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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 10-K/A
For annual and transition reports
pursuant to sections 13 or 15(d) of the
Securities Exchange Act of 1934
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission File No. 0-31157
INNOVATIVE SOLUTIONS AND SUPPORT, INC.
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(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2507402
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
420 LAPP ROAD, MALVERN, PENNSYLVANIA 19355
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(Address of principal executive offices) (Zip Code)
(610) 889-9898
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act: Common Stock, par
value $.001
Indicate by check mark whether registrant: (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No__
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[X]
The aggregate market value of the Registrant's common stock held by non-
affiliates of the Registrant as of December 15, 2000 was approximately
$70,706,188. Shares of common stock held by each executive officer and director
and by each person who owns 10% or more of our outstanding common stock have
been excluded since such persons may be deemed affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.
As of December 15, 2000, there were 12,615,427 outstanding shares of the
Registrant's Common Stock.
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Part III of the Annual Report on Form 10-K for the year ended September
30,2000 of Innovative Solutions and Support, Inc. is hereby amended and restated
in its entirety as follows:
Item 10. Directors and Executive Officers of the Registrant.
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Set forth below is certain information regarding our directors and
executive officers:
Name Age Position
---- --- --------
Geoffrey S. M. Hedrick........ 58 Chairman of the Board and Chief Executive
Officer(3)
Robert J. Ewy................. 55 President
James J. Reilly............... 60 Chief Financial Officer
David J. Marvin............... 47 Vice President of Marketing and Business
Development
Roger E. Mitchell............. 46 Vice President of Operations
Joel P. Adams................. 43 Director(1)(5)
Glen R. Bressner.............. 40 Director(2)(5)
Winston J. Churchill.......... 60 Director(3)(4)
Benjamin A. Cosgrove.......... 74 Director(3)(4)
Ivan M. Marks................. 59 Director(1)(5)
Robert E. Mittelstaedt, Jr.... 57 Director(2)(4)
______________
(1) Term expires at 2001 annual meeting.
(2) Term expires at 2002 annual meeting.
(3) Term expires at 2003 annual meeting.
(4) Member of the Compensation Committee of the Board of Directors.
(5) Member of the Audit Committee of the Board of Directors.
Geoffrey S. M. Hedrick has been our Chief Executive Officer since he founded
IS&S in February 1988 and our Chairman of the Board since 1997. Prior to
founding us, Mr. Hedrick served as President and Chief Executive Officer of
Smiths Industries North American Aerospace Companies. He also founded Harowe
Systems, Inc. in 1971, which was subsequently acquired by Smiths Industries.
Robert J. Ewy has been our President since May 1999. Prior to joining us,
from 1971 to 1999, Mr. Ewy was employed by AlliedSignal, Inc., Electronics and
Avionics Systems, where he held various positions. From 1998 to 1999, Mr. Ewy
was General Manager of Business Aviation. From 1997 to 1998, he was Vice
President of Flight Information Systems, and from 1996 to 1997, he was Vice
President of Communications and Cabin Systems. Prior thereto, from 1993 to 1996,
Mr. Ewy was Director of Strategic Business Enterprises. Mr. Ewy holds a Bachelor
of Science degree in Engineering from the University of Missouri.
James J. Reilly has been our Chief Financial Officer since February 2000.
From 1996 to 1999, Mr. Reilly was employed by B/E Aerospace, Inc., Seating
Products Group, where he served as Vice President and Chief Financial Officer.
From 1989 to 1996, Mr. Reilly was employed by E-Systems, Inc. as Vice President
and Principal Accounting Officer. Mr. Reilly holds a Bachelor of Science degree
and a Masters of Business Administration degree from the University of Hartford.
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David J. Marvin has been our Vice President of Marketing and Business
Development since August 2000. Until joining us, Mr. Marvin was employed by
Smiths industries from 1992 as the Director of Marketing. Mr. Marvin has 23
years experience in the Aerospace Industry including nine years in Systems
Engineering with Boeing, and the last twelve years in Director and Vice
President of Marketing roles. Mr. Marvin holds a Bachelor of Science degree from
Kent State University and a Masters of Science degree in Engineering from Drexel
University.
Roger E. Mitchell has been our Vice President of Operations since September
1999. From July 1998 until September 1999, Mr. Mitchell served as our Director
of Operations. Prior to joining us, Mr. Mitchell was employed by AlliedSignal,
where he held various positions, including Operations Manager from 1994 to 1998.
Mr. Mitchell received a Bachelor of Arts degree from Lewis University.
Joel P. Adams has been a director since 1995. Mr. Adams has been the
President of Adams Capital Management, Inc., a venture capital management
company, since he founded it in 1994. Mr. Adams also serves on the board of
directors of AirNet Communications Corporation and NetSolve Inc. Mr. Adams holds
a Masters of Science degree from Carnegie Mellon University and a Bachelor of
Science degree in Nuclear Engineering from the State University of New York at
Buffalo.
Glen R. Bressner has been a director since 1999. Mr. Bressner has been a
partner of Mid-Atlantic Venture Funds, a venture capital firm, since 1997. Mr.
Bressner is also a partner of NEPA Venture Fund, L.P., a venture capital firm, a
position he has held since 1985. From 1996 to 1997, Mr. Bressner served as the
Chairman of the Board of Directors of the Greater Philadelphia Venture Group.
Mr. Bressner holds a Bachelor of Science degree in Business Administration from
Boston University and a Masters of Business Administration degree from Babson
College.
Winston J. Churchill has been a director since 1990. Since 1996, Mr.
Churchill has been a managing general partner of SCP Private Equity Partners,
L.P., a private equity fund sponsored by Safeguard Scientifics, Inc. In
addition, since 1991, Mr. Churchill has been the Chairman of the Board of
Churchill Investment Partners, Inc. and CIP Capital, Inc., both of which are
venture capital firms. Mr. Churchill is also a director of Amkor Technology,
Inc., Freedom Securities Corp., Griffin Land and Nurseries, Inc. and CinemaStar
Luxury Theaters, Inc. Mr. Churchill is a member of the Executive Committee of
the Council of Institutional Investors. Mr. Churchill holds a Bachelor of
Science degree from Fordham University, a Masters of Business Administration
from Oxford University and a Juris Doctor from Yale Law School.
Benjamin A. Cosgrove has been a director since 1992. Mr. Cosgrove has been a
consultant to The Boeing Company since he retired from Boeing in 1993. Prior to
his retirement, Mr. Cosgrove was employed by Boeing for 44 years and held a
number of positions, including Senior Vice President for Technical and
Government Affairs. Mr. Cosgrove is currently a member of the NASA Advisory
Council's Task Force on the Shuttle-Mir Rendezvous and Docking Missions and the
Task Force on International Space Station Operational Readiness. Mr.
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Cosgrove holds a Bachelor of Science degree in Aeronautical Engineering from
Notre Dame University.
Ivan M. Marks has been a director since 1996. Mr. Marks has been the Vice
President-Controller of Parker Aerospace Group, which is the aerospace segment
of Parker Hannifin Corporation, since 1979. Mr. Marks holds a Bachelor of
Science degree in Business Administration from Drake University and is a
Certified Public Accountant.
Robert E. Mittelstaedt, Jr. has been a director since 1989 and served as our
Chairman of the Board of Directors from 1989 to 1997. Since 1989, Mr.
Mittelstaedt has been Vice Dean of The Wharton School of the University of
Pennsylvania. Mr. Mittelstaedt also serves on the Board of Directors of
Laboratory Corporation of America Holdings, Inc. He holds a Bachelor of Science
degree from Tulane University and a Masters of Business Administration degree
from The Wharton School of the University of Pennsylvania.
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, our
executive officers and directors are required to file reports with the SEC
relating to their ownership of and transactions in our equity securities. Based
on our records and other information, we believe that all Section 16(a) filing
requirements were met for fiscal year 2000, except that David J. Marvin, who was
hired as an executive officer in August 2000, inadvertently filed an untimely
Form 3 upon becoming an executive officer.
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Item 11. Executive Compensation.
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Summary Compensation Table
The following table sets forth the cash compensation as well as
certain other compensation paid or accrued during fiscal years 1999 and 2000 to
the Named Executives for services rendered in such years:
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Annual Long-Term
Compensation Compensation
--------------- ------------
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Awards
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Other
Annual Securities
Name and Compensa- Underlying All Other
Principal Position Year Salary($) Bonus ($) tion ($) Options (#) Compensation ($)
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Geoffrey S.M. 2000 250,765 -- -- 1,000 --
Hedrick, Chief 1999 167,307 -- -- -- --
Executive Officer
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Robert J. Ewy, 2000 225,000 -- -- 1,000 14,074(2)
President 1999 94,712(1) -- -- 328,872 8,173
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Roger E. Mitchell, 2000 131,000 -- -- 1,000 --
Vice President of 1999 113,994 -- -- 27,406 --
Operations
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__________________________
(1) Mr. Ewy joined us in May 1999 and, pursuant to his employment
agreement, was being compensated on the basis of an annual base salary
of $225,000 at the end of fiscal 1999.
(2) This amount represents a relocation bonus.
Stock Option Grants
The following table contains information concerning grants of stock
options to the Named Executives during fiscal year 2000:
Option Grants in Fiscal 2000
----------------------------
Individual Grants
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Potential Realizable Value at
Number of Assumed Annual Rates of Stock
Securities % of Total Price Appreciation for Option
Underlying Options Granted Term(2)
Options to Employees in Exercise Price Expiration ------------------
Name Granted(#)(1) 2000 ($/Sh) Date 5% 10%
-------- ---------- --------------- --------------- ----------- ------- -------
Geoffrey S. M. Hedrick 1,000 .28% 11.00 8/4/2010 $ 8,853 $20,613
Robert J. Ewy 1,000 .28% 11.00 8/4/2010 $ 8,853 $20,613
Roger E. Mitchell 1,000 .28% 11.00 8/4/2010 $ 8,853 $20,613
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(1) The options were granted under our 1998 Stock Option Plan. All of
the options granted vest five equal annual installments beginning on the
first anniversary of their grant.
(2) Illustrates the value that might be received upon exercise of
options immediately prior to the assumed expiration of their term at the
specified compounded rates of appreciation based on the market price for
the common stock when the options were granted. Assumed rates of
appreciation are not necessarily indicative of future stock performance.
Stock Option Exercises and Holdings
The following table sets forth the value of options held by each of
the Named Executives at September 30, 2000. None of the Named Executives
exercised any options during 2000.
Aggregated Option Exercises in 2000
and Option Values at September 30, 2000
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Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
September 30, 2000 (#) at September 30, 2000 ($)(1)
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Shares Value
Acquired on Realized
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
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Geoffrey S.M. Hedrick - - 0 1,000 - $ 6,125
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Robert J. Ewy - - 109,624 220,248 $1,517,306 $3,040,737
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Roger E. Mitchell - - 38,368 17,444 $ 531,051 $ 233,726
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(1) The value of unexercised in-the-money options is based on the
difference between the last sale price of a share of our common stock
as reported on the Nasdaq National Market on September 29, 2000
($17.13) and the exercise price of the options, multiplied by the
number of options.
Compensation of Directors
In February 2000, our board adopted a Non-Employee Director
Compensation Plan under which each non-employee director who serves on the
board at the beginning of each fiscal year, commencing October 1, 2000
(fiscal year 2001), will be entitled to receive shares of common stock with
a fair market value of $25,000, determined as of the first day of such
fiscal year. The shares will vest quarterly during the fiscal year,
provided that the director is still serving on the board on the date the
shares are scheduled to vest. Additionally, each non-employee director
receives $1,000 for each board meeting attended. All directors are
reimbursed for reasonable travel and lodging expenses associated with
attendance at meetings.
Prior to the adoption of the plan described above, our board had a non-
employee director share bonus program under which each incumbent non-
employee director who had completed a year of service on the board was
entitled to 5,481 shares of common stock issuable on April 11 of the
following year; provided that the first 16,443 shares attributable to a
director's first three years' of service on the board vested at the
expiration of the third year. Pursuant to this share bonus program,
effective April 11, 1999, each of our non-employee directors at such time
was issued 5,481 shares of common stock for service on the board during
fiscal year 1998.
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Employment Contracts
In May 1999, we entered into an employment agreement with Robert J. Ewy to
serve as our President at an annual salary of $225,000. The employment agreement
has a three-year term expiring in May 2002 that is automatically renewable at
the end of such term for an additional year and each year thereafter unless
either party gives notice of nonrenewal. In addition, we granted Mr. Ewy an
option to purchase 328,872 shares of our common stock at an exercise price of
$3.28 per share, which option vest in three equal annual installments beginning
in May 2000. In the event that a "termination without cause" (as defined in the
agreement) occurs, Mr. Ewy will continue to receive, subject to offset, the
remaining compensation and benefits payable under the agreement until the
expiration date of the agreement. In the event that a "voluntary termination" or
a "termination for cause" (as those terms are defined in the agreement) occurs,
Mr. Ewy will continue to receive his salary until the date his employment is
terminated and will forfeit all unexercised stock options. In the event that a
termination for death or disability occurs, Mr. Ewy will continue to receive his
salary until the date his employment is terminated and will retain the right to
exercise any options that have vested as of the date his employment was
terminated.
In July 1998, we entered into an employment letter agreement with Roger E.
Mitchell to serve as our Director of Operations at an annual salary of $110,000.
Under the agreement, we granted Mr. Mitchell options to purchase 54,812 shares
of common stock at $3.28 per share. Of these options, 27,406 vest in five equal
annual installments beginning on the first anniversary of Mr. Mitchell's
employment with us. The remaining 27,406 options vested upon the achievement by
us of certain performance objectives.
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Item 12. Security Ownership of Certain Beneficial Owners and Management.
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Security Ownership of Principal Shareholders
The following table sets forth certain information with respect to the
beneficial ownership, as of December 15, 2000, of each person who we knew to be
the beneficial owner of more than 5% of our common stock. Each of the
shareholders named below has sole voting and investment power with respect to
such shares, unless otherwise indicated.
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Common Stock
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Name and Address of
Beneficial Owner Number of Shares Percent
---------------- ---------------- -------
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Geoffrey S. M. Hedrick (1) 3,328,184 26.1%
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Parker Hannifin Corporation (2) 1,458,141 11.5
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The P/A Fund (3) 1,673,541 13.3
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NEPA Venture Fund, L.P. (4) 833,142 6.6
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James M. Draper (5) 745,443 5.9
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Joel P. Adams (6) 1,673,541 13.3
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Glen R. Bressner (7) 833,142 6.6
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(1) Mr. Hedrick's address is c/o Innovative Solutions and Support, Inc., 420
Lapp Road, Malvern, PA 19355. Includes warrants to purchase 149,088 shares of
common stock.
(2) The address of Parker Hannifin Corporation is 18321 Jamboree Boulevard,
Irvine, California 92612. The board of directors of Parker Hannifin has
dispositive and voting power over the shares held by Parker Hannifin. The board
members are Patrick S. Parker, John G. Breen, Duane E. Collins, Paul C. Ely,
Jr., Peter W. Likens, Giulio Mazzalupi, Klaus-Peter Muller, Hector R. Ortino,
Allan L. Rayfield, Wolfgang R. Schmitt, Debra L. Starnes and Dennis W. Sullivan.
Includes warrants to purchase 11,006 shares of common stock.
(3) The address of The P/A Fund is 518 Broad Street, Sewickley, Pennsylvania
15143. Through various entities, Joel P. Adams has sole voting and investment
power over the shares held by The P/A Fund.
(4) The address of NEPA Venture Fund, L.P. is 125 Goodman Drive, Bethlehem,
Pennsylvania 18015. Through various entities, Glen R. Bressner, Frederick Beste
and Marc Benson share voting and investment power over the shares held by NEPA
Venture Fund, L.P.
(5) Mr. Draper's address is c/o Innovative Solutions and Support, Inc., 420
Lapp Road, Malvern, PA 19355. Includes warrants to purchase 21,924 shares of
common stock. Also includes 548,120 shares of common stock and warrants to
purchase 21,924 shares of common stock held by a trust for the benefit Stephanie
Hedrick, the daughter of Geoffrey Hedrick, our Chairman and Chief Executive
Officer, for which Mr. Draper serves as trustee. Mr. Draper disclaims beneficial
ownership of these shares.
(6) Mr. Adams' address is c/o The P/A Fund, 518 Broad Street, Sewickley,
Pennsylvania 15143. Consists of 1,673,541 shares owned by The P/A Fund. Mr.
Adams is the President of Adams Capital Management, Inc., a venture capital firm
that manages The P/A Fund. Mr. Adams disclaims beneficial ownership of these
shares.
(7) Mr. Bressner's address is c/o NEPA Venture Fund, L.P., 125 Goodman Drive,
Bethlehem, Pennsylvania 18015. Consists of 833,142 shares beneficially owned by
NEPA Venture Fund, L.P. Mr. Bressner is a partner of Mid-Atlantic Venture Funds,
a venture capital firm that manages the NEPA Venture Fund, L.P. Mr. Bressner
disclaims beneficial ownership of these shares.
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Security Ownership of Management
The following table sets forth certain information with respect to the
beneficial ownership as of January 24, 2001 of (i) each director, (ii) our chief
executive officer and each other executive officer who earned more than $100,000
during fiscal year 2000 (collectively, the "Named Executives") and (iii) all the
directors and executive officers as a group. Each of the shareholders named
below has sole voting and investment power with respect to such shares.
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Name of Beneficial Owner Number of Shares(1) Percent of Class
------------------------ ------------------- ----------------
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Geoffrey S. M. Hedrick 3,328,184(2) 26.1%
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Robert J. Ewy 109,624(3) *
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Roger E. Mitchell 38,368(4) *
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All executive officers and directors 6,606,400(2)(5) 51.1%
as a group (11 persons)
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* Less than 1 percent.
(1) With respect to each shareholder, includes any shares issuable upon
exercise of any options or warrants held by such shareholder that are or
will become exercisable within sixty days of January 24, 2001.
(2) Includes warrants to purchase 149,088 shares of common stock.
(3) Consists of options to purchase 109,624 shares of common stock.
(4) Consists of options to purchase 38,368 shares of common stock.
(5) Includes options to purchase 165,532 shares of common stock.
Item 13. Certain Relationships and Related Transactions.
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We derived revenues of approximately $88,566 during fiscal 2000 from the
manufacture and assembly of certain products on behalf of Parker Hannifin
Corporation, which holds approximately 11.5% of our common stock.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INNOVATIVE SOLUTIONS AND SUPPORT, INC.
Dated: January 29, 2001
By: /s/ James J. Reilly
___________________________________________
James J. Reilly, Chief Financial Officer
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