||||
December 31, | September 30, | |||||||
2013 | 2013 | |||||||
Land | $ | 1,021,245 | $ | 1,021,245 | ||||
Computer equipment | 2,237,025 | 2,173,266 | ||||||
Corporate airplane | 3,128,504 | 3,128,504 | ||||||
Furniture and office equipment | 1,054,347 | 1,062,296 | ||||||
Manufacturing facility | 5,649,070 | 5,631,001 | ||||||
Equipment | 4,897,120 | 4,678,678 | ||||||
Total | 17,987,311 | 17,694,990 | ||||||
Less: Accumulated depreciation and amortization | (10,459,727 | ) | (10,374,495 | ) | ||||
$ | 7,527,584 | $ | 7,320,495 | |||||
Schedule of other assets | ' | |||||||
December 31, | September 30, | |||||||
2013 | 2013 | |||||||
Intangible assets, net of accumulated amortization of $495,037 at December 31, 2013 and September 30, 2013 | $ | 105,200 | $ | 105,200 | ||||
Other non-current assets | 126,781 | 116,333 | ||||||
$ | 231,981 | $ | 221,533 | |||||
Schedule of accrued expenses | ' | |||||||
December 31, | September 30, | |||||||
2013 | 2013 | |||||||
Warranty | $ | 756,544 | $ | 701,456 | ||||
Salary, benefits and payroll taxes | 459,288 | 679,325 | ||||||
Professional fees | 357,633 | 393,570 | ||||||
Income taxes payable | 243,633 | 337,993 | ||||||
EDC program costs | 1,153,618 | 560,428 | ||||||
Litigation claims | 481,060 | 656,865 | ||||||
Other | 251,277 | 343,272 | ||||||
$ | 3,703,053 | $ | 3,672,909 | |||||
Schedule of warranty cost and accrual information | ' | |||||||
Warranty Accrual at September 30, 2013 | $ | 701,456 | ||||||
Accrued expense | 116,260 | |||||||
Warranty cost | (61,172 | ) | ||||||
Warranty Accrual at December 31, 2013 | $ | 756,544 |
Earnings_Per_Share_Tables
Earnings Per Share (Tables) | 3 Months Ended | |||||||
Dec. 31, 2013 | ||||||||
Earnings Per Share | ' | |||||||
Schedule of income per share | ' | |||||||
For the three months ended December 31, | ||||||||
2013 | 2012 | |||||||
Numerator: | ||||||||
Net income | $ | 1,008,596 | $ | 317,589 | ||||
Denominator: | ||||||||
Basic weighted average shares | 16,888,086 | 16,608,507 | ||||||
Dilutive effect of share-based awards | 206,260 | 6 | ||||||
Diluted weighted average shares | 17,094,346 | 16,608,513 | ||||||
Earnings per common share: | ||||||||
Basic EPS | $ | 0.06 | $ | 0.02 | ||||
Diluted EPS | $ | 0.06 | $ | 0.02 |
Summary_of_Significant_Account3
Summary of Significant Accounting Policies (Details) (USD $) | 3 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
item | ||
Property and Equipment | ' | ' |
Depreciation | $129,000 | $106,000 |
Long-Lived Assets | ' | ' |
Impairment charges | 0 | 0 |
Revenue Recognition | ' | ' |
Minimum number of deliverable for allocating revenue to each deliverable | 1 | ' |
Engineering Development | ' | ' |
Percentage of employees who were engineers engaged in various engineering development projects | 40.00% | ' |
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 | ' | ' |
Estimated useful lives | '10 years | ' |
Depreciation | $0 | ' |
Manufacturing facility | ' | ' |
Property and Equipment | ' | ' |
Estimated useful lives | '39 years | ' |
Summary_of_Significant_Account4
Summary of Significant Accounting Policies (Details 2) (Fair value on a recurring basis, Quoted Price in Active Markets for Identical Assets (Level 1), Money market funds, USD $) | Dec. 31, 2013 | Sep. 30, 2013 |
Fair value on a recurring basis | Quoted Price in Active Markets for Identical Assets (Level 1) | Money market funds | ' | ' |
Assets | ' | ' |
Cash and cash equivalents | $14,396,556 | $14,396,014 |
Summary_of_Significant_Account5
Summary of Significant Accounting Policies (Details 3) (USD $) | Dec. 31, 2013 | Sep. 30, 2013 | Dec. 31, 2013 | Sep. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 |
item | AAI | AAI | Net sales | Net sales | Net sales | Net sales | Net sales | Net sales | Net sales | Net sales | Net sales | Inventory purchases | Inventory purchases | ||
Major Customers | Major Customers | Major Customers | Major Customers | Major Customers | Major Customers | Major Customers | Major Customers | Major Customers | Major Suppliers | Major Suppliers | |||||
item | item | DoD | Pilatus | Eclipse | Eclipse | FedEx | AAI | AAI | item | item | |||||
Concentrations | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of major customers | ' | ' | ' | ' | 4 | 2 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Concentrations risk (as a percent) | ' | ' | ' | ' | ' | ' | 22.00% | 13.00% | 12.00% | 29.00% | 11.00% | 4.00% | 13.00% | ' | ' |
Number of major suppliers | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1 | 1 |
Concentration of Credit Risk | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of banks for maintenance of cash balances | 2 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Reserves for doubtful accounts | $0 | $0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Pre-bankruptcy outstanding accounts receivable | 4,759,853 | 4,489,434 | ' | 760,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Collection of accounts receivable | ' | ' | $760,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Supplemental_Balance_Sheet_Dis2
Supplemental Balance Sheet Disclosures (Details) (USD $) | 3 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | |
Supplemental Balance Sheet Disclosures | ' | ' | ' |
Unbilled receivables, net of customer payments | $7,314,710 | ' | $6,539,442 |
Inventories | ' | ' | ' |
Raw materials | 3,624,157 | ' | 3,126,592 |
Work-in-process | 1,123,403 | ' | 857,602 |
Finished goods | 227,981 | ' | 393,319 |
Inventory | 4,975,541 | ' | 4,377,513 |
Prepaid expenses and other current assets | ' | ' | ' |
Prepaid insurance | 186,743 | ' | 350,913 |
Other | 326,531 | ' | 291,297 |
Total | 513,274 | ' | 642,210 |
Unbilled receivables | ' | ' | ' |
Change in operating income resulting from revised estimates | -1,408,624 | -384,591 | ' |
Contracts accounted for under percentage of completion | ' | ' | ' |
Unbilled receivables | ' | ' | ' |
Change in operating income resulting from revised estimates | $183,000 | $0 | ' |
Supplemental_Balance_Sheet_Dis3
Supplemental Balance Sheet Disclosures (Details 2) (USD $) | 3 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | |
Property and equipment | ' | ' | ' |
Total | $17,987,311 | ' | $17,694,990 |
Less: Accumulated depreciation and amortization | -10,459,727 | ' | -10,374,495 |
Property and equipment, net | 7,527,584 | ' | 7,320,495 |
Depreciation | 129,000 | 106,000 | ' |
Other assets: | ' | ' | ' |
Intangible assets, net of accumulated amortization of $495,037 at December 31, 2013 and September 30, 2013 | 105,200 | ' | 105,200 |
Other non-current assets | 126,781 | ' | 116,333 |
Total other assets | 231,981 | ' | 221,533 |
Accumulated amortization of intangible assets | 495,037 | ' | 495,037 |
Impairment charges | 0 | 0 | ' |
Total amortization expense | 0 | 13,000 | ' |
Land | ' | ' | ' |
Property and equipment | ' | ' | ' |
Total | 1,021,245 | ' | 1,021,245 |
Computer equipment | ' | ' | ' |
Property and equipment | ' | ' | ' |
Total | 2,237,025 | ' | 2,173,266 |
Corporate airplane | ' | ' | ' |
Property and equipment | ' | ' | ' |
Total | 3,128,504 | ' | 3,128,504 |
Depreciation | 0 | ' | ' |
Furniture and office equipment | ' | ' | ' |
Property and equipment | ' | ' | ' |
Total | 1,054,347 | ' | 1,062,296 |
Manufacturing facility | ' | ' | ' |
Property and equipment | ' | ' | ' |
Total | 5,649,070 | ' | 5,631,001 |
Equipment | ' | ' | ' |
Property and equipment | ' | ' | ' |
Total | $4,897,120 | ' | $4,678,678 |
Supplemental_Balance_Sheet_Dis4
Supplemental Balance Sheet Disclosures (Details 3) (USD $) | 3 Months Ended | |
Dec. 31, 2013 | Sep. 30, 2013 | |
Accrued expenses | ' | ' |
Warranty | $756,544 | ' |
Salary, benefits and payroll taxes | 459,288 | 679,325 |
Professional fees | 357,633 | 393,570 |
Income taxes payable | 243,633 | 337,993 |
EDC program costs | 1,153,618 | 560,428 |
Litigation claims | 481,060 | 656,865 |
Other | 251,277 | 343,272 |
Total | 3,703,053 | 3,672,909 |
Warranty cost and accrual information | ' | ' |
Warranty Accrual, beginning of period | 701,456 | ' |
Accrued expense | 116,260 | ' |
Warranty cost | -61,172 | ' |
Warranty Accrual, end of period | $756,544 | ' |
Income_Taxes_Details
Income Taxes (Details) (USD $) | 3 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Components of income taxes | ' | ' |
Income tax expense | $416,161 | $96,119 |
Reconciliation of the statutory federal rate to the Company's effective income tax rate | ' | ' |
Effective tax rates (as a percent) | 29.00% | 23.00% |
Shareholders_Equity_and_Shareb1
Shareholders' Equity and Share-based Payments (Details) (USD $) | 3 Months Ended | 0 Months Ended | 3 Months Ended | 3 Months Ended | |||||||||||||
Dec. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Apr. 29, 2013 | Jan. 25, 2013 | Mar. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | |
item | Options | Options | Options | 1998 Plan | 1998 Plan | Restricted Plan | Restricted Plan | Restricted Plan | 2009 Plan | 2009 Plan | 2009 Plan | 2009 Plan | 2009 Plan | ||||
Non-employee directors | Non-employee directors | Non-employee directors | Performance-based Award | ||||||||||||||
item | Employees | ||||||||||||||||
Shareholders' Equity and Share-based Payments | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock, shares authorized | 75,000,000 | ' | 75,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Preferred Stock, shares authorized | 10,000,000 | ' | 10,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Share-based compensation | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Share-based compensation expense | $234,000 | $184,000 | ' | ' | ' | $22,000 | ' | $0 | $10,000 | $0 | $0 | ' | $184,000 | $124,000 | $50,000 | $50,000 | ' |
Unrecognized compensation cost, related to non-vested stock options | ' | ' | ' | ' | ' | ' | 59,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Excess (shortfall) in income tax benefits related to share-based compensation arrangements | -147,000 | -10,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Reduction in applicable option exercise price of each outstanding option (in dollars per share) | ' | ' | ' | ' | $1.50 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of share-based compensation plans maintained by the company | 3 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of shares of common stock available for awards under the plan | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 346,220 | ' | ' | ' | ' |
Number of shares of common stock reserved for awards | ' | ' | ' | ' | ' | ' | ' | 3,389,000 | ' | ' | ' | ' | 1,200,000 | ' | ' | ' | ' |
Fair market value of annual award of non-vested shares | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 40,000 | ' | ' | ' | ' | ' |
Number of quarterly installments of shares awards | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 4 | ' | ' | ' | ' | ' |
Maximum award (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 300,000 |
Stock repurchase program | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Maximum number of shares of outstanding common stock approved to acquire under repurchase program | ' | ' | ' | 250,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of shares of common stock yet to be purchased under the repurchase program | 250,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of shares of common stock purchased under the repurchase program | ' | 175 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cost of common stock purchased under the repurchase program | ' | $696 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Average market price of common stock purchased under the repurchase program (in dollars per share) | ' | $3.96 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Earnings_Per_Share_Details
Earnings Per Share (Details) (USD $) | 3 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Numerator: | ' | ' |
Net income | $1,008,596 | $317,589 |
Denominator: | ' | ' |
Basic weighted average shares | 16,888,086 | 16,608,507 |
Dilutive effect of share-based awards (in shares) | 206,260 | 6 |
Diluted weighted average shares | 17,094,346 | 16,608,513 |
Earnings per common share: | ' | ' |
Basic EPS (in dollars per share) | $0.06 | $0.02 |
Diluted EPS (in dollars per share) | $0.06 | $0.02 |
Options to purchase common stock outstanding (in shares) | 779,834 | 651,600 |
Weighted dilutive shares outstanding excluded from the computation of diluted earnings per share | 84,598 | 800,645 |
Contingencies_Details
Contingencies (Details) (Breach of contract and violation of the Pennsylvania Wage Payment and Collection Law, Pending lawsuit, USD $) | 0 Months Ended | 1 Months Ended |
Sep. 26, 2011 | Dec. 31, 2013 | |
Breach of contract and violation of the Pennsylvania Wage Payment and Collection Law | Pending lawsuit | ' | ' |
Legal Proceedings | ' | ' |
Amount of damages claimed | $583,000 | ' |
Settlement amount | ' | $540,000 |