INNOVATIVE SOLUTIONS & SUPPORT INC Debt Disclosure

20. Loan Agreement

​

On June 28, 2023, the Company and one of its subsidiaries entered into an Amendment to Loan Documents (the “Loan Amendment”) with PNC Bank, National Association (the “PNC”), which amends certain terms of that certain Loan Agreement entered into by the parties on May 11, 2023 (the “Loan Agreement” and, as amended, the “Amended Loan Agreement”) and (ii) a corresponding Term Note in favor of PNC (the “Term Note”), which together provide for a senior secured term loan in an aggregate principal amount of

$20.0 million, with a maturity date of June 28, 2028. Availability of funds under the Term Loan was conditioned upon the closing of the transactions contemplated by the Amended Loan Agreement and was used to fund a portion of the 2023 Transaction. Under the agreement, the Company has the right to prepay any amounts outstanding at any time and from time to time, whole or in part; subject to payment of any break funding indemnification amounts.

​

The interest rate applicable to loans outstanding under the Term Loan is a floating interest rate equal to the sum of (A) the Term SOFR Rate (as defined in the Term Note) plus (B) an unadjusted spread of the Applicable SOFR Margin plus (C) a SOFR adjustment of ten basis points. The Applicable SOFR Margin ranges from 1.5% to 2.5% depending on the Company’s funded debt to EBITDA ratio. Commencing on June 30, 2023, the Term Loan consists of sixty equal monthly principal installments, over a period of ten years, with the balance payable on the maturity date of the Term Loan.

​

In addition to providing for the Term Loan, the Loan Agreement, together with a corresponding Revolving Line of Credit Note in favor of PNC, executed May 11, 2023, provided for a senior secured revolving line of credit in an aggregate principal amount of $10,000,000, with an expiration date of May 11, 2028 (the “Revolving Line of Credit”).

​

On December 19, 2023, the Company and PNC entered into an Amendment to the Loan (the “Restated Loan Amendment”) and a corresponding Amended and Restated Revolving Line of Credit Note (“Restated Line of Credit Note”) and Amended and Restated Line of Credit and Investment Sweep Rider (the “Restated Rider”), to increase the aggregate principal amount available under the Company’s senior secured revolving line of credit from $10,000,000 to $30,000,000 and extend the maturity date until December 19, 2028.

​

On September 30, 2024, the Company and one of its subsidiaries, Innovative Solutions and Support, LLC (“ISSL”) entered into an Amendment to Loan Documents (the “Loan 2024 Amendment”) with PNC, which amends certain terms of the Loan Agreement to increase the line of credit with PNC. Concurrently with the Loan 2024 Amendment, the Company entered into (i) an Amended and Restated Revolving Line of Credit in favor of PNC (the “A&R Revolving Line of Credit”), and (ii) an Amended and Restated Line of Credit and Investment Sweep Rider with PNC (the “A&R Rider”).

​

The A&R Revolving Line of Credit Note provides for a senior secured revolving line of credit in an aggregate principal amount of $35,000,000, with an expiration date of December 19, 2028. The interest rate applicable to loans outstanding under the A&R Revolving Line of Credit is a rate per annum equal to the sum of (A) Daily SOFR (as defined in the A&R Revolving Line of Credit Note) plus (B) an unadjusted spread of the Applicable SOFR Margin plus (C) a SOFR adjustment of ten basis points. The applicable SOFR Margin ranges from 1.5% to 2.5% depending on the Company’s funded debt to EBITDA ratio as defined in the A&R Revolving Line of Credit Note. The A&R Rider provides for how PNC will make advances to the Company under the AR Revolving Line of Credit.

​

The Company was in compliance with all applicable covenants throughout and at September 30, 2024. As of fiscal year ended September 30, 2024, the outstanding balance drawn on the A&R Revolving Line of Credit was $28,027,002 with an effective interest rate of 6.4 percent. As of September 30, 2024, the Company had availability of $6,972,998 under the A&R Revolving Line of Credit.

​

On July 18^th, 2025, the outstanding balance drawn on the A&R Revolving Line of Credit of $25,342,529 was fully paid. The payoff is considered a debt extinguishment and no gain or loss was recorded upon settlement. For fiscal year 2025 the A&R Revolving Line of Credit had an effective interest rate of 3.6 percent.

​

On July 18, 2025, Innovative Solutions and Support, Inc. (the “Company”), its wholly-owned subsidiary Innovative Solutions and Support, LLC (“Borrower”) and certain domestic subsidiaries entered into a Credit Agreement (the “2025 Credit Agreement”) with J.P. Morgan Chase Bank, N.A. (the “Bank”) and the other lender parties thereto, which Credit Agreement provides for the Bank to extend to the Borrower credit facilities in an aggregate principal amount of up to USD $100.0 million (the “New Credit Facilities”), consisting of the following:

​

​

The New Credit Facilities replaced the Company’s existing $35 million Amended and Restated Revolving Line of Credit Note, dated as of September 30, 2024 in favor of PNC Bank, National Association (the “PNC Facility”).

​

The New Credit Facilities provide expanded liquidity and improved flexibility, better enabling the Company to execute on its long-term growth strategy and capital allocation priorities, consistent with the Company’s focus on driving long-term value creation for its shareholders.

​

Loans under the New Credit Facilities bear interest at the Borrower's option at either:

​

​

The Alternate Base Rate is defined as the highest of (a) the Prime Rate, (b) the Federal Reserve Bank of New York rate for overnight funds plus 0.50%, and (c) the Adjusted Term SOFR Rate for a one-month period plus 1.00%, with a minimum rate of 1.00% per annum.

​

The Adjusted Term SOFR Rate is the Term SOFR Rate plus 0.10%.

​

An applicable margin is determined based on the Company's Total Net Leverage Ratio and ranges from 0.75% to 1.75% for Alternate Base Rate loans and from 1.75% to 2.75% for Adjusted Term SOFR Rate loans.

​

The New Credit Facilities mature five years (i.e. July 18, 2030) following the date of the initial advance (the “Maturity Date”) All outstanding balances are due on the Maturity Date.

​

For the fiscal year ended September 30, 2025, the Initial Term Loan had an effective interest rate of 7.0% and the Revolving Facility had an effective interest rate of 8.0%. No borrowings were drawn on the Delayed Draw Term Loan.

​

Initial Term Loan

​

The Initial Term Loan requires quarterly principal payments of $625,000 commencing September 30, 2025, with the remaining balance due on the Maturity Date.

​

Revolving Facility Loan

​

The Revolving Facility matures five years (i.e. July 18, 2030) following the date of the initial advance (the “Maturity Date”) with all outstanding balances due on the Maturity Date.

​

The Revolving Facility principal is due on the Maturity Date. All amounts outstanding under the Credit Facilities will be due and payable upon the earlier of the Maturity Date, or the acceleration of the Credit Facilities upon an event of default.

​

On August 18^, 2025, the balance of $2,000,000 on the Revolving Facility was paid off. There were no additional borrowings on the Revolving facility as of September 30, 2025.

​

Delayed Draw Term Loan

​

The Delayed Draw Term Loan requires quarterly principal payments equal to 2.50% of the original aggregate principal amount commencing with the first scheduled payment date after January 18, 2026, with the remaining balance due on the Maturity Date.

​

Under the New Term Loan and Revolving Facility, $25,000,000 and $2,000,000, respectively were immediately drawn and used to pay $25,342,529 as payoff for the A&R Revolving Line of Credit and to pay $631,700 in transaction fees and expenses. The remaining $1,026,237.50 balance was deposited by the Company to the PNC Checking account.

​

Debt Issuance Costs

​

For the Initial Term loan, debt issuance costs of $246,148 were capitalized as contra-liabilities and are amortized as interest expense on a basis that approximates the effective interest method over the term of the Initial Term Loan debt. Contra-liabilities are netted against and presented as a direct deduction from the carrying amount of debt. The unamortized balance of the Initial Term loan contra-liabilities as of September 30, 2025 was $236,193.

​

For the Revolving Facility and the Delayed Draw Term Loan, debt issuance costs of $295,378 and $443,066, respectively were capitalized as assets and are amortized using straight straight-line amortization to interest expense over the terms of the respective debt. The current and non-current capitalized assets related to the Revolving Facility and the Delayed Draw Term Loan are aggregated to Current Other Assets and Non-Current Other Assets on the Consolidated Balance Sheet. The unamortized balances of the Revolving Facility and the Delayed Draw Term Loan included in current and non-current other assets as of September 30, 2025 were $283,252 and 424,878, respectively

​

Future borrowings under the Initial Term Loan and Revolving Facility may be used for working capital and general corporate purposes, including permitted acquisitions. The Delayed Draw Term Loan may only be used for permitted acquisitions.

​

Debt Collateral and Covenants

​

The Company’s obligations under the 2025 Credit Agreement are secured by substantially all of the assets of the Company and certain of its subsidiaries, including a first priority lien on the Company's Exton facility.

​

The Company’s Initial Term Loan Facility, Revolving Facility and Delayed Term Loan facility contain affirmative and negative covenants that, among other things, may limit or restrict the Company’s ability to: create liens and encumbrances; incur debt; merge, dissolve, liquidate or consolidate; make acquisitions and investments; dispose of or transfer assets; change the nature of our business; engage in certain transactions with affiliates; and enter into hedging transactions, in each case, subject to certain qualifications and exceptions. In addition, we are required to maintain a maximum net leverage ratio and a minimum fixed charge coverage ratio.

​

The Company was in compliance with all debt covenants as of September 30, 2025.

​

Commitment Fees

​

The 2025 Credit Agreement terms include Revolving Facility and Delayed Draw Term Loan Facility commitment fees. For the fiscal ended September 30, 2025, unused line of credit fees of $15,194 under the Revolving Facility and $23,438 under the Delayed Draw Term Loan were included in interest expense. There were no unused line of credit fees for the fiscal year ended September 30, 2024 and 2023.

​

Long term debt, excluding contra-liabilities, consisted of the following:

​

​

As of September 30, 2025, scheduled annual payments based on the maturities of debt are expected to be as follows:

​

​

* Excludes interest payments payable at each debt reset date

​

Loan Facilities Availability

​

As of September 30, 2025, the Company had availability of $30,000,000 under the Revolving Facility and $45,000,000 under the Delayed Draw Term Loan facility.

​

The Company has the right to request up to $25,000,000 in additional revolving commitments or incremental term loans, subject to lender approval and satisfaction of certain conditions.