Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Dec. 31, 2018 | Jan. 31, 2019 | |
Document and Entity Information | ||
Entity Registrant Name | INNOVATIVE SOLUTIONS & SUPPORT INC | |
Entity Central Index Key | 836,690 | |
Document Type | 10-Q | |
Document Period End Date | Dec. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 16,907,484 | |
Document Fiscal Year Focus | 2,019 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2018 | Sep. 30, 2018 |
Current assets | ||
Cash and cash equivalents | $ 20,341,618 | $ 20,390,713 |
Accounts receivable | 3,219,069 | 3,449,893 |
Inventories | 4,295,988 | 4,280,108 |
Prepaid expenses and other current assets | 630,331 | 544,234 |
Total current assets | 28,487,006 | 28,664,948 |
Property and equipment, net | 8,719,249 | 8,786,737 |
Other assets | 173,178 | 181,993 |
Total assets | 37,379,433 | 37,633,678 |
Current liabilities | ||
Accounts payable | 1,039,720 | 1,529,792 |
Accrued expenses | 1,749,688 | 1,463,021 |
Contract liability | 166,517 | 356,801 |
Total current liabilities | 2,955,925 | 3,349,614 |
Deferred income taxes | 129,617 | 129,594 |
Total liabilities | 3,085,542 | 3,479,208 |
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, 2018 and September 30, 2018 | ||
Common stock, $.001 par value: 75,000,000 shares authorized, 18,937,050 issued at December 31, 2018 and September 30, 2018 | 18,937 | 18,937 |
Additional paid-in capital | 51,783,779 | 51,783,779 |
Retained earnings | 3,859,712 | 3,720,291 |
Treasury stock, at cost, 2,096,451 shares at December 31, 2018 and September 30, 2018 | (21,368,537) | (21,368,537) |
Total shareholders' equity | 34,293,891 | 34,154,470 |
Total liabilities and shareholders' equity | $ 37,379,433 | $ 37,633,678 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2018 | Sep. 30, 2018 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 18,937,050 | 18,937,050 |
Treasury stock, shares | 2,096,451 | 2,096,451 |
Class A Convertible stock | ||
Preferred stock, shares authorized | 200,000 | 200,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Sales: | ||
Total net sales | $ 3,977,650 | $ 3,087,984 |
Cost of sales: | ||
Total cost of sales | 1,811,847 | 1,593,268 |
Gross profit | 2,165,803 | 1,494,716 |
Operating expenses: | ||
Research and development | 596,372 | 923,721 |
Selling, general and administrative | 1,473,416 | 1,622,555 |
Total operating expenses | 2,069,788 | 2,546,276 |
Operating income (loss) | 96,015 | (1,051,560) |
Interest income | 21,552 | 9,624 |
Other income | 21,854 | 21,431 |
Income (loss) before income taxes | 139,421 | (1,020,505) |
Income tax expense (benefit) | 0 | (138,886) |
Net income (loss) | $ 139,421 | $ (881,619) |
Net income(loss) per common share: | ||
Basic (in dollars per share) | $ 0.01 | $ (0.05) |
Diluted (in dollars per share) | $ 0.01 | $ (0.05) |
Weighted average shares outstanding: | ||
Basic (in shares) | 16,840,599 | 16,783,129 |
Diluted (in shares) | 16,840,599 | 16,783,129 |
Product | ||
Sales: | ||
Total net sales | $ 3,775,509 | $ 3,087,984 |
Cost of sales: | ||
Total cost of sales | 1,723,281 | $ 1,593,268 |
Engineering development contracts | ||
Sales: | ||
Total net sales | 202,141 | |
Cost of sales: | ||
Total cost of sales | $ 88,566 |
CONSOLIDATED STATEMENT OF SHARE
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY - 3 months ended Dec. 31, 2018 - USD ($) | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Total |
Balance at Sep. 30, 2018 | $ 18,937 | $ 51,783,779 | $ 3,720,291 | $ (21,368,537) | $ 34,154,470 |
Increase (Decrease) in Stockholders' Equity | |||||
Net income | 139,421 | 139,421 | |||
Balance at Dec. 31, 2018 | $ 18,937 | $ 51,783,779 | $ 3,859,712 | $ (21,368,537) | $ 34,293,891 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income (loss) | $ 139,421 | $ (881,619) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 116,078 | 103,368 |
Deferred income taxes | 23 | 61,813 |
(Increase) decrease in: | ||
Accounts receivable | 230,824 | 1,267,975 |
Unbilled receivables, net | 397,657 | |
Inventories | (15,880) | (315,397) |
Prepaid expenses and other current assets | (85,619) | 191,171 |
Income taxes receivable | (478) | (201,155) |
Increase (decrease) in: | ||
Accounts payable, net | (490,072) | (394,485) |
Accrued expenses | 286,667 | (21,009) |
Contract liability | (190,284) | (142,889) |
Net cash (used in) provided by operating activities | (9,320) | 65,430 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (39,775) | (83,277) |
Net cash used in investing activities | (39,775) | (83,277) |
Net decrease in cash and cash equivalents | (49,095) | (17,847) |
Cash and cash equivalents, beginning of year | 20,390,713 | 24,680,301 |
Cash and cash equivalents, end of period | $ 20,341,618 | $ 24,662,454 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Dec. 31, 2018 | |
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,” “IS&S,” “we” or “us”) was incorporated in Pennsylvania on February 12, 1988. The Company operates in one business segment as a systems integrator that designs, develops, manufactures, sells, and services air data equipment, engine display systems, standby equipment, primary flight guidance, autothrottles and cockpit display systems for retrofit applications and original equipment manufacturers (“OEMs”). The Company supplies integrated Flight Management Systems (“FMS”), Flat Panel Display Systems (“FPDS”), FPDS with Autothrottle, air data equipment, Integrated Standby Units (“ISU”), ISU with Autothrottle and advanced Global Positioning System (“GPS”) receivers that enable reduced carbon footprint navigation. The Company has continued to position itself as a system integrator, which capability 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, 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. 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, 2018 is derived from the audited financial statements of the Company. Operating results for the three months ended December 31, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2019. 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, 2018. 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 The Company prepares its condensed consolidated financial statements in conformity with GAAP, which 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 net sales 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 liabilities, 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, self-insurance reserves, 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, 2018 and September 30, 2018 consist of cash on deposit and cash 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 the estimated useful lives of the assets (the lesser of three to seven years or over the lease term), except for the manufacturing facility and the corporate airplanes, which are depreciated using the straight-line method over their estimated useful lives of thirty-nine years and ten years, respectively. 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. Fair Value of Financial Instruments The net carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable 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, 2018 and September 30, 2018, according to the valuation techniques the Company used to determine their fair values. Fair Value Measurement on December 31, 2018 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 $ 19,742,373 $ — $ — Fair Value Measurement on September 30, 2018 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 $ 19,725,474 $ — $ — 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.” 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 should 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, 2018 or 2017. Revenue Recognition The Company enters into sales arrangements with customers that, in general, provide for the Company to design, develop, manufacture and deliver large flat-panel display systems, flight information computers and advanced monitoring systems that measure and display critical flight information, including data relative to aircraft separation, airspeed, altitude, and engine and fuel data measurements. Revenue from Contracts with Customers The Company adopted ASC 606 on October 1, 2018 using the modified retrospective method for all contracts not completed as of the date of adoption. The reported results for December 31, 2018 reflect the application of ASC 606 guidance while the reported results for December 31, 2017 were prepared under the guidance of ASC 605, Revenue Recognition (ASC 605), which is also referred to herein as "legacy GAAP" or the “previous guidance.” The adoption of ASC 606 represents a change in accounting principle. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services. To achieve this core principle, the Company applies the following five steps: 1) Identify the contract with a customer The Company’s contract with its customers typically is the form of a purchase order issued to the Company by its customers and, to a lesser degree, in the form of purchase order issued in connection with a formal contract executed with a customer. For purpose of accounting for revenue under ASC 606, a contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer. 2) Identify the performance obligations in the contract Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. Most of our revenue is derived from purchases under which we provide a specific product or service and, as a result, there is only one performance obligation. In the event that a contract includes multiple promised goods or services, such as an EDC contract which includes both engineering services and a resulting product shipment, the Company must apply judgment to determine whether promised goods or services are capable of being distinct and distinct in the context of the contract. In these cases, the Company considers whether the customer could, on its own or together with other resources that are readily available from third parties, produce the physical product using only the output resulting from the Company’s completion of engineering services. If the customer cannot produce the physical product, then the promised goods or services are accounted for as a combined performance obligation. 3) Determine the transaction price The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company's contracts as of December 31, 2018 included variable consideration. 4) Allocate the transaction price to performance obligations in the contract If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions as well as the cost of the goods or services and the Company’s normal margins for similar performance obligations. 5) Recognize revenue when or as the Company satisfies a performance obligation The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or service to a customer. Revenue from products transferred to customers at a point in time accounted for 95 percent of our revenue for the quarter ended December 31, 2018, and is typically recognized at the time of shipment of products to the customer. The remaining revenue results from EDC contracts and is recognized over time using an input measure (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress. Contract costs include material, components and third party avionics purchased from suppliers, direct labor, and overhead costs. At December 31, 2018, we had approximately $4,298,000 of remaining performance obligations, which we also refer to as total backlog. We expect to recognize 99 percent of our remaining performance obligations as revenue over the next 12 months with the remaining balance recognized thereafter. Contract Estimates Accounting for performance obligations in long-term contracts that are satisfied over time involves the use of various techniques to estimate progress towards satisfaction of the performance obligation. The Company typically measures progress based on costs incurred compared to estimated total contract costs. Contract cost estimates are based on various assumptions to project the outcome of future events that often span more than a single year. These assumptions include the amount of labor and labor costs, the quantity and cost of raw materials used in the completion of the performance obligation, and the complexity of the work to be performed. As a significant change in one or more of these estimates could affect the profitability of our contracts, we review and update our contract-related estimates regularly. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the quarter it is identified. The impact of adjustments in contract estimates on our operating earnings can be reflected in either operating costs and expenses or revenue. The aggregate impact of adjustments in contract estimates did not change our revenue and operating earnings (and diluted earnings per share) for the three-month period ended December 31, 2018. Therefore, no adjustment on any contract was material to our unaudited Consolidated Financial Statements for the three-month periods ended December 31, 2018. Financial Statement Impact of Adopting ASC 606 The Company adopted ASC 606 using the modified retrospective method, and the adoption resulted in no adjustment to the Company’s accumulated deficit as of the adoption date and there were no significant changes in the Company’s consolidated statements of operations for the three months ended December 31, 2018 as a result of the adoption of ASC 606 on October 1, 2018 compared to if the Company had continued to recognize revenues under ASC 605. Additionally, there was no change to the Company’s assets or liabilities as of December 31, 2018 as a result of the adoption of ASC 606 on October 1, 2018 compared to if the Company had continued to recognize revenues under ASC 605. The adoption of ASC 606 had no impact on the Company’s cash flows from operations. Contract Balances Contract liabilities primarily relate to consideration received in advance of performance under the contract. The Company does not have significant contract assets as of December 31, 2018. Below is a summary of our contract liabilities balance: December 31, 2018 Balance as of beginning of fiscal year $ 356,801 Balance as of end of period 166,517 The most significant changes in our contract liabilities balance during the three months ended December 31, 2018 were due to revenue recognized that was included in the contract liabilities balance at the beginning of the period, partially offset by amounts billed. In the three months ended December 31, 2018, we recognized revenue of approximately $271,000 that was included in the opening contract liabilities balance. Customer Service Revenue The Company enters into sales arrangements with customers for the repair or upgrade of its various products that are not under warranty. The Company’s customer service revenue and cost of sales are included in product sales and product cost of sales, respectively, on the accompanying consolidated statements of operations. The Company’s customer service revenue and cost of sales for the three months ended December 31, 2018 and 2017 respectively are as follows: For the Three Months Ended December 31, 2018 2017 Customer Service Sales $ 662,094 $ 1,038,847 Customer Service Cost of Sales 325,152 513,357 Gross Profit $ 336,942 $ 525,490 Income Taxes Income taxes are recorded in accordance with 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 and year-end 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 periods. Deferred tax assets are reduced by a valuation allowance 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 verified objectively, and significant management judgment is required in determining any valuation allowance recorded against net deferred tax assets. The Company evaluates deferred income taxes on a quarterly basis to determine if a valuation allowance is 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 carryforwards, taxable income in carry-back years, and tax planning strategies which are both prudent and feasible. The Company’s current balance of the deferred tax valuation allowance is recorded against all of its federal and state deferred tax assets. The Company will continue to assess all available evidence during future periods to evaluate any changes to the realization of its deferred tax assets. If the Company were to determine that it would be able to realize additional federal or state deferred tax assets in the future, it would make an adjustment to the valuation allowance which would reduce the provision for 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 as a result 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 it has made adequate accruals 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 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. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 34 percent to 21 percent; (2) bonus depreciation that will allow for full expensing of qualified property; (3) elimination of the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (4) a new limitation on deductible interest expense; (5) the repeal of the domestic production activity deduction; and (6) limitations on The Tax Act reduced the corporate tax rate to 21 percent, effective January 1, 2018. Consequently, we recorded a decrease related to deferred tax assets and deferred tax liabilities with a corresponding net adjustment to deferred income tax expense of $321,038 for the year ended December 31, 2017. This expense is offset fully by a change in the valuation allowance. We have completed our accounting for the income tax effects of certain elements of the Tax Act. Engineering Development The Company invests a large percentage of its sales on engineering development, both Research and Development (“R&D”) and EDC. At December 31, 2018, approximately 23% of the Company’s employees were engineers engaged in various engineering development projects. Total engineering development expense is comprised of both internally funded R&D and product development and design charges related to specific customer contracts. Engineering development 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. Product development and design charges related to specific customer contracts are charged to cost of sales-EDC based on estimated progress towards satisfaction of the performance obligation under ASC 606. Treasury Stock We account for treasury stock purchased under the cost method and include treasury stock as a component of stockholder’s equity. Treasury stock purchased with intent to retire (whether or not the retirement is actually accomplished) is charged to common stock. 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 a financial statement 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 ended December 31, 2018 and 2017, comprehensive income consisted of net income only, and there were no items of other comprehensive income for any of the periods presented. Share-Based Compensation The Company accounts for share-based compensation under 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. The Company recognizes such cost over the period during which an employee or non-employee director is required to provide service in exchange for the award. Warranty The Company offers warranties on some products of various lengths, however the standard warranty is twenty-four months. Our standard warranties typically only cover repairs of product defects and, although the Company offers extended warranties, there have been no sales of extended warranties. As a result, none of the Company's warranties represent performance obligations under ASC 606. At the time of shipment, the Company establishes a reserve for estimated costs of warranties based on 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 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. While 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 the estimated warranty liability accordingly. Self-Insurance Reserves Since January 1, 2014, the Company has self-insured a significant portion of its employee medical insurance. The Company maintains a stop-loss insurance policy that limits its losses both on a per employee basis and an aggregate basis. Liabilities associated with the risks that are retained by the Company are estimated based upon actuarial assumptions such as historical claims experience, demographic factors and other actuarial assumptions. The Company estimated the total medical claims incurred but not reported and the Company believes that it has adequate reserves for these claims at December 31, 2018 and September 30, 2018, respectively. However, the actual value of such claims could be significantly affected if future occurrences and claims differ from these assumptions. At December 31, 2018 and September 30, 2018, the estimated liability for medical claims incurred but not reported was approximately $62,000 and $60,000 respectively. The Company has recorded the excess of funded premiums over estimated claims incurred but not reported of approximately $122,000 and $102,000 as a current asset in the accompanying condensed consolidated balance sheets as of December 31, 2018 and September 30, 2018, respectively. Concentrations Major Customers and Products For the three months ended December 31, 2018, three customers, Air Transport Services Group, Pilatus Aircraft Ltd (“Pilatus”), and DHL, accounted for 30%, 21% and 12% of net sales, respectively. For the three months ended December 31, 2017, one customer, S&K Aerospace LLC, accounted for 10% of net sales. The Company had one customer that accounted for 29% and 27% of the Company's accounts receivable balance as of December 31, 2018 and September 30, 2018, respectively. The Company anticipates payment according to contractual terms with this customer. Major Suppliers The Company buys several of its components from sole source suppliers. Although there are a limited number of suppliers of particular components, management believes other suppliers could provide similar components on comparable terms. For the three months ended December 31, 2018, the Company had one supplier that accounted for 10% of the Company’s total inventory related purchases. For the three months ended December 31, 2017, the Company had one supplier that accounted for 14% 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 major consideration. Cash balances are maintained with two major banks. Balances on deposit with certain money market accounts and 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. Basis of Presentation Certain prior year financial statement amounts have been reclassified to conform to the current year presentation. Recent Accounting Pronouncements In March 2016, the FASB issued ASU 2016-09, Improvements to Employer Share-Based Payment Accounting, which simplifies the tax treatment of stock “shortfalls” and “windfalls.” Previous guidance required excess tax benefits (“windfalls”) to be recorded in equity. Tax deficiencies (“shortfalls”) were recorded in equity to the extent of previous windfalls then to the income statement. The new guidance simplifies this treatment by having all “windfalls” and “shortfalls” recorded through the income statement. This guidance became effective for us beginning on October 1, 2017. Adoption of this standard did not have a material effect upon the consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under this guidance, an entity is required to recognize right-of- |
Supplemental Balance Sheet Disc
Supplemental Balance Sheet Disclosures | 3 Months Ended |
Dec. 31, 2018 | |
Supplemental Balance Sheet Disclosures | |
Supplemental Balance Sheet Disclosures | 2. Supplemental Balance Sheet Disclosures Inventories Inventories are stated at the lower of cost (first-in, first-out) or net realizable value, net of write-downs for excess and obsolete inventory, and consist of the following: December 31, September 30, 2018 2018 Raw materials $ 3,153,742 $ 2,892,366 Work-in-process 716,059 817,051 Finished goods 426,187 570,691 $ 4,295,988 $ 4,280,108 Prepaid expenses and other current assets Prepaid expenses and other current assets consist of the following: December 31, September 30, 2018 2018 Prepaid insurance $ 376,586 $ 258,015 Income tax refund receivable 2,056 1,578 Other 251,689 284,641 $ 630,331 $ 544,234 Property and equipment Property and equipment, net consists of the following: December 31, September 30, 2018 2018 Land $ 1,021,245 $ 2,268,969 Computer equipment 2,273,709 5,601,039 Corporate airplanes 5,601,039 1,033,779 Furniture and office equipment 1,033,779 5,733,313 Manufacturing facility 5,733,313 5,580,083 Equipment 5,615,118 1,021,245 21,278,203 21,238,428 Less: accumulated depreciation and amortization (12,558,954) (12,451,691) $ 8,719,249 $ 8,786,737 Depreciation and amortization related to property and equipment was approximately $107,000 and $103,000 for the three months ended December 31, 2018 and 2017, respectively. The corporate airplanes are utilized primarily in support of product development. The Pilatus PC-12 airplane, one of the Company’s two corporate airplanes, has been depreciated to its estimated salvage value. Other assets Other assets consist of the following: December 31, September 30, 2018 2018 Intangible assets, net of accumulated amortization of $538,837 and $531,637 at December 31, 2018 and September 30, 2018, respectively $ 61,400 $ 68,600 Other non-current assets 111,778 113,393 $ 173,178 $ 181,993 Intangible assets consist of licensing and certification rights which are amortized over a defined number of units. No impairment charges were recorded in the three months ended December 31, 2018 and 2017. Intangible asset amortization expense was approximately $7,000 and $0 for the three months ended December 31, 2018 and 2017, 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 as of December 31, 2018 and September 30, 2018 include the security deposit for an airplane hangar, and a deposit for medical claims required under the Company’s medical plan. In addition, other non-current assets as of December 31, 2018 and September 30, 2018 includes $36,000 and $38,000, respectively, of prepaid software licenses that will be earned upon the shipment of a certain product to a customer. Other non-current assets amortization expense was approximately $2K and $0 for the three months ended December 31, 2018 and 2017, respectively. Accrued expenses Accrued expenses consist of the following: December 31, September 30, 2018 2018 Warranty $ 837,317 $ 854,952 Salary, benefits and payroll taxes 314,563 143,183 Professional fees 271,204 203,823 Other 326,604 261,063 $ 1,749,688 $ 1,463,021 Warranty cost and accrual information for the three months ended December 31, 2018 is highlighted below: Three Months Ending December 31, 2018 Warranty accrual, beginning of period $ 854,952 Accrued expense 2,600 Warranty cost (20,235) Warranty accrual, end of period $ 837,317 |
Income Taxes
Income Taxes | 3 Months Ended |
Dec. 31, 2018 | |
Income Taxes | |
Income Taxes | 3. Income Taxes During the three month period ended December 31, 2018, income taxes were impacted relative to the prior year period by the Tax Cuts and Jobs Act (“the Tax Act”), which was enacted into law on December 22, 2017. Income tax effects resulting from changes in tax laws are accounted for by the Company in accordance with the authoritative guidance, which requires that these tax effects be recognized in the period in which the law is enacted and the effects are recorded as a component of the provision for income taxes from continuing operations. The Act includes significant changes to the U.S. corporate income tax system which reduces the U.S. federal corporate tax rate from 35.0% to 21.0% as of January 1, 2018. The decrease in the U.S. federal corporate tax rate from 35.0% to 21.0% results in a blended statutory tax rate of 24.5% for the fiscal year ending September 30, 2018. The Act also eliminates for NOLs the previous carryback period of two years and permits an indefinite carryforward period. The income tax expense for the three months ended December 31, 2018 was $0 as compared to an income tax benefit of $139,000 for the three months ended December 31, 2017. The effective tax rate for the three months ended December 31, 2018 was 0% and differs from the statutory tax rate mostly due to an increase in the valuation allowance of approximately $162,000. The majority of this change is a result of the tax benefit related to pre-tax losses not being currently realizable in future periods. The effective tax rate benefit for the three months ended December 31, 2017 was 13.6% and differs from the statutory tax rate mostly due to a change in the valuation allowance in the current period. |
Shareholders' Equity and Share-
Shareholders' Equity and Share-based Payments | 3 Months Ended |
Dec. 31, 2018 | |
Shareholders' Equity and Share-based Payments | |
Shareholders' Equity and Share-based Payments | 4. Shareholders’ Equity and Share-based Payments At December 31, 2018, 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 718 by using the fair value method for expensing stock options and stock awards. There was no total share-based compensation expense for each of the three months ended December 31, 2018 and 2017. There was no income tax effect recognized as a credit to additional paid-in capital related to share-based compensation arrangements for each of the three months ended December 31, 2018 and 2017. The Company currently maintains two share-based compensation plans, the 2003 Restricted Stock Plan (the “Restricted Plan”) and the 2009 Stock-Based Incentive Compensation Plan (the “2009 Plan”), each of which the shareholders approved. 2009 Stock-Based Incentive Compensation Plan The 2009 Plan authorizes the grant of stock appreciation rights, restricted stock, options, RSUs and other equity-based awards (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 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 or nonqualified stock options. In addition, the 2009 Plan provides that no more than 300,000 shares may be awarded in any calendar year to any employee as a performance-based award under Section 162(m) of the Code. As of September 30, 2018, there were 208,128 shares of common stock available for Awards under the 2009 Plan. If any Award is forfeited, or if any option terminates, expires, or lapses without being exercised, the related 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 proportionately and equitably adjust 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 adversely affect the status of any Award that is intended to qualify for an exemption from the deductibility limitation 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 adversely affect the status of any Award that is intended to qualify for an exemption from the deductibility limitation under Section 162(m) of the Code, unless otherwise determined by the Compensation Committee. Total compensation expense related to Options issued to employees under the 2009 Plan was $0 for each of the three months ended December 31, 2018 and 2017. The expense under the 2009 Plan related to shares issued to non-employee members of the Company’s Board of Directors as compensation was approximately $0 for each of the three month periods ended December 31, 2018 and 2017. Total compensation expense associated with the 2009 Plan was approximately $0 for each of the three month periods ended December 31, 2018 and 2017. Restricted Stock Units During fiscal 2016, the Company’s Board of Directors (the “Board”) approved grants of RSUs to the non-employee directors on the Board as compensation for their services during calendar year 2016. Under the terms of the awards, at the conclusion of the vesting period on January 2, 2017, the grants of RSUs were settled in shares of the Company’s common stock at a rate of one share of stock for each unit. Directors that did not serve for the entirety of calendar year 2016 received a pro rata portion of such award for time served. As of December 31, 2018, there were no unvested restricted stock units outstanding under the 2009 Plan. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Dec. 31, 2018 | |
Earnings Per Share | |
Earnings Per Share | 5. Earnings Per Share Three Months Ended December 31, 2018 2017 Numerator: Net income (loss) $ 139,421 $ (881,619) Denominator: Basic weighted average shares 16,840,599 16,783,129 Dilutive effect of share-based awards — — Diluted weighted average shares 16,840,599 16,783,129 Earnings per common share: Basic EPS $ 0.01 $ (0.05) Diluted EPS $ 0.01 $ (0.05) Earnings per share (“EPS”) are 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, 2018 and 2017, there were 550,834 and 586,834 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, 2018 and 2017, respectively, 550,834 and 586,834 diluted weighted-average shares outstanding were excluded from the computation of diluted EPS because the effect would be anti-dilutive. |
Contingencies
Contingencies | 3 Months Ended |
Dec. 31, 2018 | |
Contingencies | |
Contingencies | 6. Contingencies In the ordinary course of business, the Company is at times subject to various legal proceedings and claims. The Company does not believe any such matters that are currently pending will, individually or in the aggregate, have a material effect on the results of operations or financial position. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Dec. 31, 2018 | |
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, 2018 is derived from the audited financial statements of the Company. Operating results for the three months ended December 31, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2019. 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, 2018. 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 The Company prepares its condensed consolidated financial statements in conformity with GAAP, which 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 net sales 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 liabilities, 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, self-insurance reserves, 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, 2018 and September 30, 2018 consist of cash on deposit and cash 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 the estimated useful lives of the assets (the lesser of three to seven years or over the lease term), except for the manufacturing facility and the corporate airplanes, which are depreciated using the straight-line method over their estimated useful lives of thirty-nine years and ten years, respectively. 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. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The net carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable 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, 2018 and September 30, 2018, according to the valuation techniques the Company used to determine their fair values. Fair Value Measurement on December 31, 2018 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 $ 19,742,373 $ — $ — Fair Value Measurement on September 30, 2018 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 $ 19,725,474 $ — $ — |
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.” 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 should 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, 2018 or 2017. |
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 large flat-panel display systems, flight information computers and advanced monitoring systems that measure and display critical flight information, including data relative to aircraft separation, airspeed, altitude, and engine and fuel data measurements. Revenue from Contracts with Customers The Company adopted ASC 606 on October 1, 2018 using the modified retrospective method for all contracts not completed as of the date of adoption. The reported results for December 31, 2018 reflect the application of ASC 606 guidance while the reported results for December 31, 2017 were prepared under the guidance of ASC 605, Revenue Recognition (ASC 605), which is also referred to herein as "legacy GAAP" or the “previous guidance.” The adoption of ASC 606 represents a change in accounting principle. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services. To achieve this core principle, the Company applies the following five steps: 1) Identify the contract with a customer The Company’s contract with its customers typically is the form of a purchase order issued to the Company by its customers and, to a lesser degree, in the form of purchase order issued in connection with a formal contract executed with a customer. For purpose of accounting for revenue under ASC 606, a contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer. 2) Identify the performance obligations in the contract Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. Most of our revenue is derived from purchases under which we provide a specific product or service and, as a result, there is only one performance obligation. In the event that a contract includes multiple promised goods or services, such as an EDC contract which includes both engineering services and a resulting product shipment, the Company must apply judgment to determine whether promised goods or services are capable of being distinct and distinct in the context of the contract. In these cases, the Company considers whether the customer could, on its own or together with other resources that are readily available from third parties, produce the physical product using only the output resulting from the Company’s completion of engineering services. If the customer cannot produce the physical product, then the promised goods or services are accounted for as a combined performance obligation. 3) Determine the transaction price The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company's contracts as of December 31, 2018 included variable consideration. 4) Allocate the transaction price to performance obligations in the contract If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions as well as the cost of the goods or services and the Company’s normal margins for similar performance obligations. 5) Recognize revenue when or as the Company satisfies a performance obligation The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or service to a customer. Revenue from products transferred to customers at a point in time accounted for 95 percent of our revenue for the quarter ended December 31, 2018, and is typically recognized at the time of shipment of products to the customer. The remaining revenue results from EDC contracts and is recognized over time using an input measure (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress. Contract costs include material, components and third party avionics purchased from suppliers, direct labor, and overhead costs. At December 31, 2018, we had approximately $4,298,000 of remaining performance obligations, which we also refer to as total backlog. We expect to recognize 99 percent of our remaining performance obligations as revenue over the next 12 months with the remaining balance recognized thereafter. Contract Estimates Accounting for performance obligations in long-term contracts that are satisfied over time involves the use of various techniques to estimate progress towards satisfaction of the performance obligation. The Company typically measures progress based on costs incurred compared to estimated total contract costs. Contract cost estimates are based on various assumptions to project the outcome of future events that often span more than a single year. These assumptions include the amount of labor and labor costs, the quantity and cost of raw materials used in the completion of the performance obligation, and the complexity of the work to be performed. As a significant change in one or more of these estimates could affect the profitability of our contracts, we review and update our contract-related estimates regularly. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the quarter it is identified. The impact of adjustments in contract estimates on our operating earnings can be reflected in either operating costs and expenses or revenue. The aggregate impact of adjustments in contract estimates did not change our revenue and operating earnings (and diluted earnings per share) for the three-month period ended December 31, 2018. Therefore, no adjustment on any contract was material to our unaudited Consolidated Financial Statements for the three-month periods ended December 31, 2018. Financial Statement Impact of Adopting ASC 606 The Company adopted ASC 606 using the modified retrospective method, and the adoption resulted in no adjustment to the Company’s accumulated deficit as of the adoption date and there were no significant changes in the Company’s consolidated statements of operations for the three months ended December 31, 2018 as a result of the adoption of ASC 606 on October 1, 2018 compared to if the Company had continued to recognize revenues under ASC 605. Additionally, there was no change to the Company’s assets or liabilities as of December 31, 2018 as a result of the adoption of ASC 606 on October 1, 2018 compared to if the Company had continued to recognize revenues under ASC 605. The adoption of ASC 606 had no impact on the Company’s cash flows from operations. Contract Balances Contract liabilities primarily relate to consideration received in advance of performance under the contract. The Company does not have significant contract assets as of December 31, 2018. Below is a summary of our contract liabilities balance: December 31, 2018 Balance as of beginning of fiscal year $ 356,801 Balance as of end of period 166,517 The most significant changes in our contract liabilities balance during the three months ended December 31, 2018 were due to revenue recognized that was included in the contract liabilities balance at the beginning of the period, partially offset by amounts billed. In the three months ended December 31, 2018, we recognized revenue of approximately $271,000 that was included in the opening contract liabilities balance. Customer Service Revenue The Company enters into sales arrangements with customers for the repair or upgrade of its various products that are not under warranty. The Company’s customer service revenue and cost of sales are included in product sales and product cost of sales, respectively, on the accompanying consolidated statements of operations. The Company’s customer service revenue and cost of sales for the three months ended December 31, 2018 and 2017 respectively are as follows: For the Three Months Ended December 31, 2018 2017 Customer Service Sales $ 662,094 $ 1,038,847 Customer Service Cost of Sales 325,152 513,357 Gross Profit $ 336,942 $ 525,490 |
Income Taxes | Income Taxes Income taxes are recorded in accordance with 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 and year-end 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 periods. Deferred tax assets are reduced by a valuation allowance 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 verified objectively, and significant management judgment is required in determining any valuation allowance recorded against net deferred tax assets. The Company evaluates deferred income taxes on a quarterly basis to determine if a valuation allowance is 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 carryforwards, taxable income in carry-back years, and tax planning strategies which are both prudent and feasible. The Company’s current balance of the deferred tax valuation allowance is recorded against all of its federal and state deferred tax assets. The Company will continue to assess all available evidence during future periods to evaluate any changes to the realization of its deferred tax assets. If the Company were to determine that it would be able to realize additional federal or state deferred tax assets in the future, it would make an adjustment to the valuation allowance which would reduce the provision for 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 as a result 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 it has made adequate accruals 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 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. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 34 percent to 21 percent; (2) bonus depreciation that will allow for full expensing of qualified property; (3) elimination of the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (4) a new limitation on deductible interest expense; (5) the repeal of the domestic production activity deduction; and (6) limitations on The Tax Act reduced the corporate tax rate to 21 percent, effective January 1, 2018. Consequently, we recorded a decrease related to deferred tax assets and deferred tax liabilities with a corresponding net adjustment to deferred income tax expense of $321,038 for the year ended December 31, 2017. This expense is offset fully by a change in the valuation allowance. We have completed our accounting for the income tax effects of certain elements of the Tax Act. |
Engineering Development | Engineering Development The Company invests a large percentage of its sales on engineering development, both Research and Development (“R&D”) and EDC. At December 31, 2018, approximately 23% of the Company’s employees were engineers engaged in various engineering development projects. Total engineering development expense is comprised of both internally funded R&D and product development and design charges related to specific customer contracts. Engineering development 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. Product development and design charges related to specific customer contracts are charged to cost of sales-EDC based on estimated progress towards satisfaction of the performance obligation under ASC 606. |
Treasury Stock | Treasury Stock We account for treasury stock purchased under the cost method and include treasury stock as a component of stockholder’s equity. Treasury stock purchased with intent to retire (whether or not the retirement is actually accomplished) is charged to common stock. |
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 a financial statement 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 ended December 31, 2018 and 2017, comprehensive income consisted of net income only, and there were no items of other comprehensive income for any of the periods presented. |
Share-Based Compensation | Share-Based Compensation The Company accounts for share-based compensation under 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. The Company recognizes such cost over the period during which an employee or non-employee director is required to provide service in exchange for the award. |
Warranty | Warranty The Company offers warranties on some products of various lengths, however the standard warranty is twenty-four months. Our standard warranties typically only cover repairs of product defects and, although the Company offers extended warranties, there have been no sales of extended warranties. As a result, none of the Company's warranties represent performance obligations under ASC 606. At the time of shipment, the Company establishes a reserve for estimated costs of warranties based on 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 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. While 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 the estimated warranty liability accordingly. |
Self-Insurance Reserves | Self-Insurance Reserves Since January 1, 2014, the Company has self-insured a significant portion of its employee medical insurance. The Company maintains a stop-loss insurance policy that limits its losses both on a per employee basis and an aggregate basis. Liabilities associated with the risks that are retained by the Company are estimated based upon actuarial assumptions such as historical claims experience, demographic factors and other actuarial assumptions. The Company estimated the total medical claims incurred but not reported and the Company believes that it has adequate reserves for these claims at December 31, 2018 and September 30, 2018, respectively. However, the actual value of such claims could be significantly affected if future occurrences and claims differ from these assumptions. At December 31, 2018 and September 30, 2018, the estimated liability for medical claims incurred but not reported was approximately $62,000 and $60,000 respectively. The Company has recorded the excess of funded premiums over estimated claims incurred but not reported of approximately $122,000 and $102,000 as a current asset in the accompanying condensed consolidated balance sheets as of December 31, 2018 and September 30, 2018, respectively. |
Concentrations | Concentrations Major Customers and Products For the three months ended December 31, 2018, three customers, Air Transport Services Group, Pilatus Aircraft Ltd (“Pilatus”), and DHL, accounted for 30%, 21% and 12% of net sales, respectively. For the three months ended December 31, 2017, one customer, S&K Aerospace LLC, accounted for 10% of net sales. The Company had one customer that accounted for 29% and 27% of the Company's accounts receivable balance as of December 31, 2018 and September 30, 2018, respectively. The Company anticipates payment according to contractual terms with this customer. Major Suppliers The Company buys several of its components from sole source suppliers. Although there are a limited number of suppliers of particular components, management believes other suppliers could provide similar components on comparable terms. For the three months ended December 31, 2018, the Company had one supplier that accounted for 10% of the Company’s total inventory related purchases. For the three months ended December 31, 2017, the Company had one supplier that accounted for 14% 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 major consideration. Cash balances are maintained with two major banks. Balances on deposit with certain money market accounts and 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. Basis of Presentation Certain prior year financial statement amounts have been reclassified to conform to the current year presentation. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In March 2016, the FASB issued ASU 2016-09, Improvements to Employer Share-Based Payment Accounting, which simplifies the tax treatment of stock “shortfalls” and “windfalls.” Previous guidance required excess tax benefits (“windfalls”) to be recorded in equity. Tax deficiencies (“shortfalls”) were recorded in equity to the extent of previous windfalls then to the income statement. The new guidance simplifies this treatment by having all “windfalls” and “shortfalls” recorded through the income statement. This guidance became effective for us beginning on October 1, 2017. Adoption of this standard did not have a material effect upon the consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption. The Company is currently evaluating the impacts of adoption of this guidance. In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which simplifies balance sheet presentation of deferred income taxes. Previous guidance required an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position; however, the new guidance requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The updated standard is effective for the Company beginning October 1, 2017, with early adoption permitted as of the beginning of any interim or annual reporting period. The Company early adopted this standard retrospectively and reclassified its current deferred tax balances to noncurrent deferred tax for all periods presented. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. In July 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-11, Simplifying the Measurement of Inventory. ASU 2015-11 simplifies the subsequent measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value. ASU 2015-11 applies only to inventories for which cost is determined by methods other than last-in first-out and the retail inventory method. ASU 2015-11 is effective for public companies for annual reporting periods beginning after December 15, 2016, and interim periods within those fiscal years. We adopted ASU 2015-11 effective October 1, 2017 and the implementation had no material impact on the consolidated financial statements. In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40) (ASU 2014-15). The objective of ASU 2014-15 is to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and provide related disclosures. Previously, GAAP did not provide guidance to evaluate whether there was substantial doubt regarding an organization’s ability to continue as a going concern. This ASU provides guidance to an organization’s management, with principles and definitions to reduce diversity in the timing and content of financial statement disclosures commonly provided by organizations. This standard was adopted by the Company at September 30, 2017, and the adoption of this ASU did not have a material impact on the consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which provides a single, comprehensive revenue recognition model for all contracts with customers, and contains principles to determine the measurement of revenue and timing of when it is recognized. The model will supersede most existing revenue recognition guidance, and also requires enhanced revenue-related disclosures. Under the new standard and its related amendments (collectively known as ASC 606), revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized will reflect the consideration that the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). We adopted this guidance on October 1, 2018 using the modified retrospective method. See Note 1 to the unaudited condensed consolidated financial statements for a discussion of the impact resulting from the adoption of this guidance. In June 2018, the FASB issued ASU No. 2018-07, Stock-based Compensation: Improvements to Nonemployee Share-based Payment Accounting, which amends the existing accounting standards for share-based payments to nonemployees. This ASU aligns much of the guidance on measuring and classifying nonemployee awards with that of awards to employees. Under the new guidance, the measurement of nonemployee equity awards is fixed on the grant date. This ASU becomes effective in the first quarter of fiscal year 2019 and early adoption is permitted but no earlier than an entity’s adoption date of Topic 606. Entities will apply the ASU by recognizing a cumulative-effect adjustment to retained earnings as of the beginning of the annual period of adoption. We adopted ASU 2018-07 effective October 1, 2018 and the implementation had no material impact on the consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement which modifies the disclosures on fair value measurements by removing the requirement to disclose the amount and reason for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers. The ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income. For public entities, the standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures and adoption of the additional disclosures can be delayed until the effective date. The Company does not currently expect the adoption of ASU 2018-13 to have a material impact on its consolidated financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
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, 2018 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 $ 19,742,373 $ — $ — Fair Value Measurement on September 30, 2018 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 $ 19,725,474 $ — $ — |
Summary of contract liabilities balance | December 31, 2018 Balance as of beginning of fiscal year $ 356,801 Balance as of end of period 166,517 |
Schedule of customer service revenue and cost of sales | For the Three Months Ended December 31, 2018 2017 Customer Service Sales $ 662,094 $ 1,038,847 Customer Service Cost of Sales 325,152 513,357 Gross Profit $ 336,942 $ 525,490 |
Supplemental Balance Sheet Di_2
Supplemental Balance Sheet Disclosures (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Supplemental Balance Sheet Disclosures | |
Schedule of inventories | December 31, September 30, 2018 2018 Raw materials $ 3,153,742 $ 2,892,366 Work-in-process 716,059 817,051 Finished goods 426,187 570,691 $ 4,295,988 $ 4,280,108 |
Schedule of prepaid expenses and other current assets | December 31, September 30, 2018 2018 Prepaid insurance $ 376,586 $ 258,015 Income tax refund receivable 2,056 1,578 Other 251,689 284,641 $ 630,331 $ 544,234 |
Schedule of property and equipment, net | December 31, September 30, 2018 2018 Land $ 1,021,245 $ 2,268,969 Computer equipment 2,273,709 5,601,039 Corporate airplanes 5,601,039 1,033,779 Furniture and office equipment 1,033,779 5,733,313 Manufacturing facility 5,733,313 5,580,083 Equipment 5,615,118 1,021,245 21,278,203 21,238,428 Less: accumulated depreciation and amortization (12,558,954) (12,451,691) $ 8,719,249 $ 8,786,737 |
Schedule of other assets | December 31, September 30, 2018 2018 Intangible assets, net of accumulated amortization of $538,837 and $531,637 at December 31, 2018 and September 30, 2018, respectively $ 61,400 $ 68,600 Other non-current assets 111,778 113,393 $ 173,178 $ 181,993 |
Schedule of accrued expenses | December 31, September 30, 2018 2018 Warranty $ 837,317 $ 854,952 Salary, benefits and payroll taxes 314,563 143,183 Professional fees 271,204 203,823 Other 326,604 261,063 $ 1,749,688 $ 1,463,021 |
Schedule of warranty cost and accrual information | Three Months Ending December 31, 2018 Warranty accrual, beginning of period $ 854,952 Accrued expense 2,600 Warranty cost (20,235) Warranty accrual, end of period $ 837,317 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Earnings Per Share | |
Schedule of earnings per share | Three Months Ended December 31, 2018 2017 Numerator: Net income (loss) $ 139,421 $ (881,619) Denominator: Basic weighted average shares 16,840,599 16,783,129 Dilutive effect of share-based awards — — Diluted weighted average shares 16,840,599 16,783,129 Earnings per common share: Basic EPS $ 0.01 $ (0.05) Diluted EPS $ 0.01 $ (0.05) |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) | Jan. 01, 2018 | Dec. 31, 2018USD ($)segment | Dec. 31, 2017USD ($) | Sep. 30, 2018USD ($) |
Number of business segments | ||||
Number of business segments in which the entity operates | segment | 1 | |||
Long-Lived Assets | ||||
Impairment charges | $ 0 | $ 0 | ||
Income Taxes | ||||
U.S. Federal statutory tax rate (as a percent) | 21.00% | 35.00% | 24.50% | |
Net operating losses (as a percent) | 80.00% | |||
Engineering Development | ||||
Percentage of employees who were engineers engaged in various engineering development projects | 23.00% | |||
Warranty | ||||
Length of warranty period | 24 months | |||
Contract Balances | ||||
Balance at beginning of the period | $ 356,801 | |||
Balance at end of the period | 166,517 | $ 356,801 | ||
Revenue recognized included in the opening contract liabilities balance. | 271,000 | |||
Customer Service Revenue | ||||
Customer Service Sales | 3,977,650 | $ 3,087,984 | ||
Customer Service Cost of Sales | 1,811,847 | 1,593,268 | ||
Gross profit | 2,165,803 | 1,494,716 | ||
Customer Service | ||||
Customer Service Revenue | ||||
Customer Service Sales | 662,094 | 1,038,847 | ||
Customer Service Cost of Sales | 325,152 | 513,357 | ||
Gross profit | $ 336,942 | $ 525,490 | ||
Property and equipment except manufacturing facility and the corporate airplane | Minimum | ||||
Number of business segments | ||||
Estimated useful lives | 3 years | |||
Property and equipment except manufacturing facility and the corporate airplane | Maximum | ||||
Number of business segments | ||||
Estimated useful lives | 7 years | |||
Manufacturing facility | ||||
Number of business segments | ||||
Estimated useful lives | 39 years | |||
Corporate airplanes | ||||
Number of business segments | ||||
Estimated useful lives | 10 years |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Fair Value (Details) - USD ($) | Dec. 31, 2018 | Sep. 30, 2018 |
Self-Insurance Reserves | ||
Estimated liability for medical claims incurred but not reported | $ 62,000 | $ 60,000 |
Excess of funded premiums over estimated claims incurred but not reported | 122,000 | 102,000 |
Fair value on a recurring basis | Quoted Price in Active Markets for Identical Assets (Level 1) | Money market funds | ||
Assets | ||
Cash and cash equivalents | $ 19,742,373 | $ 19,725,474 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Revenue Recognition (Details) | 3 Months Ended |
Dec. 31, 2018USD ($) | |
Revenue Recognition | |
Revenue, Practical Expedient, Remaining Performance Obligation [true/false] | true |
Percentage of revenue from products | 95.00% |
Remaining performance obligations | $ 4,298,000 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01 | |
Revenue, remaining performance obligations | |
Percentage of remaining performance obligation expected to be recognized in period | 99.00% |
Revenue, Remaining Performance Obligation,Expected Timing of Satisfaction, Period | 12 months |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Concentration Risk (Details) | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2018customeritem | Dec. 31, 2017customeritem | Sep. 30, 2018 | |
Concentration of Credit Risk | |||
Number of banks for maintenance of cash balances | item | 2 | ||
Major Suppliers | |||
Concentrations | |||
Number of major suppliers | item | 1 | 1 | |
Net sales | Major Customers and Products | |||
Concentrations | |||
Number of major customers | customer | 3 | 1 | |
Net sales | Major Customers and Products | Air Transport Services Group | |||
Concentrations | |||
Concentration of risk (as a percent) | 30.00% | ||
Net sales | Major Customers and Products | Pilatus Aircraft Ltd ("Pilatus") | |||
Concentrations | |||
Concentration of risk (as a percent) | 21.00% | ||
Net sales | Major Customers and Products | DHL | |||
Concentrations | |||
Concentration of risk (as a percent) | 12.00% | ||
Net sales | Major Customers and Products | S&K Aerospace LLC | |||
Concentrations | |||
Concentration of risk (as a percent) | 10.00% | ||
Accounts receivable | Major Customers and Products | |||
Concentrations | |||
Number of major customers | customer | 1 | ||
Concentration of risk (as a percent) | 29.00% | 27.00% | |
Inventory | Major Suppliers | |||
Concentrations | |||
Concentration of risk (as a percent) | 10.00% | 14.00% |
Supplemental Balance Sheet Di_3
Supplemental Balance Sheet Disclosures - Inventories and Prepaid expenses and other current assets (Details) - USD ($) | Dec. 31, 2018 | Sep. 30, 2018 |
Inventory valuation | ||
Raw materials | $ 3,153,742 | $ 2,892,366 |
Work-in-process | 716,059 | 817,051 |
Finished goods | 426,187 | 570,691 |
Inventories | 4,295,988 | 4,280,108 |
Prepaid expenses and other current assets | ||
Prepaid insurance | 376,586 | 258,015 |
Income tax refund receivable | 2,056 | 1,578 |
Other | 251,689 | 284,641 |
Total prepaid expenses and other current assets | $ 630,331 | $ 544,234 |
Supplemental Balance Sheet Di_4
Supplemental Balance Sheet Disclosures - Property and Equipment (Details) | 3 Months Ended | ||
Dec. 31, 2018USD ($)aircraft | Dec. 31, 2017USD ($) | Sep. 30, 2018USD ($) | |
Property and equipment | |||
Property and equipment, gross | $ 21,278,203 | $ 21,238,428 | |
Less: accumulated depreciation and amortization | (12,558,954) | (12,451,691) | |
Property and equipment, net | 8,719,249 | 8,786,737 | |
Depreciation and amortization for property and equipment | 107,000 | $ 103,000 | |
Other assets | |||
Intangible assets, net of accumulated amortization of $538,837 and $531,637 at December 31, 2018 and September 30, 2018, respectively | 61,400 | 68,600 | |
Other non-current assets | 111,778 | 113,393 | |
Total other assets | 173,178 | 181,993 | |
Accumulated amortization of intangible assets | 538,837 | 531,637 | |
Impairment charges | 0 | 0 | |
Intangible asset amortization expense | 7,000 | 0 | |
Prepaid software licenses | 36,000 | 38,000 | |
Land | |||
Property and equipment | |||
Property and equipment, gross | 1,021,245 | 2,268,969 | |
Computer equipment | |||
Property and equipment | |||
Property and equipment, gross | 2,273,709 | 5,601,039 | |
Corporate airplanes | |||
Property and equipment | |||
Property and equipment, gross | $ 5,601,039 | 1,033,779 | |
Number of airplanes depreciated | aircraft | 2 | ||
Pilatus PC-12 | |||
Property and equipment | |||
Number of airplanes depreciated | aircraft | 1 | ||
Furniture and office equipment | |||
Property and equipment | |||
Property and equipment, gross | $ 1,033,779 | 5,733,313 | |
Manufacturing facility | |||
Property and equipment | |||
Property and equipment, gross | 5,733,313 | 5,580,083 | |
Equipment | |||
Property and equipment | |||
Property and equipment, gross | 5,615,118 | $ 1,021,245 | |
prepaid software licenses | |||
Other assets | |||
Intangible asset amortization expense | $ 2,000 | $ 0 |
Supplemental Balance Sheet Di_5
Supplemental Balance Sheet Disclosures - Accrued Expenses (Details) - USD ($) | 3 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2018 | Sep. 30, 2018 | |
Accrued expenses | |||
Warranty | $ 854,952 | $ 837,317 | $ 854,952 |
Salary, benefits and payroll taxes | 314,563 | 143,183 | |
Professional fees | 271,204 | 203,823 | |
Other | 326,604 | 261,063 | |
Total accrued expenses | $ 1,749,688 | $ 1,463,021 | |
Warranty cost and accrual information | |||
Warranty accrual, beginning of period | 854,952 | ||
Accrued expense | 2,600 | ||
Warranty cost | (20,235) | ||
Warranty accrual, end of period | $ 837,317 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Jan. 01, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 |
Income Taxes | ||||
U.S. Federal statutory tax rate (as a percent) | 21.00% | 35.00% | 24.50% | |
Net operating loss previous carryback period elimination | 2 years | |||
Income tax expense (benefit) | $ 0 | $ (138,886) | ||
Effective tax rate benefit (as a percent) | 0.00% | 13.60% | ||
Change in valuation allowance | $ 162,000 |
Shareholders' Equity and Shar_2
Shareholders' Equity and Share-based Payments (Details) | 3 Months Ended | ||
Dec. 31, 2018USD ($)itemshares | Dec. 31, 2017USD ($) | Sep. 30, 2018shares | |
Share-based compensation | |||
Common stock, shares authorized | 75,000,000 | 75,000,000 | |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | |
Share-based compensation expense | $ | $ 0 | $ 0 | |
Income tax effect recognized as a credit to additional paid-in capital related to share-based compensation | $ | $ 0 | 0 | |
Number of share-based compensation plans maintained by the company | item | 2 | ||
RSU | Director | |||
Share-based compensation | |||
Shares settled in pro rata basis | 1 | ||
2009 Plan | |||
Share-based compensation | |||
Share-based compensation expense | $ | $ 0 | 0 | |
Number of shares of common stock reserved for awards | 1,200,000 | ||
Number of shares of common stock available for awards under the plan | 208,128 | ||
2009 Plan | Employee | |||
Share-based compensation | |||
Share-based compensation expense | $ | $ 0 | 0 | |
2009 Plan | Non-employee director | |||
Share-based compensation | |||
Share-based compensation expense | $ | $ 0 | $ 0 | |
2009 Plan | Performance-based Award | Employee | |||
Share-based compensation | |||
Number of shares of common stock reserved for awards | 300,000 | ||
2009 Plan | RSU | Non-employee director | |||
Share-based compensation | |||
Restricted stock units outstanding ( in shares) | 0 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Numerator: | ||
Net income (loss) | $ 139,421 | $ (881,619) |
Denominator: | ||
Basic weighted average shares | 16,840,599 | 16,783,129 |
Diluted weighted average shares | 16,840,599 | 16,783,129 |
Earnings per common share: | ||
Basic EPS (in dollars per share) | $ 0.01 | $ (0.05) |
Diluted EPS (in dollars per share) | $ 0.01 | $ (0.05) |
Options to purchase common stock outstanding (in shares) | 550,834 | 586,834 |
Diluted weighted-average shares outstanding excluded from computation of diluted EPS (in shares) | 550,834 | 586,834 |