Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Jun. 30, 2022 | Jul. 29, 2022 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jun. 30, 2022 | |
Document Transition Report | false | |
Entity File Number | 000-31157 | |
Entity Registrant Name | INNOVATIVE SOLUTIONS AND SUPPORT, INC. | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 17,276,213 | |
Entity Central Index Key | 0000836690 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q3 | |
Entity Interactive Data Current | Yes | |
Title of 12(b) Security | Common Stock, par value $0.001 per share | |
Security Exchange Name | NASDAQ | |
Entity Tax Identification Number | 23-2507402 | |
Entity Address, Address Line One | 720 Pennsylvania Drive | |
Entity Incorporation, State or Country Code | PA | |
Entity Address, City or Town | Exton | |
Entity Address, State or Province | PA | |
Entity Address, Postal Zip Code | 19341 | |
City Area Code | 610 | |
Local Phone Number | 646-9800 | |
Trading Symbol | ISSC |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2022 | Sep. 30, 2021 |
Current assets | ||
Cash and cash equivalents | $ 14,541,901 | $ 8,265,606 |
Accounts receivable | 3,003,362 | 4,046,337 |
Inventories | 4,905,034 | 4,545,392 |
Prepaid expenses and other current assets | 778,850 | 833,076 |
Assets held for sale | 1,558,475 | |
Total current assets | 24,787,622 | 17,690,411 |
Property and equipment, net | 6,381,461 | 8,143,483 |
Deferred income taxes | 278,085 | 1,063,822 |
Other assets | 168,900 | 188,284 |
Total assets | 31,616,068 | 27,086,000 |
Current liabilities | ||
Accounts payable | 752,479 | 623,620 |
Accrued expenses | 1,683,430 | 1,431,115 |
Contract liability | 329,116 | 417,504 |
Total current liabilities | 2,765,025 | 2,472,239 |
Other liabilities | 18,407 | 28,680 |
Total liabilities | 2,783,432 | 2,500,919 |
Commitments and contingencies (See Note 6) | ||
Shareholders' equity | ||
Preferred stock, 10,000,000 shares authorized, $.001 par value, of which 200,000 shares are authorized as Class A Convertible stock. No shares issued and outstanding at June 30, 2022 and September 30, 2021 | ||
Common stock, $.001 par value: 75,000,000 shares authorized, 19,372,664 and 19,342,823 issued at June 30, 2022 and September 30, 2021 | 19,373 | 19,343 |
Additional paid-in capital | 52,142,818 | 51,817,095 |
(Accumulated deficit) | (1,961,018) | (5,882,820) |
Treasury stock, at cost, 2,096,451 shares at June 30, 2021 and September 30, 2021 | (21,368,537) | (21,368,537) |
Total shareholders' equity | 28,832,636 | 24,585,081 |
Total liabilities and shareholders' equity | $ 31,616,068 | $ 27,086,000 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2022 | Sep. 30, 2021 |
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 | 19,372,664 | 19,342,823 |
Treasury stock, shares | 2,096,451 | 2,096,451 |
Series A Preferred Stock | ||
Preferred stock, shares authorized | 200,000 | 200,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Net Sales: | ||||
Total net sales | $ 6,933,976 | $ 6,180,183 | $ 20,477,574 | $ 16,171,680 |
Cost of sales: | ||||
Total cost of sales | 2,879,462 | 2,825,681 | 8,270,729 | 7,348,364 |
Gross profit | 4,056,514 | 3,354,502 | 12,206,845 | 8,823,316 |
Operating expenses: | ||||
Research and development | 676,381 | 646,795 | 2,062,937 | 1,936,747 |
Selling, general and administrative | 1,694,233 | 1,512,138 | 5,226,015 | 4,847,410 |
Total operating expenses | 2,370,614 | 2,158,933 | 7,288,952 | 6,784,157 |
Operating income | 1,685,900 | 1,195,569 | 4,917,893 | 2,039,159 |
Interest income | 10,429 | 107 | 10,871 | 1,138 |
Other income | 21,608 | 17,231 | 49,401 | 50,994 |
Income before income taxes | 1,717,937 | 1,212,907 | 4,978,165 | 2,091,291 |
Income tax expense (benefit) | 358,763 | (1,473,014) | 1,056,363 | (1,443,352) |
Net income | $ 1,359,174 | $ 2,685,921 | $ 3,921,802 | $ 3,534,643 |
Net income per common share: | ||||
Basic (in dollars per share) | $ 0.08 | $ 0.16 | $ 0.23 | $ 0.21 |
Diluted (in dollars per share) | $ 0.08 | $ 0.16 | $ 0.23 | $ 0.21 |
Weighted average shares outstanding: | ||||
Basic (in shares) | 17,261,349 | 17,230,387 | 17,253,822 | 17,222,312 |
Diluted (in shares) | 17,265,798 | 17,231,438 | 17,255,305 | 17,223,908 |
Product | ||||
Net Sales: | ||||
Total net sales | $ 6,935,976 | $ 5,981,462 | $ 20,279,371 | $ 15,886,967 |
Cost of sales: | ||||
Total cost of sales | $ 2,879,462 | 2,764,765 | 8,253,981 | 7,270,708 |
Engineering development contracts | ||||
Net Sales: | ||||
Total net sales | 198,721 | 198,203 | 284,713 | |
Cost of sales: | ||||
Total cost of sales | $ 60,916 | $ 16,748 | $ 77,656 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY - USD ($) | Common Stock | Additional Paid-in Capital | (Accumulated Deficit) Retained Earnings | Treasury Stock | Total |
Balance at Sep. 30, 2020 | $ 19,311 | $ 51,458,787 | $ (2,340,530) | $ (21,368,537) | $ 27,769,031 |
Increase (Decrease) in Stockholders' Equity | |||||
Share-based compensation | 0 | 45,591 | 0 | 0 | 45,591 |
Dividends declared | 0 | (8,607,192) | (8,607,192) | ||
Net income | 0 | 0 | 240,145 | 0 | 240,145 |
Balance at Dec. 31, 2020 | 19,311 | 51,504,378 | (10,707,577) | (21,368,537) | 19,447,575 |
Balance at Sep. 30, 2020 | 19,311 | 51,458,787 | (2,340,530) | (21,368,537) | 27,769,031 |
Increase (Decrease) in Stockholders' Equity | |||||
Net income | 3,534,643 | ||||
Balance at Jun. 30, 2021 | 19,343 | 51,771,014 | (7,413,079) | (21,368,537) | 23,008,741 |
Balance at Dec. 31, 2020 | 19,311 | 51,504,378 | (10,707,577) | (21,368,537) | 19,447,575 |
Increase (Decrease) in Stockholders' Equity | |||||
Issuance of stock to directors | 27 | 159,953 | 159,980 | ||
Share-based compensation | 44,594 | 44,594 | |||
Net income | 608,577 | 608,577 | |||
Balance at Mar. 31, 2021 | 19,338 | 51,708,925 | (10,099,000) | (21,368,537) | 20,260,726 |
Increase (Decrease) in Stockholders' Equity | |||||
Share-based compensation | 45,084 | 45,084 | |||
Exercise of stock options | 5 | 17,005 | 17,010 | ||
Net income | 2,685,921 | 2,685,921 | |||
Balance at Jun. 30, 2021 | 19,343 | 51,771,014 | (7,413,079) | (21,368,537) | 23,008,741 |
Balance at Sep. 30, 2021 | 19,343 | 51,817,095 | (5,882,820) | (21,368,537) | 24,585,081 |
Increase (Decrease) in Stockholders' Equity | |||||
Share-based compensation | 0 | 45,591 | 0 | 0 | 45,591 |
Net income | 0 | 0 | 1,133,058 | 0 | 1,133,058 |
Balance at Dec. 31, 2021 | 19,343 | 51,862,686 | (4,749,762) | (21,368,537) | 25,763,730 |
Balance at Sep. 30, 2021 | 19,343 | 51,817,095 | (5,882,820) | (21,368,537) | 24,585,081 |
Increase (Decrease) in Stockholders' Equity | |||||
Net income | 3,921,802 | ||||
Balance at Jun. 30, 2022 | 19,373 | 52,142,818 | (1,961,018) | (21,368,537) | 28,832,636 |
Balance at Dec. 31, 2021 | 19,343 | 51,862,686 | (4,749,762) | (21,368,537) | 25,763,730 |
Increase (Decrease) in Stockholders' Equity | |||||
Issuance of stock to directors | 25 | 159,970 | 159,995 | ||
Share-based compensation | 44,594 | 44,594 | |||
Net income | 1,429,570 | 1,429,570 | |||
Balance at Mar. 31, 2022 | 19,368 | 52,067,250 | (3,320,192) | (21,368,537) | 27,397,889 |
Increase (Decrease) in Stockholders' Equity | |||||
Issuance of stock to directors | 2 | 13,329 | 13,331 | ||
Share-based compensation | 45,088 | 45,088 | |||
Exercise of stock options | 3 | 17,151 | 17,154 | ||
Net income | 1,359,174 | 1,359,174 | |||
Balance at Jun. 30, 2022 | $ 19,373 | $ 52,142,818 | $ (1,961,018) | $ (21,368,537) | $ 28,832,636 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 3,921,802 | $ 3,534,643 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 278,164 | 334,250 |
Share-based compensation expense | ||
Stock options | 135,273 | 135,269 |
Stock awards | 173,326 | 159,980 |
Loss on disposal of property and equipment | 357 | |
Excess and obsolete inventory cost | (195,762) | |
Deferred income taxes | 785,737 | (1,461,617) |
(Increase) decrease in: | ||
Accounts receivable | 1,042,975 | 75,383 |
Inventories | (264,789) | (351,714) |
Prepaid expenses and other current assets | 69,344 | (22,219) |
Increase (decrease) in: | ||
Accounts payable | 128,859 | 145,150 |
Accrued expenses | 357,566 | 206,627 |
Income taxes payable | (119,855) | 17,784 |
Contract liability | (88,388) | 1,215,329 |
Net cash provided by operating activities | 6,420,371 | 3,793,103 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (161,230) | (324,025) |
Net cash used in investing activities | (161,230) | (324,025) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from exercise of stock options | 17,154 | 17,010 |
Dividend paid | (19,788,092) | |
Net cash provided by (used in) financing activities | 17,154 | (19,771,082) |
Net increase (decrease) in cash and cash equivalents | 6,276,295 | (16,302,004) |
Cash and cash equivalents, beginning of year | 8,265,606 | 23,784,867 |
Cash and cash equivalents, end of year | 14,541,901 | 7,482,863 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||
Cash paid for income taxes | $ 390,481 | $ 481 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Jun. 30, 2022 | |
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. This 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, 2021 is derived from the audited financial statements of the Company. Operating results for the three-and nine-month periods ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2022, including in terms of the impact of the coronavirus pandemic (the “COVID-19 pandemic”), which cannot be determined at this time. 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, 2021. Principles of Consolidation 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. Impact of the Russia and Ukraine War The war between Russia and Ukraine and the global response to this war could have an adverse impact on our business and results of operations. Although the war has not had, and is not expected to have, a material impact on our operating results, it is not possible to predict the broader or long-term consequences of the war between Russia and Ukraine, which may include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, cybersecurity conditions, financial markets and energy markets. Such geopolitical instability and uncertainty could have a negative impact on our ability to sell and ship products, collect payments from and support customers in certain regions, and could increase the costs, risks and adverse impacts from supply chain and logistics disruptions. Another potential impact could also be an adjustment to accounting estimates related to asset valuation. Impact of the COVID-19 Pandemic The Company has not yet seen a material impact from the COVID-19 pandemic on its business, financial position, liquidity, or ability to service customers or maintain critical operations. IS&S will continue to monitor the impact of the COVID-19 pandemic on its business, including how it has impacted and will impact the Company’s employees, customers, suppliers and distribution channels. The Company could face liquidity shortages, weaker product demand from its customers, disruptions in its supply chain, and/or staffing shortages in its workforce in the future due to the direct and indirect effects of the COVID-19 pandemic. Use of Estimates The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Estimates are used in accounting for, among other items, long term contracts, allowances for doubtful accounts, inventory obsolescence, product warranty cost liabilities, income taxes, engineering and material costs on Engineering Development Contract (“EDC”) programs, percentage of completion on EDC contracts, recoverability of long-lived assets and contingencies. Estimates and assumptions are reviewed periodically and the effects of changes, if any, are reflected in the consolidated statements of operations in the period they are determined. 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 June 30, 2022 and September 30, 2021 consist of cash on deposit and cash invested in money market funds with financial institutions. Inventory Valuation 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. Assets Held for Sale Assets to be disposed of by sale (“disposal groups”) are reclassified into “assets held for sale” if their carrying amounts are principally expected to be recovered through a sale transaction rather than through continuing use. The reclassification occurs when the disposal group is available for immediate sale and the sale is probable. These criteria are generally met when an agreement to sell exists, or management has committed to a plan to sell the assets within one year. Disposal groups are measured at the lower of carrying amount or fair value less costs to sell and are not depreciated or amortized. When the net realizable value of a disposal group increases during a period, a gain can be recognized to the extent that it does not increase the value of the disposal group beyond its original carrying value when the disposal group was reclassified as held for sale. The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less costs to sell is reported as an adjustment to the carrying value of the disposal group. 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 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.” 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-and nine-month periods ended June 30, 2022 or 2021. Fair Value of Financial Instruments The net carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and short-term debt approximate their fair value because of the short-term nature of these instruments. For financial assets and liabilities measured at fair value on a recurring basis, fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value as follows: Level 1 — Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date. Level 2 — Other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including: ● Quoted prices for similar assets or liabilities in active markets; ● Quoted prices for identical or similar assets in non-active markets; ● Inputs other than quoted prices that are observable for the asset or liability; and ● Inputs that are derived principally from or corroborated by other observable market data. Level 3 — Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2022 and September 30, 2021, according to the valuation techniques the Company used to determine their fair values. Fair Value Measurement on June 30, 2022 Quoted Price in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Assets Cash and cash equivalents: Money market funds $ 10,945,240 $ — $ — Fair Value Measurement on September 30, 2021 Quoted Price in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Assets Cash and cash equivalents: Money market funds $ 6,051,902 $ — $ — 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, autothrottles 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 accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers 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 a purchase order issued in connection with a formal contract executed with a customer. For the 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 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. 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 by 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. Historically, the Company has also recognized revenue 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. 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-and nine-month periods ended June 30, 2022 and 2021, respectively. Therefore, no adjustment on any contract was material to our unaudited consolidated financial statements for the three-and nine-month periods ended June 30, 2022 and 2021, respectively. Contract Balances Contract assets consist of the right to consideration in exchange for product offerings that we have transferred to a customer under the contract. Contract liabilities primarily relate to consideration received in advance of performance under the contract. The following table reflects the Company’s contract assets and contract liabilities: Contract Liabilities September 30, 2021 $ 417,504 Amount transferred to receivables from contract assets — Contract asset additions — Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period (316,320) Increases due to invoicing prior to satisfaction of performance obligations 227,932 June 30, 2022 $ 329,116 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-and nine-month periods ended June 30, 2022 and 2021 respectively are as follows: For the Three Months Ended June 30, For the Nine Months Ended June 30, 2022 2021 2022 2021 Customer Service Sales $ 1,338,893 $ 980,845 $ 3,784,493 $ 3,010,720 Customer Service Cost of Sales 369,562 408,161 1,112,298 1,079,462 Gross Profit $ 961,331 $ 572,684 $ 2,672,195 $ 1,931,258 Lease Recognition The Company accounts for leases in accordance with ASU 2016-02, Leases Income Taxes Income taxes are recorded in accordance with ASC Topic 740, “ Income Taxes 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. For the quarter ended June 30, 2021, the valuation allowance was released for all federal and some state deferred tax assets. This release both increased the deferred tax asset and removed the valuation allowance. 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 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 U.S. 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. Engineering Development The Company invests a significant percentage of its sales on engineering development, both Research & Development (“R&D”) and EDC. At June 30, 2022, approximately 19% of the Company’s employees were engineers engaged in various engineering development projects. Total engineering development expense comprises 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 the method of contract accounting (either percentage-of-completion or completed contract) applicable to such contracts. Treasury Stock We account for treasury stock purchased under the cost method and include treasury stock as a component of shareholders’ 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,” Share-Based Compensation The Company accounts for share-based compensation under ASC Topic 718, “Stock Compensation” Accordingly, adoption of ASC Topic 718’s fair value method results in recording compensation costs under the Company’s stock-based compensation plans. The Company determined the fair value of its stock option awards at the date of grant using the Black-Scholes option pricing model. Option pricing models and generally accepted valuation techniques require management to make assumptions and to apply judgment to determine the fair value of its awards. These assumptions and judgments include estimating future volatility of the Company’s stock price, expected dividend yield, future employee turnover rates, and future employee stock option exercise behaviors. Changes in these assumptions can materially affect fair value estimates. The Company does not believe that a reasonable likelihood exists that there will be a material change in future estimates or assumptions used to determine share-based compensation expense. However, if actual results are not consistent with the Company’s estimates or assumptions, the Company would adjust its estimates. Such adjustments could have a material impact on the Company’s financial position. Warranty Reserves The Company offers warranties on some products of various lengths, however the standard warranty period is twenty-four months. 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 and demographic factors. The Company estimated the total medical claims incurred but not reported and the Company believes that it has adequate reserves for these claims at June 30, 2022 and September 30, 2021, respectively. However, the actual value of such claims could be significantly affected if future occurrences and claims differ from these assumptions. At June 30, 2022 and September 30, 2021, the estimated liability for medical claims incurred but not reported was $57,274 and $55,934, respectively. The Company has recorded the excess of funded premiums over estimated claims incurred but not reported of $347,287 and $208,651 as a current asset in the accompanying condensed consolidated balance sheets as of June 30, 2022 and September 30, 2021, respectively. Concentrations Major Customers and Products In the three-month period ended June 30, 2022, three customers, Pilatus Aircraft Ltd (“Pilatus”), Textron Aviation, Inc. (“Textron”) and Cargojet Inc., accounted for 27%, 16% and 14% of net sales, respectively. In the nine-month period ended June 30, 2022, three customers, Pilatus, Textron and Air Transport Services Group, accounted for 27%, 11% and 10% of net sales, respectively. In the three-month period ended June 30, 2021, two customers, Pilatus, and Textron, accounted for 25%, and 21% of net sales, respectively. In the nine-month period ended June 30, 2021, two customers, Pilatus and Textron, accounted for 20% and 17% of net sales, respectively. 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- and nine-month periods ended June 30, 2022, the Company had zero and two suppliers, respectively that were individually responsible for greater than 10% of the Company’s total inventory related purchases. For the three- and nine-month periods ended June 30, 2021, the Company had three and one suppliers, respectively that were individually responsible for greater than 10% of the Company’s total inventory related purchases. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash balances and accounts receivable. The Company invests its excess cash where preservation of principal is the 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 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. Recent Accounting Pronouncements In June 2016, FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instrument In December 2019, the FASB issued ASU 2019-12, “ Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes As new accounting pronouncements are issued, we will adopt those that are applicable. |
Supplemental Balance Sheet Disc
Supplemental Balance Sheet Disclosures | 9 Months Ended |
Jun. 30, 2022 | |
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: June 30, September 30, 2022 2021 Raw materials $ 4,116,347 $ 3,729,692 Work-in-process 670,883 629,814 Finished goods 117,804 185,886 $ 4,905,034 $ 4,545,392 Prepaid expenses and other current assets Prepaid expenses and other current assets consist of the following: June 30, September 30, 2022 2021 Prepaid insurance $ 483,344 $ 318,138 Income tax 15,118 — Other 280,388 514,938 $ 778,850 $ 833,076 Assets held for sale The asset classified as held for sale, net consists of the following: June 30, September 30, 2022 2021 Corporate airplane (Pilatus PC-12) $ 3,142,500 $ — Less: accumulated depreciation (1,584,025) — $ 1,558,475 $ — As of June 30, 2022, the Company classified $1.6 million of net property and equipment as “assets held for sale” on the consolidated balance sheet. During the quarter ended June 30, 2022, management of the Company implemented a plan to sell a Company-owned aircraft and commenced efforts to locate a buyer for the aircraft. In June 2022, the Company entered into an agreement to sell the aircraft for $2,900,000, and management expects to complete the sale during the quarter ended September 30, 2022 at which time, the Company will recognize a gain on the sale of the aircraft. Property and equipment Property and equipment, net consists of the following: June 30, September 30, 2022 2021 Computer equipment $ 2,307,139 $ 2,309,053 Corporate airplanes 2,406,468 5,601,039 Furniture and office equipment 976,993 970,725 Manufacturing facility 5,889,491 5,889,491 Equipment 5,624,966 5,545,529 Land 1,021,245 1,021,245 18,226,302 21,337,082 Less: accumulated depreciation and amortization (11,844,841) (13,193,599) $ 6,381,461 $ 8,143,483 Depreciation and amortization related to property and equipment was $89,072 and $90,061 for the three-month periods ended June 30, 2022 and 2021, 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. Depreciation and amortization related to property and equipment was approximately $269,567 and $278,956 for the nine-month periods ended June 30, 2022 and 2021, respectively. Other assets Other assets consist of the following: June 30, September 30, 2022 2021 Intangible assets, net of accumulated amortization of $635,095 and $634,032 at June 30, 2022 and September 30, 2021 $ 61,411 $ 62,474 Operating lease right-of-use asset 32,189 42,976 Other non-current assets 75,300 82,834 $ 168,900 $ 188,284 Intangible assets consist of licensing and certification rights which are amortized over a defined number of units. No impairment charges were recorded in the nine-month periods ended June 30, 2022 and 2021. Intangible asset amortization expense was $0 and $16,841 for the three-month periods ended June 30, 2022 and 2021, respectively. Intangible asset amortization expense was $1,063 and $49,314 for the nine-month periods ended June 30, 2022 and 2021, 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 June 30, 2022 and September 30, 2021 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 June 30, 2022 and September 30, 2021 includes $0 and $7,535, 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 $2,021 and $2,870 for the three-month periods ended June 30, 2022 and 2021, respectively. Other non-current assets amortization expense was $7,534 and $5,980 for the nine-month periods ended June 30, 2022 and 2021, respectively. Accrued expenses Accrued expenses consist of the following: June 30, September 30, 2022 2021 Warranty $ 600,621 $ 589,260 Salary, benefits and payroll taxes 553,482 385,287 Professional fees 176,433 163,130 Income tax — 104,737 Operating lease 13,782 14,296 Other 339,112 174,405 $ 1,683,430 $ 1,431,115 Warranty cost and accrual information for the three-month period ended June 30, 2022 is highlighted below: Three Months Ending Nine Months Ending June 30, 2022 June 30, 2022 Warranty accrual, beginning of period $ 585,867 $ 589,260 Accrued expense 50,399 115,043 Warranty cost (35,645) (103,682) Warranty accrual, end of period $ 600,621 $ 600,621 |
Income Taxes
Income Taxes | 9 Months Ended |
Jun. 30, 2022 | |
Income Taxes | |
Income Taxes | 3. Income Taxes 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 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 income tax expense for the three-month period ended June 30, 2022 was $358,763 as compared to an income tax benefit of $1,473,014 for the three-month period ended June 30, 2021. The effective tax rate for the three-month period ended June 30, 2022 was 20.9% and differs from the statutory tax rate primarily due to permanent items and state taxes. The effective tax benefit rate for the three-month period ended June 30, 2021 was 121.4% and differs from the statutory tax rate primarily due to the release of the valuation allowance for deferred tax assets. This release both increased the deferred tax asset and removed the valuation allowance. The income tax expense for the nine-month period ended June 30, 2022 was $1,056,363 as compared to an income tax benefit of $1,443,352 for the nine-month period ended June 30, 2021. The effective tax rate for the nine-month period ended June 30, 2022 was 21.2% and differs from the statutory tax rate primarily due to permanent items and state taxes. The effective tax benefit rate for the nine-month period ended June 30, 2021 was 69.0% and differs from the statutory tax rate primarily due to the release of the valuation allowance for deferred tax assets. This release both increased the deferred tax asset and removed the valuation allowance. |
Shareholders' Equity and Share-
Shareholders' Equity and Share-Based Payments | 9 Months Ended |
Jun. 30, 2022 | |
Shareholders' Equity and Share-Based Payments | |
Shareholders' Equity and Share-Based Payments | 4. Shareholders’ Equity and Share-Based Payments At June 30, 2022, 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. Total share-based compensation expense was $58,419 and $45,084 for the three-month periods ended June 30, 2022 and 2021, respectively. Total share-based compensation expense was $308,599 and $295,249 for the nine-month periods ended June 30, 2022 and 2021, respectively. 2019 Stock-Based Incentive Compensation Plan The 2019 Plan was approved by the Company’s shareholders at the Company’s Annual Meeting of Shareholders held on April 2, 2019. The 2019 Plan authorizes the grant of stock appreciation rights, restricted stock, options and other equity-based awards. Options granted under the 2019 Plan may be either “incentive stock options” as defined in section 422 of the Code or nonqualified stock options, as determined by 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 2019 Plan is 750,000, plus 139,691 shares of common stock that were authorized but unissued under the 2009 Plan as of the effective date of the 2019 Plan (i.e., April 2, 2019), all of which may be issued pursuant to awards of incentive stock options. In addition, the 2019 Plan provides that no more than 300,000 shares may be awarded in any calendar year to any employee. As of June 30, 2022, there were 661,722 shares of common stock available for awards under the 2019 Plan. If any award is forfeited, terminates or otherwise is settled for any reason without an actual distribution of shares to the participant, 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 2019 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 kind of shares of common stock covered by awards then outstanding under the 2019 Plan, the aggregate number and kind of shares of common stock available under the 2019 Plan, any applicable individual limits on the number of shares of common stock available for awards under the 2019 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. 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. The compensation expense related to options issued to employees under the 2019 Plan was $45,088 and $135,273 for the three- and nine-month periods ended June 30, 2022, respectively. The compensation expense related to options issued to employees under the 2019 Plan was $45,084 and $135,269 for the three- and nine-month periods ended June 30, 2021, respectively. The compensation expense under the 2019 Plan related to shares issued to non-employee members of the Board was $13,331 and $173,326 for the three- and nine-month periods ended June 30, 2022, respectively. The compensation expense under the 2019 Plan related to shares issued to non-employee members of the Board was $0 for the three-month period ended June 30, 2021and $159,980 for the nine-month period ended June 30, 2021. Total compensation expense associated with the 2019 Plan was $58,419 and $45,084 for the three-month periods ended June 30, 2022 and 2021, respectively. Total compensation expense associated with the 2019 Plan was $308,599 and $295,249 for the nine-month periods ended June 30, 2022 and 2021, respectively. At June 30, 2022, unrecognized compensation expense of approximately $28,739, net of forfeitures, related to non-vested stock options under the 2019 Plan, will be recognized. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Jun. 30, 2022 | |
Earnings Per Share | |
Earnings Per Share | 5. Earnings Per Share Three Months Ended June 30, Nine Months Ended June 30, 2022 2021 2022 2021 Numerator: Net income $ 1,359,174 $ 2,685,921 $ 3,921,802 $ 3,534,643 Denominator: Basic weighted average shares 17,261,349 17,230,387 17,253,822 17,222,312 Dilutive effect of share-based awards 4,449 1,051 1,483 1,596 Diluted weighted average shares 17,265,798 17,231,438 17,255,305 17,223,908 Earnings per common share: Basic EPS $ 0.08 $ 0.16 $ 0.23 $ 0.21 Diluted EPS $ 0.08 $ 0.16 $ 0.23 $ 0.21 Net income per share is calculated pursuant to ASC Topic 260, “ Earnings per Share” The number of incremental shares from the assumed exercise of stock options and RSUs is calculated by using the treasury stock method. As of June 30, 2022 and 2021, there were 100,000 options to purchase common stock outstanding, respectively, and no shares subject to vesting of restricted stock units 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-month periods ended June 30, 2022 and 2021, respectively, 0 and 100,000 diluted weighted-average shares outstanding were excluded from the computation of diluted EPS because the effect would be anti-dilutive. For the nine-month periods ended June 30, 2022 and 2021, respectively, 66,667 and 100,000 diluted weighted-average shares outstanding were excluded from the computation of diluted EPS because the effect would be anti-dilutive. |
Contingencies
Contingencies | 9 Months Ended |
Jun. 30, 2022 | |
Commitments and 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. |
Leases
Leases | 9 Months Ended |
Jun. 30, 2022 | |
Leases | |
Leases | 7. Leases The Company accounts for leases in accordance with ASU 2016-02 and records “right-of-use” assets and corresponding lease liabilities on the balance sheet for most leases with an initial term of greater than one year. Consistent with previous accounting guidance, we will recognize payments for leases with a term of less than one year in the statement of operations on a straight-line basis over the lease term. We lease real estate and equipment under various operating leases. A lease exists when a contract or part of a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In determining whether a lease exists, we consider whether a contract provides us with both: (a) the right to obtain substantially all of the economic benefits from the use of the identified asset and (b) the right to direct the use of the identified asset. Some of our leases include base rental periods coupled with options to renew or terminate the lease, generally at our discretion. In evaluating the lease term, we consider whether we are reasonably certain to exercise such options. To the extent a significant economic incentive exists to exercise an option, that option is included within the lease term. However, based on the nature of our lease arrangements, options generally do not provide us with a significant economic incentive and are therefore excluded from the lease term for the majority of our arrangements. Our leases typically include a combination of fixed and variable payments. Fixed payments are generally included when measuring the right-of-use asset and lease liability. Variable payments, which primarily represent payments based on usage of the underlying asset, are generally excluded from such measurement and expensed as incurred. In addition, certain of our lease arrangements may contain a lease coupled with an arrangement to provide other services, such as maintenance, or may require us to make other payments on behalf of the lessor related to the leased asset, such as payments for taxes or insurance. As permitted by ASU 2016-02, we have elected to account for these non-lease components together with the associated lease component if included in the lease payments. This election has been made for each of our asset classes. The measurement of “right-of-use” assets and lease liabilities requires us to estimate appropriate discount rates. To the extent the rate implicit in the lease is readily determinable, such rate is utilized. However, based on information available at lease commencement for our leases, the rate implicit in the lease is not known. In these instances, we utilize an incremental borrowing rate, which represents the rate of interest that we would pay to borrow on a collateralized basis over a similar term. The following table presents the lease-related assets and liabilities reported in the Consolidated Balance Sheet as of June 30, 2022: Classification on the Consolidated Balance Sheet on June 30, 2022 Assets Operating leases Other assets $ 32,189 Liabilities Operating leases- current Accrued expenses $ 13,782 Operating leases – noncurrent Other liabilities $ 18,407 Total lease liabilities $ 32,189 Rent expense and cash paid for various operating leases in aggregate are $3,669 and $11,007 for the three- and nine-month periods ended June 30, 2022. The weighted average remaining lease term is 2.4 years and the weighted average discount rate is 5.0% as of June 30, 2022. Future minimum lease payments under operating leases are as follows at June 30, 2022: Twelve Months Ending Operating June 30, Leases 2023 $ 14,676 2024 14,676 2025 6,115 Total minimum lease payments $ 35,467 Amount representing interest (3,278) Present value of minimum lease payments 32,189 Current portion (13,782) Long-term portion of lease obligations $ 18,407 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Jun. 30, 2022 | |
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, 2021 is derived from the audited financial statements of the Company. Operating results for the three-and nine-month periods ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2022, including in terms of the impact of the coronavirus pandemic (the “COVID-19 pandemic”), which cannot be determined at this time. 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, 2021. |
Principles of Consolidation | Principles of Consolidation 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. |
Impact of the Russia and Ukraine War | Impact of the Russia and Ukraine War The war between Russia and Ukraine and the global response to this war could have an adverse impact on our business and results of operations. Although the war has not had, and is not expected to have, a material impact on our operating results, it is not possible to predict the broader or long-term consequences of the war between Russia and Ukraine, which may include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, cybersecurity conditions, financial markets and energy markets. Such geopolitical instability and uncertainty could have a negative impact on our ability to sell and ship products, collect payments from and support customers in certain regions, and could increase the costs, risks and adverse impacts from supply chain and logistics disruptions. Another potential impact could also be an adjustment to accounting estimates related to asset valuation. |
Impact of the COVID-19 Pandemic | Impact of the COVID-19 Pandemic The Company has not yet seen a material impact from the COVID-19 pandemic on its business, financial position, liquidity, or ability to service customers or maintain critical operations. IS&S will continue to monitor the impact of the COVID-19 pandemic on its business, including how it has impacted and will impact the Company’s employees, customers, suppliers and distribution channels. The Company could face liquidity shortages, weaker product demand from its customers, disruptions in its supply chain, and/or staffing shortages in its workforce in the future due to the direct and indirect effects of the COVID-19 pandemic. |
Use of Estimates | Use of Estimates The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Estimates are used in accounting for, among other items, long term contracts, allowances for doubtful accounts, inventory obsolescence, product warranty cost liabilities, income taxes, engineering and material costs on Engineering Development Contract (“EDC”) programs, percentage of completion on EDC contracts, recoverability of long-lived assets and contingencies. Estimates and assumptions are reviewed periodically and the effects of changes, if any, are reflected in the consolidated statements of operations in the period they are determined. |
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 June 30, 2022 and September 30, 2021 consist of cash on deposit and cash invested in money market funds with financial institutions. |
Inventory Valuation | Inventory Valuation 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. |
Assets Held for Sale | Assets Held for Sale Assets to be disposed of by sale (“disposal groups”) are reclassified into “assets held for sale” if their carrying amounts are principally expected to be recovered through a sale transaction rather than through continuing use. The reclassification occurs when the disposal group is available for immediate sale and the sale is probable. These criteria are generally met when an agreement to sell exists, or management has committed to a plan to sell the assets within one year. Disposal groups are measured at the lower of carrying amount or fair value less costs to sell and are not depreciated or amortized. When the net realizable value of a disposal group increases during a period, a gain can be recognized to the extent that it does not increase the value of the disposal group beyond its original carrying value when the disposal group was reclassified as held for sale. The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less costs to sell is reported as an adjustment to the carrying value of the disposal group. |
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 |
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.” 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-and nine-month periods ended June 30, 2022 or 2021. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The net carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and short-term debt approximate their fair value because of the short-term nature of these instruments. For financial assets and liabilities measured at fair value on a recurring basis, fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value as follows: Level 1 — Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date. Level 2 — Other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including: ● Quoted prices for similar assets or liabilities in active markets; ● Quoted prices for identical or similar assets in non-active markets; ● Inputs other than quoted prices that are observable for the asset or liability; and ● Inputs that are derived principally from or corroborated by other observable market data. Level 3 — Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2022 and September 30, 2021, according to the valuation techniques the Company used to determine their fair values. Fair Value Measurement on June 30, 2022 Quoted Price in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Assets Cash and cash equivalents: Money market funds $ 10,945,240 $ — $ — Fair Value Measurement on September 30, 2021 Quoted Price in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Assets Cash and cash equivalents: Money market funds $ 6,051,902 $ — $ — |
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, autothrottles 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 accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers 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 a purchase order issued in connection with a formal contract executed with a customer. For the 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 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. 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 by 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. Historically, the Company has also recognized revenue 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. 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-and nine-month periods ended June 30, 2022 and 2021, respectively. Therefore, no adjustment on any contract was material to our unaudited consolidated financial statements for the three-and nine-month periods ended June 30, 2022 and 2021, respectively. Contract Balances Contract assets consist of the right to consideration in exchange for product offerings that we have transferred to a customer under the contract. Contract liabilities primarily relate to consideration received in advance of performance under the contract. The following table reflects the Company’s contract assets and contract liabilities: Contract Liabilities September 30, 2021 $ 417,504 Amount transferred to receivables from contract assets — Contract asset additions — Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period (316,320) Increases due to invoicing prior to satisfaction of performance obligations 227,932 June 30, 2022 $ 329,116 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-and nine-month periods ended June 30, 2022 and 2021 respectively are as follows: For the Three Months Ended June 30, For the Nine Months Ended June 30, 2022 2021 2022 2021 Customer Service Sales $ 1,338,893 $ 980,845 $ 3,784,493 $ 3,010,720 Customer Service Cost of Sales 369,562 408,161 1,112,298 1,079,462 Gross Profit $ 961,331 $ 572,684 $ 2,672,195 $ 1,931,258 |
Lease Recognition | Lease Recognition The Company accounts for leases in accordance with ASU 2016-02, Leases |
Income Taxes | Income Taxes Income taxes are recorded in accordance with ASC Topic 740, “ Income Taxes 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. For the quarter ended June 30, 2021, the valuation allowance was released for all federal and some state deferred tax assets. This release both increased the deferred tax asset and removed the valuation allowance. 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 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 U.S. 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. |
Engineering Development | Engineering Development The Company invests a significant percentage of its sales on engineering development, both Research & Development (“R&D”) and EDC. At June 30, 2022, approximately 19% of the Company’s employees were engineers engaged in various engineering development projects. Total engineering development expense comprises 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 the method of contract accounting (either percentage-of-completion or completed contract) applicable to such contracts. |
Treasury Stock | Treasury Stock We account for treasury stock purchased under the cost method and include treasury stock as a component of shareholders’ 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,” |
Share-Based Compensation | Share-Based Compensation The Company accounts for share-based compensation under ASC Topic 718, “Stock Compensation” Accordingly, adoption of ASC Topic 718’s fair value method results in recording compensation costs under the Company’s stock-based compensation plans. The Company determined the fair value of its stock option awards at the date of grant using the Black-Scholes option pricing model. Option pricing models and generally accepted valuation techniques require management to make assumptions and to apply judgment to determine the fair value of its awards. These assumptions and judgments include estimating future volatility of the Company’s stock price, expected dividend yield, future employee turnover rates, and future employee stock option exercise behaviors. Changes in these assumptions can materially affect fair value estimates. The Company does not believe that a reasonable likelihood exists that there will be a material change in future estimates or assumptions used to determine share-based compensation expense. However, if actual results are not consistent with the Company’s estimates or assumptions, the Company would adjust its estimates. Such adjustments could have a material impact on the Company’s financial position. |
Warranty Reserves | Warranty Reserves The Company offers warranties on some products of various lengths, however the standard warranty period is twenty-four months. 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 and demographic factors. The Company estimated the total medical claims incurred but not reported and the Company believes that it has adequate reserves for these claims at June 30, 2022 and September 30, 2021, respectively. However, the actual value of such claims could be significantly affected if future occurrences and claims differ from these assumptions. At June 30, 2022 and September 30, 2021, the estimated liability for medical claims incurred but not reported was $57,274 and $55,934, respectively. The Company has recorded the excess of funded premiums over estimated claims incurred but not reported of $347,287 and $208,651 as a current asset in the accompanying condensed consolidated balance sheets as of June 30, 2022 and September 30, 2021, respectively. |
Concentrations | Concentrations Major Customers and Products In the three-month period ended June 30, 2022, three customers, Pilatus Aircraft Ltd (“Pilatus”), Textron Aviation, Inc. (“Textron”) and Cargojet Inc., accounted for 27%, 16% and 14% of net sales, respectively. In the nine-month period ended June 30, 2022, three customers, Pilatus, Textron and Air Transport Services Group, accounted for 27%, 11% and 10% of net sales, respectively. In the three-month period ended June 30, 2021, two customers, Pilatus, and Textron, accounted for 25%, and 21% of net sales, respectively. In the nine-month period ended June 30, 2021, two customers, Pilatus and Textron, accounted for 20% and 17% of net sales, respectively. 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- and nine-month periods ended June 30, 2022, the Company had zero and two suppliers, respectively that were individually responsible for greater than 10% of the Company’s total inventory related purchases. For the three- and nine-month periods ended June 30, 2021, the Company had three and one suppliers, respectively that were individually responsible for greater than 10% of the Company’s total inventory related purchases. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash balances and accounts receivable. The Company invests its excess cash where preservation of principal is the 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 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. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In June 2016, FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instrument In December 2019, the FASB issued ASU 2019-12, “ Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes As new accounting pronouncements are issued, we will adopt those that are applicable. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Jun. 30, 2022 | |
Summary of Significant Accounting Policies | |
Schedule of financial assets and liabilities accounted for at fair value on a recurring basis | Fair Value Measurement on June 30, 2022 Quoted Price in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Assets Cash and cash equivalents: Money market funds $ 10,945,240 $ — $ — Fair Value Measurement on September 30, 2021 Quoted Price in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Assets Cash and cash equivalents: Money market funds $ 6,051,902 $ — $ — |
Summary of contract assets and contract liabilities balances | Contract Liabilities September 30, 2021 $ 417,504 Amount transferred to receivables from contract assets — Contract asset additions — Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period (316,320) Increases due to invoicing prior to satisfaction of performance obligations 227,932 June 30, 2022 $ 329,116 |
Schedule of customer service revenue and cost of sales | For the Three Months Ended June 30, For the Nine Months Ended June 30, 2022 2021 2022 2021 Customer Service Sales $ 1,338,893 $ 980,845 $ 3,784,493 $ 3,010,720 Customer Service Cost of Sales 369,562 408,161 1,112,298 1,079,462 Gross Profit $ 961,331 $ 572,684 $ 2,672,195 $ 1,931,258 |
Supplemental Balance Sheet Di_2
Supplemental Balance Sheet Disclosures (Tables) | 9 Months Ended |
Jun. 30, 2022 | |
Supplemental Balance Sheet Disclosures | |
Schedule of inventories | June 30, September 30, 2022 2021 Raw materials $ 4,116,347 $ 3,729,692 Work-in-process 670,883 629,814 Finished goods 117,804 185,886 $ 4,905,034 $ 4,545,392 |
Schedule of prepaid expenses and other current assets | Prepaid expenses and other current assets consist of the following: June 30, September 30, 2022 2021 Prepaid insurance $ 483,344 $ 318,138 Income tax 15,118 — Other 280,388 514,938 $ 778,850 $ 833,076 |
Schedule of assets held for sale | June 30, September 30, 2022 2021 Corporate airplane (Pilatus PC-12) $ 3,142,500 $ — Less: accumulated depreciation (1,584,025) — $ 1,558,475 $ — |
Schedule of property and equipment, net | June 30, September 30, 2022 2021 Computer equipment $ 2,307,139 $ 2,309,053 Corporate airplanes 2,406,468 5,601,039 Furniture and office equipment 976,993 970,725 Manufacturing facility 5,889,491 5,889,491 Equipment 5,624,966 5,545,529 Land 1,021,245 1,021,245 18,226,302 21,337,082 Less: accumulated depreciation and amortization (11,844,841) (13,193,599) $ 6,381,461 $ 8,143,483 |
Schedule of other assets | June 30, September 30, 2022 2021 Intangible assets, net of accumulated amortization of $635,095 and $634,032 at June 30, 2022 and September 30, 2021 $ 61,411 $ 62,474 Operating lease right-of-use asset 32,189 42,976 Other non-current assets 75,300 82,834 $ 168,900 $ 188,284 |
Schedule of accrued expenses | June 30, September 30, 2022 2021 Warranty $ 600,621 $ 589,260 Salary, benefits and payroll taxes 553,482 385,287 Professional fees 176,433 163,130 Income tax — 104,737 Operating lease 13,782 14,296 Other 339,112 174,405 $ 1,683,430 $ 1,431,115 |
Schedule of warranty cost and accrual information | Three Months Ending Nine Months Ending June 30, 2022 June 30, 2022 Warranty accrual, beginning of period $ 585,867 $ 589,260 Accrued expense 50,399 115,043 Warranty cost (35,645) (103,682) Warranty accrual, end of period $ 600,621 $ 600,621 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Jun. 30, 2022 | |
Earnings Per Share | |
Schedule of earnings per share | Three Months Ended June 30, Nine Months Ended June 30, 2022 2021 2022 2021 Numerator: Net income $ 1,359,174 $ 2,685,921 $ 3,921,802 $ 3,534,643 Denominator: Basic weighted average shares 17,261,349 17,230,387 17,253,822 17,222,312 Dilutive effect of share-based awards 4,449 1,051 1,483 1,596 Diluted weighted average shares 17,265,798 17,231,438 17,255,305 17,223,908 Earnings per common share: Basic EPS $ 0.08 $ 0.16 $ 0.23 $ 0.21 Diluted EPS $ 0.08 $ 0.16 $ 0.23 $ 0.21 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Jun. 30, 2022 | |
Leases | |
Schedule of lease-related assets and liabilities reported in the Consolidated Balance Sheet | Classification on the Consolidated Balance Sheet on June 30, 2022 Assets Operating leases Other assets $ 32,189 Liabilities Operating leases- current Accrued expenses $ 13,782 Operating leases – noncurrent Other liabilities $ 18,407 Total lease liabilities $ 32,189 |
Schedule of future minimum lease payments under operating leases | Future minimum lease payments under operating leases are as follows at June 30, 2022: Twelve Months Ending Operating June 30, Leases 2023 $ 14,676 2024 14,676 2025 6,115 Total minimum lease payments $ 35,467 Amount representing interest (3,278) Present value of minimum lease payments 32,189 Current portion (13,782) Long-term portion of lease obligations $ 18,407 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) | 3 Months Ended | 9 Months Ended | |||||
Jun. 30, 2022 USD ($) | Jun. 30, 2021 USD ($) | Dec. 31, 2020 USD ($) | Jun. 30, 2022 USD ($) segment | Jun. 30, 2021 USD ($) | Sep. 30, 2021 USD ($) | Sep. 30, 2020 USD ($) | |
Number of business segments | |||||||
Number of business segments in which the entity operates | segment | 1 | ||||||
Long-Lived Assets | |||||||
Impairment charges | $ 0 | $ 0 | $ 0 | $ 0 | |||
Contract Balances | |||||||
Balance at beginning of the period (contract liabilities) | 417,504 | ||||||
Amount transferred to receivables from contract assets | 0 | ||||||
Contract asset additions | 0 | ||||||
Performance obligations satisfied during the period that were included in the contract liability balance at the beginning of the period | (316,320) | ||||||
Increases due to invoicing prior to satisfaction of performance obligations | 227,932 | ||||||
Balance at end of the period (contract liabilities) | 329,116 | 329,116 | |||||
Customer Service Revenue | |||||||
Customer Service Cost of Sales | 2,879,462 | 2,825,681 | 8,270,729 | 7,348,364 | |||
Gross profit | 4,056,514 | 3,354,502 | $ 12,206,845 | 8,823,316 | |||
Engineering Development | |||||||
Percentage of employees who were engineers engaged in various engineering development projects | 19% | ||||||
Warranty | |||||||
Length of warranty period | 24 months | ||||||
Self-Insurance Reserves | |||||||
Estimated liability for medical claims incurred but not reported | 57,274 | $ 57,274 | $ 55,934 | ||||
Excess of funded premiums over estimated claims incurred but not reported | 347,287 | 347,287 | 208,651 | ||||
Restricted Cash | |||||||
Dividends paid | $ 8,607,192 | ||||||
Cash and cash equivalents | 14,541,901 | 14,541,901 | 8,265,606 | ||||
Total cash and cash equivalents and restricted cash | 14,541,901 | 7,482,863 | 14,541,901 | 7,482,863 | $ 8,265,606 | $ 23,784,867 | |
Customer Service | |||||||
Customer Service Revenue | |||||||
Customer Service Sales | 1,338,893 | 980,845 | 3,784,493 | 3,010,720 | |||
Customer Service Cost of Sales | 369,562 | 408,161 | 1,112,298 | 1,079,462 | |||
Gross profit | $ 961,331 | $ 572,684 | $ 2,672,195 | $ 1,931,258 | |||
Property Plant and Equipment Other than Air Transportation Equipment and Manufacturing Facility | Minimum | |||||||
Number of business segments | |||||||
Estimated useful lives | 3 years | ||||||
Property Plant and Equipment Other than Air Transportation Equipment and Manufacturing Facility | 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 - Impact of COVID-19 (Details) | Jun. 30, 2022 USD ($) |
Summary of Significant Accounting Policies | |
Income tax receivable | $ 15,118 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Revenue Recognition (Details) | 9 Months Ended |
Jun. 30, 2022 | |
Revenue Recognition. | |
Revenue, Remaining Performance Obligation, Optional Exemption, Performance Obligation [true false] | true |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Fair Value (Details) - USD ($) | Jun. 30, 2022 | Sep. 30, 2021 |
Fair Value, Measurements, Recurring | Quoted Price in Active Markets for Identical Assets (Level 1) | Money Market Funds | ||
Assets | ||
Cash and cash equivalents | $ 10,945,240 | $ 6,051,902 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Concentration Risk (Details) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2022 item customer | Jun. 30, 2021 customer item | Jun. 30, 2022 customer item | Jun. 30, 2021 customer item | |
Concentration of Credit Risk | ||||
Number of banks for maintenance of cash balances | 2 | 2 | ||
Revenues Net | Customer Concentration Risk | ||||
Concentrations | ||||
Number of major customers | customer | 3 | 2 | 3 | 2 |
Revenues Net | Customer Concentration Risk | Pilatus Aircraft Ltd ("Pilatus") | ||||
Concentrations | ||||
Concentration of risk (as a percent) | 27% | 25% | 27% | 20% |
Revenues Net | Customer Concentration Risk | Textron Aviation, Inc | ||||
Concentrations | ||||
Concentration of risk (as a percent) | 16% | 21% | 11% | 17% |
Revenues Net | Customer Concentration Risk | Air Transport Services Group | ||||
Concentrations | ||||
Concentration of risk (as a percent) | 10% | |||
Revenues Net | Customer Concentration Risk | Cargojet Inc. ("Cargojet") | ||||
Concentrations | ||||
Concentration of risk (as a percent) | 14% | |||
Inventory | Supplier Concentration Risk | ||||
Concentrations | ||||
Number of major suppliers | 0 | 1 | 2 | 1 |
Supplemental Balance Sheet Di_3
Supplemental Balance Sheet Disclosures - Inventories and Prepaid expenses and other current assets (Details) - USD ($) | Jun. 30, 2022 | Sep. 30, 2021 |
Inventory Valuation | ||
Raw materials | $ 4,116,347 | $ 3,729,692 |
Work-in-process | 670,883 | 629,814 |
Finished goods | 117,804 | 185,886 |
Inventories | 4,905,034 | 4,545,392 |
Prepaid expenses and other current assets | ||
Prepaid insurance | 483,344 | 318,138 |
Income tax receivable | 15,118 | |
Other | 280,388 | 514,938 |
Total prepaid expenses and other current assets | $ 778,850 | $ 833,076 |
Supplemental Balance Sheet Di_4
Supplemental Balance Sheet Disclosures - Assets held for sale (Details) | Jun. 30, 2022 USD ($) |
Supplemental Balance Sheet Disclosures | |
Corporate airplane (Pilatus PC-12) | $ 3,142,500 |
Less: accumulated depreciation | (1,584,025) |
Assets held for sale | 1,558,475 |
Aircraft sale | $ 2,900,000 |
Supplemental Balance Sheet Di_5
Supplemental Balance Sheet Disclosures - Property and Equipment & Other Assets (Details) | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2022 USD ($) | Jun. 30, 2021 USD ($) | Jun. 30, 2022 USD ($) aircraft | Jun. 30, 2021 USD ($) | Sep. 30, 2021 USD ($) | |
Property and equipment | |||||
Property and equipment, gross | $ 18,226,302 | $ 18,226,302 | $ 21,337,082 | ||
Less: accumulated depreciation and amortization | (11,844,841) | (11,844,841) | (13,193,599) | ||
Property and equipment, net | 6,381,461 | 6,381,461 | 8,143,483 | ||
Depreciation and amortization for property and equipment | 89,072 | $ 90,061 | 269,567 | $ 278,956 | |
Other assets | |||||
Intangible assets, net of accumulated amortization of $635,095 and $634,032 at June 30, 2022 and September 30, 2021 | 61,411 | 61,411 | 62,474 | ||
Operating lease right-of-use asset | 32,189 | 32,189 | 42,976 | ||
Other non-current assets | 75,300 | 75,300 | 82,834 | ||
Total other assets | 168,900 | 168,900 | 188,284 | ||
Accumulated amortization of intangible assets | 635,095 | 635,095 | 634,032 | ||
Impairment charges | 0 | 0 | |||
Intangible asset amortization expense | 0 | 16,841 | 1,063 | 49,314 | |
Prepaid software licenses | 0 | 0 | 7,535 | ||
Computer equipment | |||||
Property and equipment | |||||
Property and equipment, gross | 2,307,139 | 2,307,139 | 2,309,053 | ||
Corporate airplanes | |||||
Property and equipment | |||||
Property and equipment, gross | 2,406,468 | $ 2,406,468 | 5,601,039 | ||
Number of airplanes depreciated | aircraft | 2 | ||||
Pilatus Aircraft Limited | |||||
Property and equipment | |||||
Number of airplanes depreciated | aircraft | 1 | ||||
Furniture and office equipment | |||||
Property and equipment | |||||
Property and equipment, gross | 976,993 | $ 976,993 | 970,725 | ||
Manufacturing facility | |||||
Property and equipment | |||||
Property and equipment, gross | 5,889,491 | 5,889,491 | 5,889,491 | ||
Equipment | |||||
Property and equipment | |||||
Property and equipment, gross | 5,624,966 | 5,624,966 | 5,545,529 | ||
Land | |||||
Property and equipment | |||||
Property and equipment, gross | 1,021,245 | 1,021,245 | $ 1,021,245 | ||
Prepaid software licenses | |||||
Other assets | |||||
Intangible asset amortization expense | $ 2,021 | $ 2,870 | $ 7,534 | $ 5,980 |
Supplemental Balance Sheet Di_6
Supplemental Balance Sheet Disclosures - Accrued Expenses (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2022 | Sep. 30, 2021 | |
Accrued expenses | |||
Warranty | $ 600,621 | $ 600,621 | $ 589,260 |
Salary, benefits and payroll taxes | 553,482 | 553,482 | 385,287 |
Professional fees | 176,433 | 176,433 | 163,130 |
Income taxes payable | 104,737 | ||
Operating lease | 13,782 | 13,782 | 14,296 |
Other | 339,112 | 339,112 | 174,405 |
Total accrued expenses | 1,683,430 | 1,683,430 | $ 1,431,115 |
Warranty cost and accrual information | |||
Warranty accrual, beginning of period | 585,867 | 589,260 | |
Accrued expense | 50,399 | 115,043 | |
Warranty cost | (35,645) | (103,682) | |
Warranty accrual, end of period | $ 600,621 | $ 600,621 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Income Taxes | ||||
Income tax expense (benefit) | $ 358,763 | $ (1,473,014) | $ 1,056,363 | $ (1,443,352) |
Effective tax rate (as a percent) | 20.90% | 121.40% | 21.20% | 69% |
Shareholders' Equity and Shar_2
Shareholders' Equity and Share-Based Payments (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Sep. 30, 2021 | |
Share-Based compensation | |||||
Common stock, shares authorized | 75,000,000 | 75,000,000 | 75,000,000 | ||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | 10,000,000 | ||
Share-based compensation expense | $ 58,419 | $ 45,084 | $ 308,599 | $ 295,249 | |
2019 Plan | |||||
Share-Based compensation | |||||
Common stock, shares authorized | 139,691 | 139,691 | |||
Share-based compensation expense | $ 58,419 | 45,084 | $ 308,599 | 295,249 | |
Number of shares of common stock reserved for awards | 661,722 | 661,722 | |||
Unrecognized compensation cost, related to non-vested stock options | $ 28,739 | $ 28,739 | |||
2019 Plan | Maximum | |||||
Share-Based compensation | |||||
Number of shares of common stock reserved for awards | 750,000 | 750,000 | |||
2019 Plan | Employee | |||||
Share-Based compensation | |||||
Share-based compensation expense | $ 45,088 | 45,084 | $ 135,273 | 135,269 | |
Number of shares of common stock reserved for awards | 300,000 | 300,000 | |||
2019 Plan | Non Employee Director | |||||
Share-Based compensation | |||||
Share-based compensation expense | $ 13,331 | $ 0 | $ 173,326 | $ 159,980 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||
Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Dec. 31, 2020 | Jun. 30, 2022 | Jun. 30, 2021 | |
Numerator: | ||||||||
Net income | $ 1,359,174 | $ 1,429,570 | $ 1,133,058 | $ 2,685,921 | $ 608,577 | $ 240,145 | $ 3,921,802 | $ 3,534,643 |
Denominator: | ||||||||
Basic weighted average shares | 17,261,349 | 17,230,387 | 17,253,822 | 17,222,312 | ||||
Dilutive effect of share-based awards | 4,449 | 1,051 | 1,483 | 1,596 | ||||
Diluted weighted average shares | 17,265,798 | 17,231,438 | 17,255,305 | 17,223,908 | ||||
Earnings per common share: | ||||||||
Basic EPS (in dollars per share) | $ 0.08 | $ 0.16 | $ 0.23 | $ 0.21 | ||||
Diluted EPS (in dollars per share) | $ 0.08 | $ 0.16 | $ 0.23 | $ 0.21 | ||||
Options to purchase common stock outstanding (in shares) | 100,000 | 100,000 | 100,000 | 100,000 | ||||
Diluted weighted-average shares outstanding excluded from computation of diluted EPS (in shares) | 0 | 100,000 | 66,667 | 100,000 |
Leases (Details)
Leases (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2022 | Sep. 30, 2021 | |
Leases | |||
Operating lease right-of-use assets | $ 32,189 | $ 32,189 | $ 42,976 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | Other Assets, Noncurrent | Other Assets, Noncurrent | |
Operating lease liabilities | $ 13,782 | $ 13,782 | 14,296 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Accrued Liabilities, Current | Accrued Liabilities, Current | |
Operating lease liabilities non-current | $ 18,407 | $ 18,407 | |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | Other Liabilities, Noncurrent | Other Liabilities, Noncurrent | |
Present value of minimum lease payments | $ 32,189 | $ 32,189 | |
Operating leases expenses | $ 3,669 | $ 11,007 | |
Weighted average remaining lease term | 2 years 4 months 24 days | 2 years 4 months 24 days | |
Weighted average discount rate | 5% | 5% | |
Other Liabilities, Noncurrent | $ 18,407 | $ 18,407 | $ 28,680 |
Leases - Future minimum lease p
Leases - Future minimum lease payments (Details) - USD ($) | Jun. 30, 2022 | Sep. 30, 2021 |
Future minimum lease payments under operating leases | ||
2023 | $ 14,676 | |
2024 | 14,676 | |
2025 | 6,115 | |
Total minimum lease payments | 35,467 | |
Amount representing interest | (3,278) | |
Present value of minimum lease payments | 32,189 | |
Current portion | (13,782) | $ (14,296) |
Long-term portion of lease obligations | $ 18,407 |