ISSC

Business Context and Reporting Period

Company: Innovative Solutions & Support Inc. (ISSC)
Filing Type: Form 8-K (Current Report)
Date of Report: July 22, 2025
Event Date: July 18, 2025 (Entry into Material Definitive Agreement)
Context: The Company entered into a new Credit Agreement with JPMorgan Chase Bank, N.A., replacing its existing $35 million facility with PNC Bank.

Key Financial Metrics and Debt Structure

Total Credit Facilities: Up to $100.0 million aggregate principal amount.
Facility Breakdown:

• Revolving Facility: $30.0 million (for working capital, general corporate purposes, and permitted acquisitions).
• Initial Term Loan: $25.0 million (used to refinance prior debt and pay transaction costs).
• Delayed Draw Term Loan: $45.0 million (reserved exclusively for permitted acquisitions).

Interest Rates: Borrower's option of Alternate Base Rate or Adjusted Term SOFR plus an applicable margin. Margins range from 0.75% to 1.75% (Base Rate) or 1.75% to 2.75% (SOFR), based on Total Net Leverage Ratio. Default rate adds 2.00% per annum.
Maturity: Five years from the date of the initial advance.
Collateral: Secured by substantially all assets of the Borrower and guarantors, including a first priority lien on the Company's real property at 720 Pennsylvania Drive, Exton, PA.
Financial Performance: The filing text does not provide specific values for revenue, profit, cash flow, or margins.

Material Changes Versus Prior Period

• Debt Refinancing: Replaced the $35 million Amended and Restated Revolving Line of Credit Note with PNC Bank (dated September 30, 2024) with a new $100 million facility with JPMorgan Chase.
• Capacity Increase: Increased total available credit capacity from $35 million to $100 million.
• Structure Change: Introduced a term loan structure (Initial and Delayed Draw) alongside the revolving facility, whereas the prior facility was a revolving line of credit.

Guidance, Outlook, and Risks

Use of Proceeds: Initial proceeds refinanced the PNC Facility. Future Revolving Facility borrowings may fund working capital and acquisitions. The Delayed Draw Term Loan is restricted to permitted acquisitions.
Repayment Terms:

• Initial Term Loan: Quarterly principal payments of $625,000 commencing September 30, 2025.
• Delayed Draw Term Loan: Quarterly principal payments of 2.50% of the original aggregate principal amount commencing after January 18, 2026.
• Revolving Facility: Principal due at Maturity Date.

Covenants and Risks:

• Subject to customary affirmative and negative covenants (restrictions on indebtedness, liens, investments, asset dispositions, and restricted payments).
• Events of default include payment defaults, covenant breaches, cross-defaults on material indebtedness exceeding $2.5 million, bankruptcy, and change of control.
• Acceleration of all outstanding amounts upon an event of default.

Expansion Option: Borrower may request up to $25.0 million in additional revolving commitments or incremental term loans, subject to lender approval.

Investor Verification Checklist

• Verify the exact date of the initial advance to confirm the specific Maturity Date (5 years from advance).
• Review the full Credit Agreement (Exhibit 10.1) for specific definitions of "permitted acquisitions" and detailed covenant thresholds.
• Confirm the Company's current Total Net Leverage Ratio to determine the applicable interest margin.
• Assess the impact of the new quarterly principal payments ($625,000 starting Q3 2025) on future cash flow projections.
• Monitor the utilization of the $45 million Delayed Draw Term Loan for potential acquisition activity.