Form 8-K/A - Current report: [Amend]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

June 30, 2023

INNOVATIVE SOLUTIONS AND SUPPORT, INC.

(Exact name of registrant as specified in its charter)

Pennsylvania	0-31157	23-2507402
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

720 Pennsylvania Drive

Exton, Pennsylvania 19341

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code

(610) 646-9800

Not applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	ISSC	Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company. ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Item 2.01.

Completion of Acquisition or Disposition of Assets.

On July 7, 2023, Innovative Solutions and Support, Inc. (the “Company”) filed a Current Report on Form 8-K reporting that on June 30, 2023 the Company entered into and closed the transactions contemplated by that certain Asset Purchase and License Agreement with Honeywell International Inc. (“Honeywell”), pursuant to which Honeywell sold, assigned or licensed certain assets related to its legacy inertial, communication and navigation product lines (the “Acquired Business”).

This Current Report on Form 8-K/A amends the original Form 8-K to provide the historical financial statements of the Acquired Business required under Item 9.01(a) of Form 8-K and the pro forma financial information required under Item 9.01(b) of Form 8-K. Except as set forth herein, this amendment does not amend, modify or update the disclosure contained in the original Form 8-K (including the exhibits thereto).

Item 9.01.

Financial Statements and Exhibits.

(a)

Financial Statements of Businesses Acquired.

The audited abbreviated financial statements of the Acquired Business as of and for the years ended December 31, 2021 and 2022, and the unaudited abbreviated financial statements of the Acquired Business as of and for the period ended June 30, 2023, in each case with the accompanying notes, together with the Independent Auditors’ Report thereon, are filed as Exhibit 99.1 to this Current Report on Form 8-K/A and are incorporated herein by reference.

(b)

Pro Forma Financial Information.

The unaudited pro forma condensed combined financial statements of the Company and the Acquired Business for the nine months ended June 30, 2023 and for the year ended September 30, 2022 are included as Exhibit 99.2 to this Current Report on Form 8-K/A and are incorporated by reference herein.

(d)

Exhibits.

Exhibit No.	Description
23.1	Consent of Grant Thornton LLP.
99.1	Audited abbreviated financial statements of the Acquired Business as of and for the years ended December 31, 2021 and 2022 and unaudited abbreviated financial statements of the Acquired Business as of and for the period ended June 30, 2023, including notes thereto and Independent Auditors’ report thereon.
99.2	Unaudited pro forma condensed combined financial statements of the Company and the Acquired Business for the nine months ended June 30, 2023 and for the year ended September 30, 2022.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		INNOVATIVE SOLUTIONS AND SUPPORT, INC.


Date:	September 13, 2023	By:	/s/ Michael Linacre
			Michael Linacre
			Chief Financial Officer

Exhibit 23.1

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated September 13, 2023, with respect to the abbreviated financial statements of the Product Lines of Honeywell International, Inc. (the “Business”), which comprise the statements of assets acquired as of December 31, 2022 and 2021, and the statements of revenue and direct expenses for the year ended December 31, 2022 and 2021, included in this Current Report of Innovative Solutions and Support, Inc. on Form 8-K/A. We consent to the incorporation by reference of said report in the Registration Statements of Innovative Support and Solutions, Inc. on Form S-3 (File No. 333-267595) and Forms S-8 (File No. 333-163712 and File No. 333-235689).

Philadelphia, Pennsylvania

September 13, 2023

Exhibit 99.1

ACQUIRED HONEYWELL PRODUCT LINES

ABBREVIATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 (Audited)

AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2023 (Unaudited) AND

FOR THE SIX MONTHS ENDED JUNE 30, 2022 (Unaudited)

ACQUIRED HONEYWELL PRODUCT LINES

INDEX TO ABBREVIATED FINANCIAL STATEMENTS

	Page

Report of Independent Certified Public Accountants	1
Abbreviated Financial Statements:
Statements of Assets Acquired as of December 31, 2022 and 2021 (Audited) and as of June 30, 2023 (Unaudited)	3
Statements of Revenues and Direct Expenses for the years ended December 31, 2022 and 2021 (Audited) and for the six months ended June 30, 2023 and 2022 (Unaudited)	4
Notes to Abbreviated Financial Statements	5


grant thornton llp 2001 Market St. Suite 700 Philadelphia, PA 19103 D +1 215 561 4200		REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

		Board of Directors Innovative Solutions and Support, Inc. Opinion We have audited the abbreviated financial statements of the Acquired Honeywell Products Lines (the “Product Lines”), which comprise the statements of assets acquired as of December 31, 2022 and 2021, and related statements of revenue and direct expenses for the years ended December 31, 2022 and 2021, and the related notes to the financial statements. In our opinion, the accompanying abbreviated financial statements present fairly, in all material respects, the statements of assets acquired as of December 31, 2022 and 2021, and related statements of revenue and direct expenses for the years ended December 31, 2022 and 2021, in accordance with accounting principles generally accepted in the United States of America. Emphasis of a Matter As described in Note 1, the accompanying abbreviated financial statements have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in an amendment to a Form 8-K to be filed by Innovative Solutions and Support, Inc. and are not intended to be a complete presentation of assets, liabilities, revenues and expenses of the Product Lines. Our opinion is not modified with respect to this matter Basis for opinion We conducted our audits of the abbreviated financial statements in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Product Lines and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of management for the financial statements Management is responsible for the preparation and fair presentation of the abbreviated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of abbreviated financial statements that are free from material misstatement, whether due to fraud or error.


GT.COM		Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd (GTIL). GTIL and each of its member firms are separate legal entities and are not a worldwide partnership.

In preparing the abbreviated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Product Line’s ability to continue as a going concern for one year after the date the financial statements are issued.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the abbreviated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the abbreviated financial statements.

In performing an audit in accordance with US GAAS, we:

●      Exercise professional judgment and maintain professional skepticism throughout the audit.

●      Identify and assess the risks of material misstatement of the abbreviated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

●      Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Product Line’s internal control. Accordingly, no such opinion is expressed.

●      Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the abbreviated financial statements.

●      Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Product Line’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania

September 13, 2023

ACQUIRED HONEYWELL PRODUCT LINES

ABBREVIATED FINANCIAL STATEMENTS

STATEMENT OF ASSETS ACQUIRED

(U.S. Dollars)

	December 31,				June 30,
	2022		2021		2023
					(Unaudited)
ASSETS
Current assets:
Inventory, net	$	8,908,303	$	9,875,596	$	9,072,933
Total current assets		8,908,303		9,875,596		9,072,933
Equipment, net		1,304,068		885,242		1,509,155
Total assets acquired	$	10,212,371	$	10,760,838	$	10,582,088

The accompanying notes are an integral part of these abbreviated financial statements.

ACQUIRED HONEYWELL PRODUCT LINES

ABBREVIATED FINANCIAL STATEMENTS

STATEMENT OF REVENUES AND DIRECT EXPENSES

(U.S. Dollars)

	Year Ended				Six Months Ended
	December 31, 2022		December 31, 2021		June 30, 2023		June 30, 2022

					(Unaudited)
Net sales	$	21,478,069	$	20,555,260	$	8,948,683	$	11,661,016
Direct costs and operating expenses
Cost of sales		10,376,350		11,247,287		3,117,432		3,403,593
Selling, general and administrative expenses		1,547,249		1,461,575		1,004,161		1,476,470
Total direct costs and operating expenses		11,923,599		12,708,862		4,121,593		4,880,063
Net sales in excess of direct costs and operating expenses	$	9,554,470	$	7,846,398	$	4,827,090	$	6,780,953

The accompanying notes are an integral part of these abbreviated financial statements.

ACQUIRED HONEYWELL PRODUCT LINES

ABBREVIATED FINANCIAL STATEMENTS

NOTES TO ABBREVIATED FINANCIAL STATEMENTS

1. Nature of the Business and Basis of Presentation

Description of the Transaction

On June 30, 2023 (the “Acquisition Date”), Innovative Solutions and Support, Inc. (the “Company”) entered into and closed the transactions contemplated by an Asset Purchase and License Agreement with Honeywell International, Inc. (“Honeywell”) whereby Honeywell sold certain assets and granted perpetual license rights to manufacture and sell licensed products related to its inertial, communication and navigation product lines (the “Product Lines”) to the Company (the “Transaction”). The Transaction involved a sale of certain inventory, equipment and customer-related documents; an assignment of certain contracts; and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its inertial, communication and navigation product lines to repair, overhaul, manufacture sell, import, export and distribute certain products to the Company for consideration of $36.0 million in cash. Concurrent with the Transaction, the Company entered into a transition services agreement with Honeywell, at no additional costs, to receive certain transitional services and technical support during the transition service period.

Basis of Presentation

The accompanying abbreviated financial statements, which consist of the statements of assets acquired as of December 31, 2022 and 2021 and June 30, 2023 and related statements of revenues and direct expenses for the years ended December 31, 2022 and 2021 and the six months ended June 30, 2023 and 2022, and the related notes thereto will henceforth be collectively referred to as the “Abbreviated Financial Statements”. The Abbreviated Financial Statements were prepared for the purpose of complying with the requirements of Rule 3-05 of the U.S. Securities Exchange Commission Regulation S-X and present the assets acquired and liabilities assumed and the related revenues and direct expenses of the Product Lines of Honeywell. The Abbreviated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America and are unaudited with respect to the accompanying financial statements as of June 30, 2023 and the six months ended June 30, 2023 and 2022.

The Product Lines were not a separate legal entity, subsidiary, or operating segment of Honeywell; they were a fully integrated part of Honeywell’s consolidated business and operations and did not represent a substantial portion of Honeywell’s assets and liabilities. It is impracticable to prepare complete financial statements related to the Product Lines as Honeywell has not accounted for the Product Lines on a stand-alone basis or as a separate division or subsidiary, nor has Honeywell maintained the distinct and separate books and records necessary to prepare full stand-alone or carve-out financial statements. As a result, the statements of revenues and direct expenses were derived from the operating activities directly attributable to the Product Lines from Honeywell’s books and records and contain certain estimates and allocation methodologies. Although management is unable to determine all of the actual costs, expenses and resulting operating results associated with the Product Lines, it considers the allocation of such items to be reasonable for the periods presented. However, the revenues and direct expenses of the Product Lines may differ from the results that would have been achieved had the Product Lines operated as a separate entity and may not necessarily reflect the assets and liabilities or revenues and expenses of the Product Lines on a stand-alone basis in the future.

In addition, and as described further in Note 2, the statements of revenues and direct expenses exclude corporate overhead costs borne by Honeywell to support the Product Lines. As such, the statements are not indicative of the future results of Product Lines as they omit various operating expenses that the Company will incur to operate the Product Lines in the future.

2. Corporate Overhead Accounting Consideration

Honeywell performs certain functions for the Product Lines including, but not limited to, corporate management, certain legal services, administration of insurance, regulatory and compliance, treasury, information systems, finance, corporate income tax administration, employee compensation and benefit management, facilities and other corporate expenses. The costs of these functions historically have not been allocated to its products, and are not directly attributable or specifically identifiable to the Product Lines, and therefore, are not included in the Abbreviated Financial Statements. Income taxes and interest expenses have not been included in the accompanying statements as these expenses are not specifically attributable to the Product Lines.

ACQUIRED HONEYWELL PRODUCT LINES

ABBREVIATED FINANCIAL STATEMENTS

NOTES TO ABBREVIATED FINANCIAL STATEMENTS

3. Summary of Significant Accounting Policies

Use of Estimates

The preparation of the Abbreviated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of direct assets and liabilities at the date of the statements of assets acquired and the reported amounts of revenues and direct expenses during the reporting periods. Significant estimates and assumptions reflected in these Abbreviated Financial Statements relate to inventory valuation, impairment and useful lives of fixed assets, revenue recognition, and the allocation of certain operating expenses. Actual results could differ from the estimates and assumptions used in preparing these Abbreviated Financial Statements.

Revenue Recognition

The Product Lines generates revenue from the sale of products related to inertial, communication and navigation aircraft systems and through the provision of related services to repair, overhaul and distribute certain related products. The revenue generating activities are primarily with non-contracted customers and customers the Product Lines has entered into either a long-term maintenance service agreement or maintenance service plan with.

Revenue is measured as the amount of consideration the Product Lines expects to receive in exchange for transferring goods or providing services. Product sales are recognized when the Product Lines transfers control of the promised products to its customers which generally occurs at shipment. Service sales, principally representing repair, overhaul and maintenance activities, are recognized over the contractual period or as services are rendered, depending on the nature of the contract. Revenues under long-term maintenance service agreements are recognized as work is performed over the period of the contract and is allocated to the Product Lines using costs incurred specific to the Product Line relative to total costs on the contract.

Inventory

Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Carrying value adjustments for inventory obsolescence are equal to the difference between the cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

Equipment

Equipment is stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. The estimated useful lives range between three to fifteen years. Costs are considered construction in progress when the equipment is not ready for its intended use. Major additions and improvements are capitalized, while maintenance and repairs that do not improve or extend the life of assets are charged to expense as incurred.

4. Revenue Recognition

The Product Lines' offering of various inertial, communication and navigation products and services are sold to a variety of both U.S-based and international customers.

ACQUIRED HONEYWELL PRODUCT LINES

ABBREVIATED FINANCIAL STATEMENTS

NOTES TO ABBREVIATED FINANCIAL STATEMENTS

The Product Lines' customer base consists principally of companies within the aviation industry, including air transport and airlines. Significant customers are those which the Product Lines had customers that individually represented 10% or more of its revenue. The percentage of revenue from significant customers is as follows:

	Year Ended						Six Months Ended
	December 31,						June 30,
	2022			2021			2023			2022

							(Unaudited)
Customer A		3	%		12	%		2	%		3	%
Customer B		12	%		7	%		9	%		11	%
Customer C		13	%		7	%		15	%		8	%
Customer D		3	%		4	%		10	%		3	%

5. Inventory

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value, net of write-downs for excess and obsolete inventory, and consist of the following:

	December 31,				June 30,
	2022		2021		2023
					(Unaudited)
Raw materials	$	3,793,004	$	3,567,345	$	3,151,789
Finished goods		5,115,299		6,308,251		5,921,144
Inventory, net	$	8,908,303	$	9,875,596	$	9,072,933

6. Equipment

Equipment, net consist of the following:

	December 31,						June 30,
	2022			2021			2023
							(Unaudited)
Equipment	$	3,115,222		$	2,453,912		$	3,471,218
Less accumulated depreciation		(1,811,154	)		(1,568,670	)		(1,962,063	)
Equipment, net	$	1,304,068		$	885,242		$	1,509,155

Depreciation expense was $242,484 and $167,484 for the years ended December 31, 2022 and 2021, respectively. Depreciation expense was $150,909 and $121,242 for the six months ended June 30, 2023 and 2022 (unaudited), respectively.

7. Commitments and Contingencies

In the ordinary course of business, the Product Lines is involved in litigation, claims, government inquiries, investigations and proceedings, relating to intellectual property, commercial, employment, environmental and regulatory matters. There are no such claims or disputes pending.

8. Subsequent Events

The Product Lines has evaluated subsequent events through September 13, 2023, the date on which these Abbreviated Financial Statements were available to be issued, and is not aware of any items that that would require adjustment to or disclosure in these Abbreviated Financial Statements and related notes.

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On June 30, 2023, Innovative Solutions and Support, Inc. (the “Company” or “IS&S”) entered into an Asset Purchase and License Agreement (the “Agreement”) with Honeywell International, Inc. (“Honeywell”) whereby Honeywell sold certain assets and granted perpetual license rights to manufacture and sell licensed products related to its inertial, communication and navigation product lines (the “Product Lines”) to the Company (the “Transaction”). The following unaudited pro forma condensed combined financial statements of IS&S present the combination of the historical financial information of IS&S and the Product Lines adjusted to give effect to the Transaction to be accounted for under the acquisition method of accounting in accordance with Accounting Standards Codification 805, Business Combinations (“ASC 805”).

In accordance with Rule 11-02(c)(1) of Regulation S-X, a pro forma balance sheet has not been prepared to give effect to the Transaction as of June 30, 2023, as it is reflected in the condensed consolidated balance sheet of IS&S included in the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2023, which was filed with the U.S. Securities and Exchange Commission (“SEC”) on August 11, 2023.

The following tables and accompanying notes (collectively the “Unaudited Pro Forma Condensed Combined Financial Statements”) present the Company’s statements of operations on a pro forma combined basis after giving effect to the Transaction. The information in the tables below under the heading “Unaudited Pro Forma Condensed Combined Statement of Operations” for the nine months ended June 30, 2023 and the year ended September 30, 2022 give effect to the Transaction as if it had taken place on October 1, 2021 (the “Unaudited Pro Forma Condensed Combined Statements of Operations”).

The pro forma transaction accounting adjustments are based upon currently available information and certain assumptions that the Company’s management believes are reasonable. The Unaudited Pro Forma Condensed Combined Financial Statements are presented for informational purposes only and are not intended to present or be indicative of what the results of operations or financial position would have been had the events actually occurred on the date indicated, nor are they meant to be indicative of future results of operations or financial position for any future period or as of any future date. The Unaudited Pro Forma Condensed Combined Financial Statements do not include any adjustments not otherwise described herein; they do not give effect to the potential impact of current financial conditions, or any anticipated revenue enhancements, cost savings, operating synergies or dis-synergies that may result from the Transaction.

The historical financial information of the Company being presented in these Unaudited Pro Forma Condensed Combined Financial Statements is derived from the Company's unaudited consolidated statement of operations for the nine months ended June 30, 2023, and its audited consolidated statement of operations for the fiscal year ended September 30, 2022, which were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The historical financial information of the Product Lines is derived (“carved-out”) from Honeywell’s consolidated financial statements, including the unaudited consolidated statement of revenues and direct expenses for the six months ended June 30, 2023, the audited consolidated statement of revenues and direct expenses for the year ended December 31, 2022 and the unaudited statement of assets acquired as of June 30, 2023, which were prepared in accordance with GAAP and presented in the Product Lines’ Abbreviated Financial Statements included in Exhibit 99.1 of this Form 8-K/A. Note 1 to the Product Lines’ Abbreviated Financial Statements provides further information regarding the basis of presentation and allocations made in the Abbreviated Financial Statements. The Abbreviated Financial Statements only reflect the Product Lines conveyed in the Agreement, and do not purport to reflect the financial position and results of operations of the Product Lines had such business operated on a stand-alone basis during the periods presented.

The assumptions and estimates underlying the unaudited adjustments to the Unaudited Pro Forma Condensed Combined Financial Statements are described in the accompanying notes, which should be read together with the Unaudited Pro Forma Condensed Combined Financial Statements. In addition, the Unaudited Pro Forma Condensed Combined Financial Statements should be read in conjunction with the following:

The Company’s Annual Report on Form 10-K for the year ended September 30, 2022 filed with the SEC on December 16, 2022;

The Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2023 filed with the SEC on August 11, 2023;

The Product Lines’ audited Abbreviated Financial Statements as of December 31, 2022 and the year ended December 31, 2022 included in Exhibit 99.1 of this Form 8-K/A;

The Product Lines’ unaudited Abbreviated Financial Statements as of June 30, 2023 and for the six months ended June 30, 2023 and 2022 included in Exhibit 99.1 of this Form 8-K/A; and

The Product Lines’ unaudited financial information for the three months ended December 31, 2022 (used to determine the results of operations for the nine months ended June 30, 2023) not included in this Form 8-K/A.

The Company has a fiscal year end of September 30 and the Product Lines’ audited Abbreviated Financial Statements are presented as of and for the year ended December 31. The Unaudited Pro Forma Condensed Combined Statements of Operations for the nine months ended June 30, 2023 and the year ended September 30, 2022, present the combination of financial information of the Company and the Product Lines, after giving effect to the Transaction described in the accompanying notes.

Within the Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended June 30, 2023, the reporting periods of the Product Lines and the Company have been aligned. The Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended June 30, 2023 contains the Company’s results of operations for the nine months ended June 30, 2023 and the Product Lines’ revenues and direct expenses for the nine months ended June 30, 2023.

The Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended September 30, 2022 includes the Company’s results of operations for the year ended September 30, 2022 and the Product Lines’ revenues and direct expenses for the year ended December 31, 2022.

Due to the alignment of the Products Lines’ reporting period to the Company’s reporting period in the Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended June 30, 2023, the Product Lines’ revenues and direct expenses for the three months ended December 31, 2022 are included in the Unaudited Pro Forma Condensed Combined Statements of Operations for both the nine months ended June 30, 2023 and the year ended September 30, 2022. The Product Lines’ net sales and direct expenses for the three months ended December 31, 2022 were $6,081,653 and $3,245,639, respectively, resulting in net sales in excess of direct expenses for the three months ended December 31, 2022 of $2,836,014.

INNOVATIVE SOLUTIONS AND SUPPORT, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Nine Months Ended June 30, 2023

(U.S. Dollars)

	IS&S (Historical)		Product Lines (Historical)		Transaction Accounting Adjustments			Notes	Pro Forma Combined
Net sales
Product	$	21,383,435	$	15,030,335	$	-			$	36,413,770
Engineering development contracts		432,482		-		-				432,482
Total net sales		21,815,917		15,030,335		-				36,846,252

Cost of sales
Product		8,538,219		5,980,679		1,447,811		3a, 3b, 3c		15,966,709
Engineering development contracts		79,098		-		-				79,098
Total cost of sales		8,617,317		5,980,679		1,447,811				16,045,807

Gross profit		13,198,600		9,049,656		(1,447,811	)			20,800,445

Operating expenses:
Research and development		2,387,939		-		-				2,387,939
Selling, general and administrative		7,104,212		1,402,989		(262,099	)	3d		8,245,102
Total operating expenses		9,492,151		1,402,989		(262,099	)			10,633,041

Operating income		3,706,449		7,646,667		(1,185,712	)			10,167,404

Interest income (expense)		432,495		-		(1,446,900	)	3e, 3f		(1,014,405	)
Other income		131,504		-		-				131,504
Income before income taxes		4,270,448		7,646,667		(2,632,612	)			9,284,503

Income tax expense		877,315		-		1,238,471		3g		2,115,786

Net income	$	3,393,133	$	7,646,667	$	(3,871,083	)		$	7,168,717

Earnings per share:
Net income - basic	$	0.19						3h	$	0.41
Net income - diluted	$	0.19						3h	$	0.41
Weighted average shares outstanding - basic		17,415,358						3h		17,415,358
Weighted average shares outstanding - diluted		17,419,265						3h		17,419,265

INNOVATIVE SOLUTIONS AND SUPPORT, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Year Ended September 30, 2022

(U.S. Dollars)

	IS&S (Historical)		Product Lines (Historical)		Transaction Accounting Adjustments			Notes	Pro Forma Combined
Net sales
Product	$	27,279,750	$	21,478,069	$	-			$	48,757,819
Engineering development contracts		460,945				-				460,945
Total net sales		27,740,695		21,478,069		-				49,218,764

Cost of sales
Product		10,905,799		10,376,350		1,930,416		3a, 3b, 3c		23,212,565
Engineering development contracts		160,515		-		-				160,515
Total cost of sales		11,066,314		10,376,350		1,930,416				23,373,080

Gross profit		16,674,381		11,101,719		(1,930,416	)			25,845,684

Operating expenses:
Research and development		2,705,140		-		-				2,705,140
Selling, general and administrative		6,753,915		1,547,249		398,063		3d		8,699,227
Total operating expenses		9,459,055		1,547,249		398,063				11,404,367

Operating income		7,215,326		9,554,470		(2,328,479	)			14,441,317

Interest income (expense)		61,051		-		(1,552,745	)	3e, 3f		(1,491,694	)
Other income		65,232		-		-				65,232
Income before income taxes		7,341,609		9,554,470		(3,881,224	)			13,014,855

Income tax expense		1,817,831		-		1,401,292		3g		3,219,123

Net income	$	5,523,778	$	9,554,470	$	(5,282,516	)		$	9,795,732

Earnings per share:
Net income - basic	$	0.32						3h	$	0.57
Net income - diluted	$	0.32						3h	$	0.57
Weighted average shares outstanding - basic		17,256,750						3h		17,256,750
Weighted average shares outstanding - diluted		17,257,871						3h		17,257,871

INNOVATIVE SOLUTIONS AND SUPPORT, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1. Description of the Transaction

On June 30, 2023 (the “Acquisition Date”), Innovative Solutions and Support, Inc. (the “Company” or “IS&S”) entered into and closed the transactions contemplated by an Asset Purchase and License Agreement with Honeywell International, Inc. (“Honeywell”) whereby Honeywell sold certain assets and granted perpetual license rights to manufacture and sell licensed products related to its inertial, communication and navigation product lines (the “Product Lines”) to the Company (the “Transaction”). The Transaction involved a sale of certain inventory, equipment and customer-related documents; an assignment of certain contracts; and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its inertial, communication and navigation product lines to repair, overhaul, manufacture sell, import, export and distribute certain products to the Company for consideration of $36,000,000 in cash. Concurrent with the Transaction, the Company entered into a transition services agreement with Honeywell, at no additional costs, to receive certain transitional services and technical support during the transition service period.

On June 28, 2023, in connection with the Transaction, the Company and one of its subsidiaries entered into an amendment to the loan documents (the “Loan Amendment”) with PNC Bank, National Association (“PNC”), which (i) amends certain terms of that certain loan agreement entered into by the parties on May 11, 2023 (the “Loan Agreement” and, as amended, the “Amended Loan Agreement”) and (ii) a corresponding term note in favor of PNC (the “Term Note”), which together provide for a senior secured term loan in an aggregate principal amount of $20,000,000, with a maturity date of June 28, 2028 (the “Term Loan”). Availability of funds under the Term Loan was conditioned upon the closing of the transactions contemplated by the Agreement and was used to fund a portion of the Transaction.

The interest rate applicable to loans outstanding under the Term Loan is a floating interest rate equal to the sum of (A) the Term SOFR Rate (as defined in the Term Note) plus (B) an unadjusted spread of the Applicable SOFR Margin plus (C) a SOFR adjustment of ten basis points. The Term SOFR Rate was 5.09%. The SOFR Margin ranges from 1.5% to 2.5% depending on the Company’s funded debt to EBITDA ratio. As of June 30, 2023, the total interest rate was 7.69%. Commencing on June 30, 2023, the Term Loan will amortize in up to sixty equal monthly installments, on a straight-line basis, amortized over a period of ten years, with the balance payable on the maturity date of the Term Loan.

In addition to providing for the Term Loan, the Loan Agreement, together with a corresponding Revolving Line of Credit Note in favor of PNC, executed May 11, 2023 (“Line of Credit Note”), provides for a senior secured revolving line of credit in an aggregate principal amount of $10,000,000, with an expiration date of May 11, 2028 (the “Revolving Line of Credit”).

The interest rate applicable to loans outstanding under the Revolving Line of Credit is a rate per annum equal to the sum of (A) Daily SOFR (as defined in the Line of Credit Note) plus (B) an unadjusted spread of Applicable SOFR Margin plus (C) a SOFR adjustment of ten basis points. The Applicable SOFR Margin ranges from 1.5% to 2.5% depending on the Company’s funded debt to EBITDA ratio. The Company will pay an annual commitment fee of 0.15% on the amount available for borrowing under the revolving credit facility.

2. Basis of Presentation

The Unaudited Pro Forma Condensed Combined Financial Statements were prepared in accordance with Article 11 of Regulation S-X to illustrate the pro forma effects of the Transaction.

The Unaudited Pro Forma Condensed Combined Statements of Operations for the nine months ended June 30, 2023 and the year ended September 30, 2022 combine the historical consolidated statements of operations of the Company and the historical statements of revenues and direct expenses of the Product Lines for such periods, giving effect to (i) the Transaction as if it had taken place on October 1, 2021 and (ii) the assumptions and adjustments described in the accompanying notes to these Unaudited Pro Forma Condensed Combined Financial Statements.

The Unaudited Pro Forma Condensed Combined Financial Statements have been prepared using the acquisition method of accounting in accordance with ASC 805 with the Company treated as the accounting acquirer. As of the date of this Form 8-K/A to which the Unaudited Pro Forma Condensed Combined Financial Statements are attached, the Company has not completed the detailed valuation procedures necessary to finalize the required estimated fair values and estimated lives of the assets acquired, the estimated fair values of the liabilities assumed, and the related allocation of the purchase price. The effect of fair values and purchase price allocation contained within these statements are preliminary and are based on management's estimates after initial consultations with valuation personnel and discussions with Honeywell's management. The final allocation of the purchase price will be determined after completion of an analysis to determine the estimated fair value of the Product Lines's assets acquired, liabilities assumed, and associated tax adjustments; the analysis is expected to be completed by the end of the calendar year. Accordingly, the final acquisition accounting adjustments may be materially different from the unaudited pro forma adjustments described in these notes to the Unaudited Pro Forma Condensed Combined Financial Statements.

3. Transaction Accounting Adjustments

The transaction accounting adjustments are based on the Company’s preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the Unaudited Pro Forma Condensed Combined Financial Statements:

(a)

Cost of Sales – Amortization Expense Related to Customer Relationships

Reflects the adjustments to record amortization expenses based on the straight-line method of $977,250, and $1,303,000 for the nine months ended June 30, 2023 and for the year ended September 30, 2022, respectively. The amortization expense is related to the fair value of the identifiable intangible assets, which are customer relationships directly attributable to the Product Lines’ sales. The fair value of the customer relationships is estimated at $13,030,000. The estimated useful life of customer relationships is 10 years.

The estimated fair value of the acquired customer relationships is based on a variation of the income valuation approach and is determined using the multi-period excess earnings method, which is a variation of the discounted cash flow method that quantifies value based on after-tax residual cash flows generated by the intangible asset. Key estimates and assumptions used in this model are projected revenues and expenses related to the asset and a risk-adjusted discount rate used to calculate the present value of the future expected cash inflows from the asset.

(b)

Cost of Sales – Depreciation Expense Related to Equipment

Reflects the adjustments to record the depreciation expense of $117,857, and $157,143 for the nine months ended June 30, 2023 and for the year ended September 30, 2022, respectively. The depreciation expense is related to the step-up from historical carrying value to fair value of the acquired equipment. The step-up to fair value of the equipment is estimated at $1,100,000 and the equipment is estimated to have a remaining useful life of 7 years. Management determined the depreciation expense by using the straight-line method.

(c)

Cost of Sales – Inventory

Reflects the adjustments to record the additional cost of sales related to the step-up to fair value of the acquired inventory. The step-up to fair value of the inventory is estimated at $822,977. The adjustment for the nine months ended June 30, 2023 and for the year ended September 30, 2022 is $352,704 and $470,273, respectively. The related tax benefit for the nine months ended June 30, 2023 and for the year ended September 30, 2022 is $87,118 and $116,157, respectively.

(d)

Selling, General and Administrative – Transaction Costs

For the nine months ended June 30, 2023, there is an adjustment to eliminate the transaction costs of $262,099; the tax expense related to this adjustment is $64,738 for the nine months ended June 30, 2023.

For the year ended September 30, 2022, there is an adjustment to record the transaction costs of $398,063; the tax benefit related to this adjustment is $98,322 for the year ended September 30, 2022.

(e)

Interest Income (Expense) – Interest Income

Reflects the adjustments to eliminate interest income earned on $16,000,000 of the Company’s existing cash balance that was transferred to Honeywell as part of the total aggregate consideration paid to consummate the Transaction. The adjustment for the nine months ended June 30, 2023 and for the year ended September 30, 2022 is $432,495 and $61,051, respectively.

(f)

Interest Income (Expense) – Interest Expense on Term Loan

Reflects the adjustments to record the recognition of new interest expense related to the Term Loan. The adjustment for the nine months ended June 30, 2023 and for the year ended September 30, 2022 is $1,014,405 and $1,491,694, respectively.

The interest rate applicable to loans outstanding under the Term Loan is a floating interest rate equal to the sum of (A) the Term SOFR Rate (as defined in the Term Note) plus (B) an unadjusted spread of the Applicable SOFR Margin plus (C) a SOFR adjustment of ten basis points. The Applicable SOFR Margin ranges from 1.5% to 2.5% depending on the Company’s funded debt to EBITDA ratio. To estimate the adjustment, management utilized the interest rate as it stood on June 30, 2023. The Term Loan will amortize in up to sixty equal monthly installments, on a straight-line basis, amortized over a period of ten years, with the balance payable on the maturity date of the Term Loan.

A 0.125% change in the interest rates used to calculate the interest expense adjustment would have resulted in a $16,495 and $24,256 change to the adjustment in the Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended June 30, 2023 and for the year ended September 30, 2022, respectively.

(g)

Income Taxes

For the nine months ended June 30, 2023, the net adjustment of $1,238,471 represents $1,953,465 of incremental tax expense associated with the Product Lines' operations in the combined business and the elimination of the transaction costs, and $714,994 of tax benefit related to the other transaction accounting adjustments, recorded at the estimated blended statutory tax rate of 24.7%.

For the year ended September 30, 2022, the net adjustment of $1,401,292 represents $2,359,954 of incremental tax expense associated with the Product Lines' operations in the combined business and $958,662 of tax benefit related to the transaction accounting adjustments, recorded at the estimated blended statutory tax rate of 24.7%.

(h)

Earnings Per Share

The unaudited pro forma combined basic and diluted earnings per share calculations are based on the unaudited pro forma combined net income of the combined business and the weighted average outstanding shares of the Company for the nine months ended June 30, 2023 and for the year ended September 30, 2022.

	Pro Forma		Pro Forma
	Nine Months Ended		Year Ended
	June 30, 2023		September 30, 2022
Net income	$	7,168,717	$	9,795,732
Earnings per share:
Basic	$	0.41	$	0.57
Diluted	$	0.41	$	0.57
Weighted average shares outstanding:
Basic		17,415,358		17,256,750
Diluted		17,419,265		17,257,871

Cover	Jun. 30, 2023
Cover [Abstract]
Document Type	8-K/A
Amendment Flag	true
Amendment Description	Amendment No. 1
Document Period End Date	Jun. 30, 2023
Entity File Number	0-31157
Entity Registrant Name	INNOVATIVE SOLUTIONS AND SUPPORT, INC.
Entity Central Index Key	0000836690
Entity Tax Identification Number	23-2507402
Entity Incorporation, State or Country Code	PA
Entity Address, Address Line One	720 Pennsylvania Drive
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
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	ISSC
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false