INNOVATIVE SOLUTIONS AND SUPPORT, INC. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are based largely on current expectations and projections about future events and trends affecting the business, are not guarantees of future performance, and involve a number of risks, uncertainties and assumptions that are difficult to predict. In this report, the words "anticipates," "believes," "may," "will," "estimates," "continues," "anticipates," "intends," "forecasts," "expects," "plans," "could," "should," "would," "is likely" and similar expressions, as they relate to the business or to its management, are intended to identify forward-looking statements, but they are not exclusive means of identifying them. Unless the context otherwise requires, all references herein to "IS &S," the "Registrant," the "Company," "we," "us" or "our" are toInnovative Solutions and Support, Inc. and its consolidated subsidiaries. The forward-looking statements in this report are only predictions, and actual events or results may differ materially. In evaluating such statements, a number of risks, uncertainties and other factors could cause actual results, performance, financial condition, cash flows, prospects and opportunities to differ materially from those expressed in, or implied by, the forward-looking statements. These risks, uncertainties and other factors include those set forth in Item 1A (Risk Factors) of our Annual Report on Form 10-K, those set
forth under Item 1A (Risk Factors) of this report, and the following factors:
· market acceptance of the Company's ThrustSense® Integrated PT6 Autothrottle,
PC-12 Autothrottle, VmcaMitigation and Hot Start Protection capabilities, FPDS,
NextGen Flight Deck and COCKPIT/IP® or other planned products or product
enhancements;
· continued market acceptance of the Company's air data systems and products;
· the competitive environment and new product offerings from competitors;
· difficulties in developing and producing the Company's ThrustSense® Integrated
PT6 Autothrottle, PC-12 Autothrottle, Vmca Mitigation and Hot Start Protection
capabilities, NextGen Flight Deck, COCKPIT/IP® Flat Panel Display System or
other planned products or product enhancements;
· the deferral or termination of programs or contracts for convenience by
customers;
· the ability to service the international market;
· the availability of government funding;
· the impact of general economic trends on the Company's business;
· disruptions in the Company's supply chain, customer base and workforce,
including as a result of the COVID-19 pandemic;
· the Company's expectations regarding the use of funds from the Loan and the
potential for forgiveness of the Loan under the terms of the Paycheck
Protection Program;
· the ability to gain regulatory approval of products in a timely manner;
· delays in receiving components from third-party suppliers;
· the bankruptcy or insolvency of one or more key customers;
· protection of intellectual property rights;
· the ability to respond to technological change;
· failure to retain/recruit key personnel;
· risks related to succession planning;
· a cyber security incident;
· risks related to our self-insurance program;
· potential future acquisitions;
· the costs of compliance with present and future laws and regulations;
· changes in law, including changes to corporate tax laws in
and the availability of certain tax credits; and
· other factors disclosed from time to time in the Company's filings with the
United States Securities and Exchange Commission (the "SEC"). Except as expressly required by the federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, including those set forth under Item 1A (Risk Factors) of this report, whether as a result of new information, future events, or otherwise after the date of this report. Results of operations in any past period should not be considered indicative of the results to be expected for future periods. Fluctuations in operating results may result in fluctuations in the price of the Company's common stock.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. The Company does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events, circumstances or changes in expectations after the date of this report, or to reflect the occurrence of unanticipated events. The forward-looking statements in this document are intended to be subject to the safe harbor protection provided by Sections 27A of the Securities Act of 1933, as amended (the "Securities Act"), and 21E of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
Investors should also be aware that while the Company, from time to time,
communicates with securities analysts, it is against its policy to disclose any
material non-public information or other confidential commercial information.
Accordingly, shareholders should not assume that the Company agrees with any
statement or report issued by any analyst irrespective of the content of the
statement or report. Furthermore, the Company has a policy against issuing or
confirming financial forecasts or projections issued by others. Thus, to the
extent that reports issued by securities analysts contain any projections,
forecasts or opinions, such reports are not the responsibility of the Company.
20
Company Overview
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"), Autothrottle Systems, air data equipment, Integrated
Standby Units ("ISU") 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
provides the Company with the capability and 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.
For several years the Company has been working with advances in technology to
provide pilots with more information to enhance both the safety and efficiency
of flying, and has developed its COCKPIT/IP® Cockpit Information Portal ("CIP")
product line, that incorporates proprietary technology, low cost, reduced power
consumption, decreased weight, and increased functionality. The Company has
incorporated Electronic Flight Bag ("EFB") functionality, such as charting and
mapping systems, into its FPDS product line.
The Company has developed an FMS that combines the savings long associated with
in-flight fuel optimization in enroute flight management combined with the
precision of satellite-based navigation required to comply with the regulatory
environments of both domestic and international markets. The Company believes
that the FMS, alongside its FPDS and CIP product lines, is well suited to
address market demand driven by certain regulatory mandates, new technologies,
and the high cost of maintaining aging and obsolete equipment on aircraft that
will be in service for up to fifty years. The shift in the regulatory and
technological environment is illustrated by the dramatic increase in the number
of Space Based Augmentation System ("SBAS") or Wide Area Augmentation System
("WAAS") approach qualified airports, particularly as realized through Localizer
Performance with Vertical guidance ("LPV") navigation procedures. Aircraft
equipped with the Company's FMS, FPDS and SBAS/WAAS/LPV enabled navigator, will
be qualified to land at such airports and will comply with Federal Aviation
Administration ("FAA") mandates for Required Navigation Performance, and
Automatic Dependent Surveillance-Broadcast navigation. IS &S believes this will
further increase the demand for the Company's products. The Company's FMS/FPDS
product line is designed for new production and retrofit applications into
general aviation, commercial air transport and military transport aircraft. In
addition, the Company offers what we believe to be a state-of-the-art ISU,
integrating the full functionality of the primary and navigation displays into a
small backup-powered unit. This ISU builds on the Company's legacy air data
computer to form a complete next-generation cockpit display and navigation
upgrade offering to the commercial and military markets.
The Company has developed and received certification from the FAA on its NextGen
Flight Deck featuring its ThrustSense® Integrated PT6 Autothrottle
("ThrustSense® Autothrottle") for retrofit in the Pilatus PC-12. The NextGen
Flight Deck features Primary Flight and Multi-Function Displays and ISUs, as
well as an Integrated FMS and EFB System. The innovative avionics suite includes
dual flight management systems, autothrottles, synthetic vision and enhanced
vision. The NextGen enhanced avionics suite is available for integration into
other business aircraft with Non-FADEC and FADEC engines.
The Company has developed, and in April 2019 received certification from the FAA
for, its ThrustSense® Autothrottle for retrofit in the King Air , dual turbo prop
PT6 powered aircraft. The autothrottle is designed to automate the power
management for speed and power control. ThrustSense also ensures aircraft
envelope protection and engine protection during all phases of flight reducing
pilot workload and increasing safety.
More recently, on December 9, 2019 the Company received certification from the
FAA for a safety mode feature during an engine-out condition for its King Air
ThrustSense® Autothrottle.
We believe the ThrustSense® Autothrottle is innovative in that it is the first
autothrottle developed for a turbo prop that allows a pilot to automatically
control the power setting of the engine. The autothrottle computes and controls
appropriate power levels reducing overall pilot workload. The system computes
thrust, holds selected speed/torque, and implements appropriate speed and engine
limit protection. When engaged by the pilot, the autothrottle system adjusts the
throttles automatically to achieve and hold the selected airspeed guarded by a
torque/temperature limit mode. The autothrottle system takes full advantage of
the integrated cockpit utilizing weight and balance information for optimal
control settings and enabling safety functions like a turbulence control mode.
21
The Company sells to both the OEM and the retrofit markets. Customers include
various OEMs, commercial air transport carriers and corporate/general aviation
companies, DoD and its commercial contractors, aircraft operators, aircraft
modification centers, government agencies, and foreign militaries. Occasionally,
IS &S sells its products directly to DoD ; however, the Company sells its products
primarily to commercial customers for end use in DoD programs. Sales to defense
contractors are generally made on commercial terms, although some of the
termination and other provisions of government contracts are applicable to these
contracts. The Company's retrofit projects are generally pursuant to either a
direct contract with a customer or a subcontract with a general contractor to a
customer (including government agencies).
Customers have been and may continue to be affected by changes in economic
conditions both in the United States and abroad. Such changes may cause
customers to curtail or delay their spending on both new and existing aircraft.
Factors that can impact general economic conditions and the level of spending by
customers include, but are not limited to, the impact of the ongoing COVID-19
pandemic, general levels of consumer spending, increases in fuel and energy
costs, conditions in the real estate and mortgage markets, labor and healthcare
costs, access to credit, consumer confidence, and other macroeconomic factors
that affect spending behavior. Furthermore, spending by government agencies may
be reduced in the future if tax revenues decline. If customers curtail or delay
their spending or are forced to declare bankruptcy or liquidate their operations
because of adverse economic conditions, the Company's revenues and results of
operations would be affected adversely. For example, recently certain of the
Company's customers temporarily suspended product deliveries as a result of the
COVID-19 pandemic, and while these deliveries have since resumed, there is a
possibility that the COVID-19 pandemic will result in other suspensions, delays
or order cancellations by the Company's customers (or, for that matter, bythe Company's suppliers).
In particular, the ongoing COVID-19 pandemic is a significant event, driver of market trends, and source of uncertainty that may have a material impact on the Company's liquidity, financial condition, capital resources, cash flows or operating results as further set forth below in Item 1A (Risk Factors). In direct response to the COVID-19 pandemic, the Company has taken specific actions to ensure the safety of its employees, including safety measures, the transitioning of as many employees as possible to remote work and the implementation of a temporary split-shift system to minimize the impact of a potential coronavirus infection on the Company's workforce. Cost of sales related to product sales is comprised of material components and third-party avionics purchased from suppliers, direct labor, and overhead costs. Many of the components are standard, although certain parts are manufactured to meetIS &S specifications. The overhead portion of cost of sales is comprised primarily of salaries and benefits, building occupancy costs, supplies, and outside service costs related to production, purchasing, material control, and quality control. Cost of sales includes warranty costs. Cost of sales related to engineering development contracts ("EDC") sales is comprised of engineering labor, consulting services, and other costs associated with specific design and development projects. These costs are incurred pursuant to contractual arrangements and are accounted for typically as contract costs within cost of sales with the reimbursement accounted for as a sale in accordance with the percentage-of-completion method of accounting. Company funded research and development ("R&D") expenditures relate to internally-funded efforts towards the development of new products and the improvement of existing products. These costs are expensed as incurred and reported as R&D expenses. The Company intends to continue investing in the development of new products that complement current product offerings and to expense associated R&D costs as
they are incurred. Selling, general and administrative expenses consist of sales, marketing, business development, professional services, salaries and benefits for executive and administrative personnel, facility costs, recruiting, legal, accounting, bad debt expense and other general corporate expenses.
Critical Accounting Policies and Estimates
The discussion and analysis of financial condition and consolidated results of operations are based upon the Company's condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles inthe United States . The preparation of these condensed consolidated financial statements requires estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis,IS &S management evaluates its estimates based upon historical experience and various other assumptions that it believes to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The Company believes that its critical accounting policies affect its more significant estimates and judgments used in the preparation of its consolidated financial statements. The Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2019 contains a discussion of these critical accounting policies. There have been no significant changes in the Company's critical accounting policies sinceSeptember 30, 2019 . See also Note 1 to the unaudited condensed consolidated financial statements for the three- and six-month periods endingMarch 31, 2020 as set forth herein. 22 RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDEDMARCH 31, 2020 AND 2019
The following table sets forth the statements of operations data expressed as a
percentage of total net sales for the periods indicated (some items may not add
due to rounding):
Three Months Ended March 31, Six Months Ended March 31,
2020 2019 2020 2019
Net sales:
Product 96.1 % 88.2 % 97.4 % 91.5 %
Engineering development contracts 3.9 % 11.8 % 2.6 % 8.5 %
Total net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales:
Product 51.0 % 37.3 % 46.1 % 40.2 %
Engineering development contracts 1.6 % 6.9 % 1.5 % 4.6 %
Total cost of sales 52.5 % 44.2 % 47.6 % 44.8 %
Gross profit 47.5 % 55.8 % 52.4 % 55.2 %
Operating expenses:
Research and development 14.7 % 15.4 % 14.8 % 15.2 %
Selling, general and administrative 31.7 % 36.3 % 34.6 % 36.6 %
Total operating expenses 46.4 % 51.7 % 49.4 % 51.9 %
Operating income 1.1 % 4.1 % 3.0 % 3.3 %
Interest income 1.4 % 0.6 % 1.5 % 0.6 %
Other income 0.2 % 0.3 % 0.3 % 0.4 %
Income before income taxes 2.6 % 5.0 % 4.9 % 4.3 %
Income tax (benefit) expense (6.4 )% 0.2 % (3.3 )% 0.1 %
Net income 9.0 % 4.8 % 8.2 % 4.2 %
23
Three Months Ended
Net sales. Net sales were$4,835,065 for the three months endedMarch 31, 2020 compared to$4,203,127 for the three months endedMarch 31, 2019 , an increase of 15.0%. Product sales increased$938,772 in the three months endedMarch 31, 2020 compared to the three months endedMarch 31, 2019 , and EDC sales decreased$306,834 from the same period in the prior year. Product sales for the three months endedMarch 31, 2020 increased from the same period in the prior year primarily because of increased customer service shipments to commercial transport customers, theDoD and military subcontractors. The decrease in EDC sales in the current year period was primarily the result of completing a development contract for a new F-5 air data computer for theU.S. Navy . Cost of sales. Cost of sales increased$682,973 , or 36.8%, to$2,539,894 , or 52.5% of net sales, in the three months endedMarch 31, 2020 , compared to$1,856,921 or 44.2% of net sales, in the three months endedMarch 31, 2019 . The increase in cost of sales was primarily the result of an increase in labor and related benefit costs attributable to an increase in headcount to meet customer backlog requirements; higher material costs reflecting product mix; and warranty costs due to increased warranty activity for the three months endedMarch 31, 2020 compared to the three months endedMarch 31, 2019 . The Company's overall gross margin was 47.5% and 55.8% for the quarters endedMarch 31, 2020 and
2019, respectively. Research and development. R&D expense increased$63,537 , or 9.8%, to$712,019 , or 14.7% of net sales, in the three months endedMarch 31, 2020 from$648,482 , or 15.4% of net sales, in the three months endedMarch 31, 2019 . The increase in R&D expense in the quarter was primarily the result of a higher proportion of efforts focused upon internal projects rather than EDC programs, whose costs are reflected in cost of sales rather than as R&D expense. Selling, general and administrative. Selling, general and administrative expense increased by$6,732 to$1,531,389 in the three months endedMarch 31, 2020 from$1,524,657 in the three months endedMarch 31, 2019 . As a percentage of net sales, selling, general and administrative expenses decreased to 31.7% of net sales in the three months endedMarch 31, 2020 from 36.3% of net sales in the three months endedMarch 31, 2019 . Interest income. Interest income increased by$39,241 to$65,721 in the three months endedMarch 31, 2020 from$26,480 in the three months endedMarch 31, 2019 , mainly a result of higher interest rates in the current year period compared to the same period in the prior year. Other income. Other income is mainly composed of royalties earned and increased marginally by$473 to$11,219 in the three months endedMarch 31, 2020 compared to the same period in the prior year. Income tax expense. The income tax benefit for the three months endedMarch 31, 2020 was$309,402 as compared to an income tax expense of$7,794 for the three months endedMarch 31, 2019 . The effective tax benefit rate for the three months endedMarch 31, 2020 was 240.4% and differs from the statutory tax rate primarily due to the income tax benefit associated with the NOL carryback provisions under the CARES Act and the release of the valuation allowance. This loss utilization both decreased the deferred tax asset and the valuation allowance. For the three months endedMarch 31, 2020 , the valuation allowance decreased by approximately$1,342,000 to$2,524,373 and is recorded against all its federal and state deferred tax assets. The effective tax rate for the three months endedMarch 31, 2019 was 3.7% and differs from the statutory tax rate primarily due to net operating loss usage. This loss usage both decreased the deferred tax asset and the valuation allowance. For the three months endedMarch 31, 2019 , the valuation allowance decreased by approximately$84,000 . Net income. The Company reported net income for the three months endedMarch 31, 2020 of$438,105 compared to net income of$202,499 for the three months endedMarch 31, 2019 . On a diluted basis, the net income per share was$0.03 for the three months endedMarch 31, 2020 compared to net income per share of$0.01 for the three months endedMarch 31, 2019 . 24
Six Months Ended
Net sales. Net sales were$9,346,493 for the six months endedMarch 31, 2020 compared to$8,180,777 for the six months endedMarch 31, 2019 , an increase of 14.2%. Product sales increased$1,621,957 in the six months endedMarch 31, 2020 compared to the six months endedMarch 31, 2019 , and EDC sales decreased$456,241 from the same period in the prior year. Product sales for the six months endedMarch 31, 2020 increased from the same period in the prior year primarily because of increased customer service shipments to commercial transport customers, theDoD and military subcontractors. The decrease in EDC sales in the current year period was primarily the result of completing a development contract for a new F-5 air data computer for theU.S. Navy . Cost of sales. Cost of sales increased$780,907 , or 21.3%, to$4,449,675 , or 47.6% of net sales, in the six months endedMarch 31, 2020 , compared to$3,668,768 or 44.8% of net sales, in the six months endedMarch 31, 2019 . The increase in cost of sales was primarily the result of an increase in labor and related benefit costs attributable to an increase in headcount to meet customer backlog requirements; higher material costs reflecting product mix; and warranty costs due to increased warranty activity for the six months endedMarch 31, 2020 compared to the six months endedMarch 31, 2019 . The Company's overall gross margin was 52.4% and 55.2% for the quarters endedMarch 31, 2020 and 2019, respectively. Research and development. R&D expense increased$133,780 , or 10.7%, to$1,378,634 , or 14.8% of net sales, in the six months endedMarch 31, 2020 from$1,244,854 , or 15.2% of net sales, in the six months endedMarch 31, 2019 . The increase in R&D expense in the quarter was primarily the result of a higher proportion of efforts focused upon internal projects rather than EDC programs, whose costs are reflected in cost of sales rather than as R&D expense. Selling, general and administrative. Selling, general and administrative expense increased by$236,590 , or 7.9%, to$3,234,663 in the six months endedMarch 31, 2020 from$2,998,073 in the six months endedMarch 31, 2019 . The increase in selling, general, and administrative expense in the six months period was primarily the result of increased commissions and trade show related expenses. As a percentage of net sales, selling, general and administrative expenses decreased to 34.6% of net sales in the six months endedMarch 31, 2020 from 36.6% of net sales in the six months endedMarch 31, 2019 . Interest income. Interest income increased by$96,559 to$144,591 in the six months endedMarch 31, 2020 from$48,032 in the six months endedMarch 31, 2019 , mainly a result of higher interest rates in the current year period compared to the same period in the prior year. Other income. Other income is mainly composed of royalties earned and decreased marginally by$4,101 to$28,499 in the six months endedMarch 31, 2020 compared to the same period in the prior year. Income tax expense. The income tax benefit for the six months endedMarch 31, 2020 was$309,402 as compared to an income tax expense of$7,794 for the six months endedMarch 31, 2019 . The effective tax benefit rate for the six months endedMarch 31, 2020 was 67.8% and differs from the statutory tax rate primarily due to the income tax benefit associated with the NOL carryback provisions under the CARES Act and the release of the valuation allowance. This loss utilization both decreased the deferred tax asset and the valuation allowance. For the six months endedMarch 31, 2020 , the valuation allowance decreased by approximately$1,397,000 to$2,524,373 and is recorded against all its federal and state deferred tax assets.
The effective tax rate for the six months ended
Net income. The Company reported net income for the six months endedMarch 31, 2020 of$766,013 compared to net income of$341,920 for the six months endedMarch 31, 2019 . On a diluted basis, the net income per share was$0.04 for the six months endedMarch 31, 2020 compared to net income per share of$0.02 for the six months endedMarch 31, 2019 . 25
Liquidity and Capital Resources
The following table highlights key financial measurements of the Company:
March 31, September 30,
2020 2019
Cash and cash equivalents $ 22,644,037 $ 22,416,830
Accounts receivable 2,684,981 2,348,537
Current assets 31,394,725 29,958,292
Current liabilities 2,629,956 2,219,222
Contract liability 97,136 29,231Total debt and other non-current liabilities (1) 135,326
129,651
Quick ratio (2) 9.63 11.16
Current ratio (3) 11.94 13.50
Six Months Ended March 31,
2020 2019
Cash flow activites:
Net cash provided by operating activites
Net cash used in investing activites (32,420 )
(72,195 )
Net cash provided by financing activites 8,822
-
(1) Excludes contract liabilities
(2) The sum of cash and cash equivalents plus accounts receivable, divided by
current liabilities
(3) Current assets divided by current liabilities
The Company's principal source of liquidity has been cash flows from current year operations and cash accumulated from prior years' operations. Cash is used principally to finance inventory, accounts receivable, and payroll. The ongoing COVID-19 pandemic is a significant event, driver of market trends, and source of uncertainty that may have a material impact on the Company's liquidity, financial condition, capital resources, cash flows or operating results, as further set forth below in Item 1A (Risk Factors). In direct response to the COVID-19 pandemic, the Company has taken specific actions to ensure the safety of its employees, including increased safety measures, the transitioning of as many employees as possible to remote work and the implementation of a temporary split-shift system to minimize the impact of a potential coronavirus infection on the Company's workforce. Operating activities
Cash provided by operating activities for the six months ended
Cash provided by operating activities for the six months endedMarch 31, 2019 resulted primarily from decreases in accounts receivable of$829,000 , and funding from net income of$342,000 , offset by a decrease in accounts payable of$544,000 . Investing activities
Cash used in investing activities was approximately$32,420 and$72,000 for the six months endedMarch 31, 2020 and 2019, respectively and consisted primarily of the purchase of computer, production and laboratory test equipment. Financing activities
Net cash provided by financing activities was
26
Summary
Future capital requirements depend upon numerous factors, including market acceptance of the Company's products, the timing and rate of expansion of business, acquisitions, joint ventures and other factors.IS &S has experienced increases in expenditures since its inception and anticipates that expenditures will continue in the foreseeable future. The Company believes that its cash and cash equivalents will provide sufficient capital to fund operations for at least the next twelve months. However, the Company may need to develop and introduce new or enhanced products, respond to competitive pressures, invest in or acquire businesses or technologies, or respond to unanticipated requirements or developments. If insufficient funds are available, the Company may not be able to introduce new products or compete effectively.
Impact of the COVID-19 Pandemic
Through the first two quarters of 2020, 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. However, the COVID-19 pandemic, as well as the quarantines and other governmental and non-governmental restrictions which have been imposed throughout the world in an effort to contain or mitigate the spread of the coronavirus, has caused and is continuing to cause significant market turbulence and disruption that may continue for some time even after business restrictions are lifted and the threat of the coronavirus diminishes. As a result, the Company expects that it may face liquidity shortages, weaker product demand from its customers, disruptions in its supply chain, and/or staffing shortages in its workforce for the foreseeable future due to the direct and indirect effects of the COVID-19 pandemic, as further set forth below in Item 1A (Risk Factors). Backlog
Backlog represents the value of contracts and purchase orders received, less
sales recognized to date on those contracts and purchase orders. Backlog
activity for the six months ended
Three Months Ended Six Months Ended
March 31, 2020
Backlog, beginning of period $ 6,332,036 $ 5,896,163
Bookings, net 8,292,441 13,239,742
Recognized in revenue (4,835,065 ) (9,346,493 )
Backlog, end of period $ 9,789,412 $ 9,789,412 AtMarch 31, 2020 , the majority of the Company's backlog is expected to be filled within the next twelve months. To the extent new business orders do not continue to equal or exceed sales recognized in the future from the Company's existing backlog, future operating results may be impacted negatively.
Off-Balance Sheet Arrangements
The Company has no relationships with unconsolidated entities or financial partnerships, such as Special Purpose Entities or Variable Interest Entities, established for the purpose of facilitating off-balance sheet arrangements or other limited purposes.
© Edgar Online, source
