ISSC.NASDAQInnovative Solutions & Support INC
10-K/A: Innovative Solutions Amends 10-K, Details Executive Pay & Governance
Sentiment:
Annual Report Amendment
Innovative Solutions and Support, Inc. filed an amendment to its 2025 Annual Report on Form 10-K to include previously omitted Part III information on executive compensation, corporate governance, and security ownership.
Delay expectedThe company filed this Amendment No. 1 to its Annual Report on Form 10-K because it did not expect to file its definitive proxy statement within 120 days after the end of the fiscal year ended September 30, 2025.
Capital raiseThe company entered into a Sales Agreement with Stifel, Nicolaus & Company, Incorporated on September 22, 2023, which typically facilitates equity offerings.A Credit Agreement was established with JP Morgan Chase Bank, N.A. and other lenders on July 18, 2025, indicating a debt financing arrangement."Progress toward additional financing" was a qualitative goal for the Chief Financial Officer in fiscal year 2025, suggesting ongoing capital raising efforts.
Better than expectedFiscal year 2025 adjusted revenue of $53,897,000 exceeded the target of $49,100,000.Fiscal year 2025 adjusted operating income of $14,866,492 surpassed the target of $11,266,000.The CEO and CFO achieved their qualitative performance goals at 150% for fiscal year 2025.
Summary
- The filing is an Amendment No. 1 to the Annual Report on Form 10-K for the fiscal year ended September 30, 2025, primarily to provide information required by Part III (Items 10-14) that was omitted from the original filing.
- The company did not expect to file its definitive proxy statement within 120 days after the fiscal year-end, necessitating this amendment.
- For fiscal year 2025, the company achieved adjusted revenue of $53,897,000, exceeding its target of $49,100,000.
- Adjusted operating income for fiscal year 2025 was $14,866,492, surpassing the target of $11,266,000.
- Net income for fiscal year 2025 was $15.63 million, a significant increase from $7.00 million in fiscal 2024 and $6.02 million in fiscal 2023.
- CEO Shahram Askarpour's total compensation for FY2025 was $2,506,043, including a $750,750 non-equity incentive plan compensation.
- CFO Jeffrey DiGiovanni's total compensation for FY2025 was $881,733, including a $250,250 non-equity incentive plan compensation.
- Market performance conditions for 201,000 Market-Based Restricted Stock Units (MSUs) granted to Dr. Askarpour were met throughout fiscal 2025, leading to their full vesting on November 20, 2025.
- The company's non-employee directors are subject to a stock ownership and retention policy, requiring ownership equal to three times their annual cash base retainer, with all directors in compliance as of December 31, 2025.
- The 2019 Stock-Based Incentive Compensation Plan was amended on April 18, 2024, to authorize an additional 1,950,000 shares for issuance, with 1,375,682 shares remaining available as of September 30, 2025.
Sentiment
Score: 7
Explanation: The underlying financial performance for FY2025, as reflected in executive compensation metrics and net income growth, is strong. However, the necessity of this amendment due to a delayed proxy statement and instances of late Section 16(a) filings indicate minor administrative and compliance shortcomings.
Positives
- The company exceeded its fiscal 2025 financial performance targets for executive bonuses, achieving $53,897,000 in adjusted revenue against a $49,100,000 target and $14,866,492 in adjusted operating income against an $11,266,000 target.
- Net income significantly increased to $15.63 million in fiscal 2025, up from $7.00 million in fiscal 2024 and $6.02 million in fiscal 2023, indicating strong financial improvement.
- Market performance conditions for 201,000 MSUs granted to the CEO were met, reflecting positive stock price appreciation during fiscal 2025.
- All non-employee directors and Section 16 officers were in compliance with the company's stock ownership and retention policies as of December 31, 2025, aligning management and director interests with shareholders.
Negatives
- The company filed this amendment because it did not expect to file its definitive proxy statement within 120 days after the fiscal year-end, indicating a delay in compliance.
- Jeffrey DiGiovanni (CFO) and Shahram Askarpour (CEO) each filed one late Form 4, and one greater than 10% beneficial owner filed a single late Form 4, indicating minor compliance issues with Section 16(a) reports.
Risks
- Market acceptance of the company's products (ThrustSense Autothrottle, Vmca Mitigation, flight panel display systems, NextGen Flight Deck, COCKPIT/IP) or other planned products or 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, producing, or improving the company's 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.
- The ability to gain, drive, and sustain regulatory approval, including domestic and international certifications, 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, including via securing patents.
- The ability to respond to technological change.
- Failure to recruit and retain key personnel.
- Risks related to succession planning.
- A cybersecurity incident.
- Risks related to the company's self-insurance program.
- Potential future acquisitions and integration of prior and potential future acquisitions.
- The costs of compliance with present and future laws and regulations.
- Changes in law, including changes to corporate tax laws in the United States and the availability of certain tax credits.
Future Outlook
The company's forward-looking statements indicate a focus on market acceptance of new and existing products, managing competitive environments, and navigating potential challenges related to development, supply chain, regulatory approvals, and economic trends. The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by federal securities laws.
Industry Context
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Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Chief Financial Officer | Michael Linacre (resigned) | Jeffrey DiGiovanni | April 8, 2024 | Michael Linacre resigned on November 8, 2023; Relland M. Winand served as interim CFO from November 8, 2023, until Mr. DiGiovanni's appointment. |
| Director | Garry Dean | 2024 | Appointment to the Board. | |
| Director | Denise L. Devine | January 27, 2025 | Appointment to the Board. | |
| Director | Richard Silfen | 2025 | Appointment to the Board. |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Policy Adoption | The company maintains a Code of Business Conduct and Ethics applicable to directors, executive officers, and employees. | Promotes ethical conduct and compliance across the organization. | |
| Policy Adoption | A Stock Ownership and Retention Policy applies to non-employee directors, requiring ownership of shares with an aggregate value equal to three times their annual cash base retainer. All non-employee directors were in compliance as of December 31, 2025. | Commenced December 31, 2023 | Aligns the interests of non-employee directors with shareholders by promoting long-term equity ownership. |
| Policy Adoption | An Insider Trading Policy prohibits company employees, directors, and related parties from engaging in hedging transactions, purchasing company securities on margin, holding company securities in a margin account, or pledging company securities without prior approval. | Designed to promote compliance with insider trading laws and prevent conflicts of interest. | |
| Committee Composition/Expertise | The Audit Committee is composed solely of independent members (Mr. Carolin, Mr. Bressner, Ms. Devine), all of whom are deemed financially literate and qualify as audit committee financial experts. | Ensures robust oversight of financial reporting and internal controls, enhancing investor confidence. | |
| Compliance Issue | Jeffrey DiGiovanni (CFO) and Shahram Askarpour (CEO) each filed one late Form 4, and one greater than 10% beneficial owner filed a single late Form 4, regarding Section 16(a) reports. | Fiscal year ended September 30, 2025 | Indicates minor administrative lapses in timely insider trading reporting, potentially raising questions about internal controls, though the company believes all requirements were 'complied with in a timely manner, except that each... filed one late Form 4'. |
| Policy Amendment | The 2019 Stock-Based Incentive Compensation Plan was amended to include an additional 1,950,000 authorized shares available for issuance. | April 18, 2024 | Increases the pool of shares available for equity awards, providing more flexibility for executive and employee compensation and retention. |
Related Party Transactions
- On October 18, 2024, the company entered into a one-year consulting agreement with Peduzzi Associates, Ltd. (PAL) for $9,500 per month. Maj. General Dean, a director, serves as President of PAL. PAL will provide consulting services for business development growth into the Department of Defense.
Stakeholder Impact
- Shareholders: Benefit from increased transparency regarding executive compensation and corporate governance, but may note minor compliance delays. Positive financial performance metrics for FY2025 could be viewed favorably.
- Executive Officers: Compensation details are fully disclosed, including base salaries, bonuses, and equity awards, with clear performance targets and vesting schedules. Employment agreements provide severance and change-in-control benefits.
- Directors: Compensation structure and stock ownership requirements are detailed, aligning their interests with the company's long-term success.
- Employees: Benefit from general benefits like 401(k) matching, medical, dental, life insurance, and disability coverage.
Next Steps
- The next advisory vote on executive compensation (say-on-pay proposal) is scheduled for the company's annual meeting of shareholders in fiscal 2026.
Key Dates
| Date | Description |
|---|---|
| 1985 | Glen R. Bressner co-founded a series of affiliated venture funds. |
| 1996-1997 | Glen R. Bressner served as the chairman of the Board of the Greater Philadelphia Venture Group. |
| 1999 | Glen R. Bressner joined the Company's Board of Directors. |
| 2003 | Shahram Askarpour joined the Company as Vice President of Engineering. |
| 2004-2025 | Roger A. Carolin served as a Venture Partner at SCP Partners. |
| 2012-01 | Jeffrey DiGiovanni was Managing Director at Pine Hill Group until September 2018. |
| 2012-03 | Shahram Askarpour was promoted to President. |
| 2014-09 | Relland M. Winand served as the Company's Controller until December 2014. |
| 2014-12 | Relland M. Winand served as the Company's Chief Financial Officer until July 2022. |
| 2015-2020 | Maj. General Dean served Delta Airlines as international captain. |
| 2015-06 | Richard Silfen was a partner and Co-Chair of Mergers & Acquisitions of Duane Morris LLP until June 2025. |
| 2016 | Roger A. Carolin joined the Company's Board of Directors. |
| 2016 | Maj. General Dean began serving as a mentor and advisor to the Chief National Guard Bureau and the Director of the Air National Guard. |
| 2018-09 | Jeffrey DiGiovanni served as StoneMor Inc.'s Chief Accounting Officer until September 2019. |
| 2019-04-02 | The 2019 Stock-Based Incentive Compensation Plan was approved by the Company's shareholders. |
| 2019-09 | Jeffrey DiGiovanni served as Senior Vice President and Chief Financial Officer of StoneMor Inc. until May 2023. |
| 2020 | Maj. General Dean began serving as the President of Peduzzi Associates, Ltd. |
| 2021-2024 | Maj. General Dean served Arlington County Virginia as Commissioner and Vice-Chair of the Community Oversight Board of the Police. |
| 2022-01 | Shahram Askarpour was appointed as the Company's Chief Executive Officer and joined the Board. |
| 2022-04-14 | The Company entered into an amended and restated employment agreement with Dr. Askarpour. |
| 2022-06-01 | The Company entered into an offer letter agreement with former Chief Financial Officer, Michael Linacre. |
| 2023 | Maj. General Dean was appointed by Governor Glenn Youngkin to serve on the Virginia Joint Leadership Council of Veterans Service Organizations. |
| 2023-05 | Jeffrey DiGiovanni worked in a consulting capacity, advising various clients on accounting and financial reporting matters, until March 2024. |
| 2023-09-22 | Sales Agreement with Stifel, Nicolaus & Company, Incorporated. |
| 2023-11-08 | Michael Linacre resigned from all of his positions with the Company. |
| 2023-11-08 | Relland M. Winand was appointed as the interim Chief Financial Officer of the Company. |
| 2023-11-09 | The Company entered into an offer letter with Mr. Winand for his employment as Interim Chief Financial Officer. |
| 2023-12-31 | Commencement date for compliance with the minimum share ownership requirement for non-employee directors. |
| 2024-04-08 | Jeffrey DiGiovanni began his tenure as Chief Financial Officer. |
| 2024-04-18 | The Company amended the 2019 Stock-Based Incentive Compensation Plan to include an additional 1,950,000 authorized shares available for issuance. |
| 2024-06-20 | The Company entered into a Change in Control Agreement with Mr. DiGiovanni. |
| 2024-09-06 | The Company entered into an amendment to the employment agreement with Shahram Askarpour. |
| 2024-10-18 | The Company entered into a consulting agreement with Peduzzi Associates, Ltd., an entity in which Maj. General Dean serves as President. |
| 2024-11-20 | Market-Based Restricted Stock Units (MSUs) were granted to Dr. Askarpour. |
| 2024-12-17 | Mr. DiGiovanni's fiscal 2024 annual cash incentive was paid. |
| 2024-12-20 | Dr. Askarpour's fiscal 2024 annual cash incentive was paid. |
| 2025-01-01 | The Company's fiscal 2025 board compensation program was amended retroactively to this date. |
| 2025-01-12 | Date for security ownership information of certain beneficial owners and management. |
| 2025-01-27 | Denise L. Devine's tenure with the Board began. |
| 2025-02-13 | The market performance condition for 67,000 units of MSUs granted to the CEO on November 20, 2024, was met. |
| 2025-03-31 | Aggregate market value of common stock held by non-affiliates was approximately $81.8 million. |
| 2025-04-17 | The Compensation Committee amended the Company's fiscal 2025 board compensation program. |
| 2025-06 | Richard Silfen began serving as general counsel of Hildred Capital Management LLC. |
| 2025-07-10 | The market performance condition for an additional 67,000 units of MSUs granted to the CEO on November 20, 2024, was met. |
| 2025-07-18 | Credit Agreement with JP Morgan Chase Bank, N.A. |
| 2025-08-08 | The market performance condition for the final 67,000 units of MSUs granted to the CEO on November 20, 2024, was met. |
| 2025-09-30 | Fiscal year ended for the Annual Report on Form 10-K/A. |
| 2025-11-20 | The service condition for all 201,000 units of MSUs granted to Dr. Askarpour on November 20, 2024, was met, leading to their full vesting. |
| 2025-12-19 | Fiscal 2025 annual cash incentives were paid to Dr. Askarpour and Mr. DiGiovanni. |
| 2025-12-31 | Compliance date for non-employee director and Section 16 officers stock ownership policy. |
| 2026-01-12 | Date for security ownership information of certain beneficial owners and management, and number of outstanding shares (17,778,343). |
| 2026-01-27 | Date of filing for Amendment No. 1 to the Annual Report on Form 10-K/A. |
| 2026 | The next scheduled say-on-pay vote is at the Company's annual meeting of shareholders. |
| 2027-11-20 | Deadline for the initial tranche of MSUs to vest at $10.00 per share before the target trading price increases to $12.00 per share. |
| 2029-04-02 | The 2019 Stock-Based Incentive Compensation Plan will terminate unless earlier terminated by the Board. |
Keywords
SEC filing, 10-K/A, Annual Report Amendment, Executive Compensation, Corporate Governance, Innovative Solutions and Support, ISSC, Financial Performance, Stock Options, Restricted Stock Units, Board of Directors, Audit Committee, Risk Factors, Aerospace Industry, Aviation Technology
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