What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-11 compared with 2023-05-08 · 98 added, 67 removed, 167 unchanged (50% of the section changed)

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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.

In this report, the words “anticipates,” “believes,” “may,” “will,” “estimates,” “continues,” “anticipates,” “intends,” “forecasts,” “expects,” “plans,” “could,” “should,” “would,” “is likely”, “projected”, “might”, “potential”, “preliminary”, “provisionally” 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 to Innovative Solutions and Support, Inc.

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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 for the fiscal year ended September 30, 2022 and the following factors:

● market acceptance of the Company’s ThrustSense® full-regime Autothrottle, Vmca Mitigation, FPDS, NextGen Flight Deck and COCKPIT/IP® or other planned products or product enhancements;

These risks, uncertainties and other factors include those set forth in Item 1A (Risk Factors) of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 and in Item 1A (Risk Factors) to Part II of this Quarterly Report on Form 10-Q, as well as the following factors:

● market acceptance of the Company’s ThrustSense® full-regime Autothrottle, Vmc a Mitigation, 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;

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● risks related to our self-insurance program;

● potential future acquisitions;

● ability to successfully manage and integrate key acquisitions, mergers, and other transactions, such as the recent asset acquisition of certain Inertial, Communication and Navigation product lines from Honeywell International, Inc., as well as the failure to realize expected synergies and benefits anticipated when we make an acquisition;

● potential future acquisitions or dispositions;

● the costs of compliance with present and future laws and regulations;

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Except as expressly required by the federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, 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.

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 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”).

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The NextGen enhanced avionics suite is available for integration into other business aircraft with Non-FADEC and FADEC engines.

The Company has developed, it’s FAA-certified ThrustSense® Autothrottle for retrofit in the King Air, dual turbo prop PT6 powered aircraft.

The Company has developed, its FAA-certified 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 including go-around.

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The discussion and analysis of financial condition and consolidated results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States.

The preparation of these 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.

preparation of these 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.

Management has determined that the most critical accounting estimates are those related to revenue recognition, valuation of tangible and intangible assets acquired, long term contracts, the useful lives of long-lived assets for depreciation and amortization, the recoverability of long-lived assets, evaluation of goodwill impairment and contingencies.

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.

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The Annual Report on Form 10-K for the fiscal year ended September 30, 2022 contains a discussion of these critical accounting policies.

There have been no significant changes in the Company’s critical accounting policies since September 30, 2022.

See also Note 1 to the unaudited consolidated financial statements for the three and six months ended March 31, 2023 as set forth herein.

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED

MARCH 31, 2023 AND 2022

There have been no significant changes in the Company’s critical accounting policies since September 30, 2022, except new critical accounting policies in acquisition, intangible assets and goodwill.

See also Note 1 to the unaudited consolidated financial statements for the three-and nine-month periods ended June 30, 2023 as set forth herein.

The Company accounts for business acquisitions using the acquisition method of accounting.

Under this method of accounting, assets acquired and liabilities assumed are recorded at their respective fair values at the date of the acquisition.

When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions.

The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Any excess of the purchase price over the fair value of the net assets acquired is recognized as goodwill.

The Company also uses best estimates and assumptions to determine the useful lives of those acquired intangible assets with a finite life.

Critical estimates in valuing certain of the intangible assets and goodwill acquired include:

● future expected cash flows from customer contracts and license agreements;

● historical and expected customer attrition rates and anticipated growth in revenue from acquired customers;

● estimated replacement costs for equipment acquired;

● obsolescence rate applied to finished goods and raw materials acquired;

● discount rates.

Intangible Assets

Intangible assets consist of customer relationship, license agreements, and licensing and certification rights, and these assets are carried at cost less accumulated amortization and any impairment charge.

Intangible assets with a finite life are amortized over their estimated useful life and are reported net of accumulated amortization.

An impairment assessment for intangible assets with a finite life is only required when an event or change in circumstances indicates that the carrying amount of the asset may not be recoverable.

Determining the useful life of an intangible asset with a finite life also requires judgment.

Indefinite-lived intangible assets are not amortized, but are subject to an annual impairment test, or when events or circumstances dictate, more frequently.

The impairment review for indefinite-lived intangible assets can be performed using a qualitative or quantitative impairment assessment.

The quantitative assessment consists of a comparison of the fair value of the indefinite-lived intangible asset with its carrying amount.

If the carrying amount exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

If the fair value exceeds its carrying amount, the indefinite-lived intangible asset is not considered impaired.

Impairment of Goodwill

The Company evaluates the carrying amount of goodwill annually or more frequently if events or circumstances indicate that the goodwill may be impaired.

Factors that could trigger an impairment review include significant underperformance relative to historical or forecasted operating results, a significant decrease in the market value of an asset or significant negative industry or economic trends.

Assumptions used in the impairment evaluations, such as forecasted growth rates and cost of capital, are consistent with

internal projections and operating plans.

The Company believes these estimates and assumptions are reasonable and comparable to those that would be used by other marketplace participants.

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED

JUNE 30, 2023 AND 2022

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,

Three Months Ended June 30,

Nine Months Ended June 30,

Engineering development contracts

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Income tax expense

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Net sales were $7.34 million for the three months ended March 31, 2023 compared to $6.85 million for the three months ended March 31, 2022, an increase of $0.49 million, or 7.2%.

Product sales increased $0.66 million, or 12.4% in the three months ended March 31, 2023 compared to the year ago quarter.

This increase in product sales for the three months ended March 31, 2023 compared to the year ago quarter primarily resulted from increased shipments of displays for retrofit programs to commercial air transport customers under our 757/767 platform.

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

Net sales were $8.0 million for the three months ended June 30, 2023 compared to $6.9 million for the three months ended June 30, 2022, an increase of 14.8%.

Product sales increased $1.0 million and customer service sales remained flat compared to the year ago quarter.

This increase in product sales for the three months ended June 30, 2023 was primarily the result of additional shipments of displays for retrofit programs to commercial air transport customers.

The increase was also due to increase of shipments of OEM sales to Boeing under the KC-46A platform.

Cost of sales.

Cost of sales decreased slightly by $.06 million, or 2.4%, to $2.60 million, or 35.4% of net sales, in the three months ended March 31, 2023, compared to $2.66 million and 38.9% of net sales, in the three months ended March 31, 2022.

The decrease in cost of sales was due to a favorable product mix, cost control and an increase in inventory of $0.6 million.

The Company’s overall gross margin was 64.6% and 61.1% for the three months ended March 31, 2023 and 2022, respectively.

The increase in gross margin percentage for the three months ended March 31, 2023 is attributable to the absorption of direct and indirect manufacturing costs into an increased raw materials and work in process inventory balance, as well as a favorable product mix and cost control.

Cost of sales increased by $345,000, or 12.0%, to $3.2 million, or 40.5% of net sales, in the three months ended June 30, 2023, compared to $2.9 million or 41.5% of net sales, in the three months ended June 30, 2022.

The increase in cost of sales was primarily the result of an increase in product sales volume for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.

The Company’s overall gross margin was 59.5% and 58.5% for the three months ended June 30, 2023 and 2022, respectively.

The increase in gross margin percentage for the three months ended June 30, 2023 is attributable to favorable leveraging of fixed costs resulting from the increased sales and production volume and a favorable sales mix.

Research and development.

R&D expense increased $0.22 million, or 33.3%, to $0.87 million in the three months ended March 31, 2023 from $0.65 million in the three months ended March 31, 2022.

As a percentage of net sales, R&D expense increased to 11.8% of net sales in the three months ended March 31, 2023 from 9.5% of net sales in the three months ended March 31, 2022 reflecting the hiring of engineers, related product development and increased R&D projects.

R&D expense increased $175,000 or 25.9% in the three months ended June 30, 2023 from $676,000 in the three months ended June 30, 2022.

As a percentage of net sales, R&D expense increased to 10.7% of net sales in the three months

ended June 30, 2023 from 9.8% of net sales in the three months ended June 30, 2022 reflecting the hiring of engineers, related product development and increased R&D projects.

Selling, general and administrative.

Selling, general and administrative expense increased by $0.72 million to $2.45 million in the three months ended March 31, 2023 from $1.72 million in the three months ended March 31, 2022.

As a percentage of net sales, selling, general and administrative expenses increased to 33.3% of net sales in the three months ended March 31, 2023 from 25.2% of net sales in the three months ended March 31, 2022.

The increase in selling, general and administrative expense in the quarter was primarily due to additions to the sales and business development teams, increased marketing and investor relations activities in an effort to grow the business, as well as one-time non-cash executive stock awards.

Selling, general and administrative expense increased by $632,000 or 37.3% to $2.3 million in the three months ended June 30, 2023 from $1.7 million in the three months ended June 30, 2022.

As a percentage of net sales, selling, general and administrative expenses was 30.1% in the three months ended June 30, 2023 compared to 24.4% for the prior year period.

The overall increase in selling, general and administrative expense in the quarter was primarily the result of increased sales and marketing costs, legal and professional fees incurred as part of the Honeywell asset acquisition, as well as non-cash executive stock awards.

Interest income.

Interest income increased by $130k to $131k in the three months ended March 31, 2023 from $346 in the three months ended March 31, 2022, mainly as a result of increased cash balance and higher interest rates earned in the current year period compared to the same period in the prior year.

Interest income increased by $175,000 to $186,000 in the three months ended June 30, 2023 from $10,000 in the three months ended June 30, 2022, mainly a result of increased cash balance and higher interest rates earned during 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 by $11.7k to $23.3k in the three months ended March 31, 2023 compared to the same period in the prior year.

Other income is mainly composed of royalties earned and increased by $68,000 to $90,000 in the three months ended June 30, 2023 compared to the same period in the prior year.

Income tax expense.

The income tax expense for the three months ended March 31, 2023 was $0.3 million as compared to an income tax expense of $0.4 million for the three months ended March 31, 2022.

The effective tax rate for the three-month period ended March 31, 2023 was 19.6% and differs from the statutory tax rate primarily due to an increased R&D credit, as well as permanent items and state taxes.

The Company reported net income for the three months ended March 31, 2023 of $1.27 million compared to net income of $1.43 million for the three months ended March 31, 2022.

On a diluted basis, the net income per share was $0.07 for the three months ended March 31, 2023 compared to net income per share of $0.08 for the three months ended March 31, 2022.

Six Months Ended March 31, 2023 Compared to the Six Months Ended March 31, 2022

Net sales were $13.86 million for the six months ended March 31, 2023 compared to $13.54 million for the six months ended March 31, 2022, an increase of 2.3%.

Product sales increased $0.14 million and non-recurring engineering increased by $0.17 million in the six months ended March 31, 2023 compared to the same period in the prior year.

This increase in product sales for the six months ended March 31, 2023 primarily resulted from increased sales to our core OEM customers, which include Pilatus, Textron and Boeing.

Sales from new auto-throttle installations also increased.

The income tax expense for the three months ended June 30, 2023 was $340,000 as compared to $359,000 for the three months ended June 30, 2022.

The effective tax rate for the three-month period ended June 30, 2023 was 19.3% and differs from the statutory tax rate primarily due to permanent items and state taxes.

The Company reported net income for the three months ended June 30, 2023 of $1.4 million and remained flat compared to net income of $1.4 for the three months ended June 30, 2022.

On a diluted basis, the net income per share was $0.08 for the three months ended June 30, 2023 and remained flat compared to net income per share of $0.08 for the three months ended June 30, 2022.

Nine Months Ended June 30, 2023 Compared to the Nine Months Ended June 30, 2022

Net sales were $21.8 million for the nine months ended June 30, 2023 compared to $20.5 million for the nine months ended June 30, 2022, an increase of 6.5%.

Product sales increased $1.1 million, customer service was flat, and EDC sales doubled to $234,000 in the nine months ended June 30, 2023 compared to the same period in the prior year.This increase in product sales for the nine months ended June 30, 2023 primarily resulted from increased sales to our OEM customers, which include Pilatus, Textron and Boeing.

Sales increases were also seen in our new auto-throttle installations.

Cost of sales.

Cost of sales was consistent at $5.39 million, or 38.9% of net sales, in the six months ended March 31, 2023, compared to $5.39 million or 39.8% of net sales, in the six months ended March 31, 2022.

The Company’s overall gross margin was 61.1% and 60.2% for the six months ended March 31, 2023 and 2022, respectively.

The increase in gross margin percentage for the six months ended March 31, 2023 is attributable to leverage obtained through increased sales volume, controlled operational spending, and absorption of overhead costs into raw materials inventory.

Cost of sales increased $347,000, or 4.2%, to $8.6 million, or 39.5% of net sales, in the nine months ended June 30, 2023, compared to $8.3 million or 40.4% of net sales, in the nine months ended June 30, 2022.

The increase in cost of sales was primarily the result of an increase in product sales volume for the nine months ended June 30, 2023 compared to the nine months ended June 30, 2022.

The Company’s overall gross margin was 60.5% and 59.6% for the nine months ended June 30, 2023 and 2022, respectively.

The increase in gross margin percentage for the nine months ended June 30, 2023 is attributable to favorable leveraging of fixed costs resulting from the increased sales and production volume and a favorable sales mix.

Research and development.

R&D expense increased $0.15 million, or 10.8%, to $1.54 million in the six months ended March 31, 2023 from $1.39 million in the six months ended March 31, 2022.

As a percentage of net sales, R&D expense increased to 11.1% of net sales in the six months ended March 31, 2023 from 10.2% of net sales in the six months ended March 31, 2022 reflecting the start of the increased in hiring engineers, working on product development and related programs/internal projects.

R&D expense increased $325,000, or 15.8%, to $2.4 million in the nine months ended June 30, 2023 from $2.1 million in the nine months ended June 30, 2022.

As a percentage of net sales, R&D expense increased to 10.9% of net sales in the nine months ended June 30, 2023 from 10.1% of net sales in the nine months ended June 30, 2022 reflecting an increase in hiring engineers and working on product development and related programs/internal projects.

Selling, general and administrative.

Selling, general and administrative expense increased by $1.18 million to $4.71 million in the six months ended March 31, 2023 from $3.53 in the six months ended March 31, 2022.

As a percentage of net sales, selling, general and administrative expenses increased to 34.0% of net sales in the six months ended March 31, 2023 from 26.1% of net sales in the six months ended March 31, 2022.

The increase in selling, general and administrative expense in the period was primarily the result of personnel additions in the sales and marketing, business development, investor relations and investor facing activities and non-cash long-term compensation.

Selling, general and administrative expenses increased by $1.8 million to $7.0 million in the nine months ended June 30, 2023 from $5.2 million in the nine months ended June 30, 2022.

As a percentage of net sales, selling, general and administrative expenses increased to 32.6% of net sales in the nine months ended June 30, 2023 from 25.5% of net sales in the nine months ended June 30, 2022.

The increase in selling, general and administrative expense in the period was primarily the result of personnel additions in sales and marketing, legal and business development related to the acquisition, investor relations and investor facing activities and non-cash long-term compensations post COVID.

Interest income.

Interest income increased by $0.25 million to $0.25 million in the six months ended March 31, 2023 from $442 in the six months ended March 31, 2022, mainly as a result of increased cash on hand and higher interest rates compared to the same period in the prior year.

Interest income increased by $422,000 to $432,000 in the nine months ended June 30, 2023 from $11,000 in the nine months ended June 30, 2022, mainly a result of increased cash on hand and higher interest rates compared to the same period in the prior year.

Other income.

Other income is mainly composed of royalties earned and increased by $13,661 to $41,454 in the six months ended March 31, 2023 compared to the same period in the prior year.

Other income is mainly composed of royalties earned and increased by $82,000 to $132,000 in the nine months ended June 30, 2023 compared to the same period in the prior year.

Income tax expense.

The income tax expense for the six months ended March 31, 2023 was $0.54 as compared to an income tax expense of $0.70 for the six months ended March 31, 2022.

The effective tax rate for the six-month period ended March 31, 2023 was 21.4% and differs from the statutory tax rate primarily due to increased R&D tax credits, permanent items and state taxes.

The Company reported net income for the six months ended March 31, 2023 of $1.97 million compared to net income of $2.56 million for the six months ended March 31, 2022.

On a diluted basis, the net income per share was $0.11 for the six months ended March 31, 2023 compared to $0.15 for the six months ended March 31, 2022.

The income tax expense for the nine months ended June 30, 2023 was $877,000 as compared to $1.1 million the nine months ended June 30, 2021.

The effective tax rate for the nine-month period ended June 30, 2022 was 20.5% and differs from the statutory tax rate primarily due to permanent items and state taxes.

The Company reported net income for the nine months ended June 30, 2023 of $3.4 million compared to net income of $3.9 million for the nine months ended June 30, 2022.

On a diluted basis, the net income per share was $0.19 for the nine months ended June 30, 2023 compared to net income per share of $0.23 for the nine months ended June 30, 2022.

Liquidity and Capital Resources

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Current ratio (3)

Six Months Ended March 31,

Nine Months Ended June 30,

Cash flow activities:

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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, contract assets, and payroll, as well as the Company’s known contractual and other commitments (including those described in Note 7, “Leases”).

The Company’s existing cash balances and anticipated cash flows from operations are expected to be adequate to satisfy the Company’s liquidity needs for at least the next 12 months.

Apart from what has been disclosed above, management is not aware of any trends, events or uncertainties that have had or are likely to have a material impact on our liquidity, financial condition and capital resources.

The Company’s principal source of liquidity has been cash flows from current year operations and cash accumulated from prior years’ operations, supplemented with borrowings under our term loan and revolving credit facility.

Cash is used principally to finance inventory, accounts receivable, contract assets, payroll, debt service, and acquisitions, as well as the Company’s known contractual and other commitments (including those described in Note 8, “Leases”).

The Company’s existing cash balances and anticipated cash flows from operations, together with borrowings under our term loan and revolving credit facility, are expected to be adequate to satisfy the Company’s liquidity needs for at least the next 12 months.

Apart from what has been disclosed in this Management’s Discussion and Analysis, management is not aware of any trends, events or uncertainties that have had or are likely to have a material impact on our liquidity, financial condition and capital resources.

The declaration and payment of any dividend in the future will be at the discretion of the Company’s Board of Directors.

Operating activities

Net cash provided by operating activities was $2.2 million for the six-month period ended March 31, 2023 and consisted primarily of funding from net income of $2.0 million.

Net cash provided by operating activities was $3.4 million for the six-month period ended March 31, 2022 and consisted primarily of funding from net income of $2.6 million and a decrease in deferred income taxes of $0.5 million.

Net cash provided by operating activities was $0.9 million for the nine-month period ended June 30, 2023 and consisted primarily of funding from net income of $3.4 million, offset by an increase in accounts receivable of $1.6 million and a decrease in accrued expenses of $0.9 million.

Net cash provided by operating activities of $6.4 million for the nine-month period ended June 30, 2022 resulted primarily from funding from net income of $3.9 million, a decrease in accounts receivables of $1.0 million and a decrease in deferred income taxes of $0.8 million.

Investing activities

Net cash used in investing activities was $0.1 million for the six-month period ended March 31, 2023 and consisted primarily of the purchase of laboratory test equipment and computer hardware.

Net cash used in investing activities was $0.1 million for the six-month period ended March 31, 2022 and consisted primarily of the purchase of laboratory test equipment.

Net cash used in investing activities was $36.0 million for the nine-month period ended June 30, 2023 and consisted primarily of the asset purchase acquisition of Honeywell.

Net cash used in investing activities was $0.2 million for the nine-month period ended June 30, 2022 and consisted primarily of the purchase of laboratory test equipment and computer hardware.

Financing activities

Net cash provided by financing activities was $0.4 million for the six-month period ended March 31, 2023 and consisted of proceeds from the exercise of stock options.

Net cash used in financing activities was $0 for the six-month period ended March 31, 2022.

Net cash provided by financing activities was $20.4 million for the nine-month period ended June 30, 2023 and consisted of proceeds from a new credit facility of $20.0 million and the exercise of stock options.

Net cash provided by financing activities was $0.02 million for the nine-month period ended June 30, 2022 and consisted of proceeds from the exercise of stock options.

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.

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Backlog represents the value of contracts and purchase orders, less the revenue recognized to date on those contracts and purchase orders.

Backlog activity for the three-and six-month periods ended March 31, 2023:

Backlog activity for the three- and nine-month periods ended June 30, 2023:

Three Months Ended

Six Months Ended

March 31, 2023

June 30, 2023

Backlog, beginning of period

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Backlog, end of period

At March 31, 2023, the majority of the Company’s backlog is expected to be filled within the next twelve months.

At June 30, 2023, 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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis