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FORWARD LOOKINGFORWARD-LOOKING STATEMENTS

This report contains forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).federal securities laws. 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 “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. Unless the context otherwise requires, all references herein to “IS&S,” “the Registrant,the “Registrant,” “the Company,the “Company,” “we,” “us” or “our” are to Innovative Solutions and Support, Inc. and its consolidated subsidiaries. ThrustSense® and COCKPIT/IP®, among others, are trademarks of the Company. All other trademarks appearing herein are held by their respective owners. Subsequent use of Company trademarks in this report may occur without the applicable superscript symbol (® or TM) in order to facilitate the readability of this report and are not a waiver of rights that may be associated with the relevant trademarks.

The forward- looking statements in this report are only predictions, and actual events or results may differ materially. 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 lookingforward-looking statements. These risks, uncertainties and other factors include those set forth in Item 1A (Risk Factors) of thisour Annual Report on Form 10-K and the following factors:

·market acceptance of the Company’s flat panel display systems, NextGen Flight Deck, ThrustSense Integrated PT6 Autothrottle (patent pending) and COCKPIT/IP® or other planned products or product 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 and producing the Company’s NextGen Flight Deck, ThrustSense Integrated PT6 Autothrottle (patent pending), COCKPIT/IP®Flat Panel Display System or other planned products or product enhancements;

·the deferral or termination of programs or contracts for convenience by customers;

·the availability of government funding;

·the impact of general economic trends on the Company’s business;

·the ability to gain regulatory approval 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;

·failure to retain/recruit key personnel;

·a cyber security incident;

·the ability to service the international market;

·risks related to our self-insurance program;

·potential future acquisitions;

·changes in law, including changes to corporate tax laws in the United States and the availability of certain tax credits; and

·other factors disclosed from time to time in the Company’s filings with the United States Securities and Exchange Commission (the “SEC”).

Except as expressly required by the federal securities laws, the Company undertakes no obligation to publicly update or revise any forward lookingforward-looking statements, whether as a resultbecause 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. Fluctuations in operating results may result in fluctuations in the price of the Company’s common stock.

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Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. 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 Annual Report on Form 10-K, 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.Act of 1934, as amended (the “Exchange Act”).

Investors should also be aware that while the Company, from time to time, communicates with securities analysts, it is against its policy to disclose any material non-public information or other confidential commercial information. Accordingly, shareholders should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, the Company has a policy against issuing or confirming financial projections, forecasts or projectionsopinions issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of Innovative Solutions and Support, Inc.the Company.

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PART I

Item 1. Business.

Overview

Innovative Solutions and Support, Inc. (the “Company,” “IS&S,” “we” or “us”) was incorporated in Pennsylvania on February 12, 1988. The Company operates in one business segment as a systems integrator that designs, develops, manufactures, sells and services air data equipment, engine display systems, standby equipment, primary flight guidance, autothrottles and cockpit display systems for retrofit applications and original equipment manufacturers (“OEMs”). The Company supplies integrated Flight Management Systems (“FMS”), Flat Panel Display Systems (“FPDS”), FPDS with Autothrottle, air data equipment, Integrated Standby Units (“ISU”), Standby ISU with Autothrottle Systems and advanced Global Positioning System (“GPS”)GPS receivers that enable reduced carbon footprint navigation.

The Company has continued to position itself as a system integrator, which capability provides the Company with the potential to generate more substantive orders over a broader product base. TheThis strategy, as both a manufacturer and integrator, is designed to leverage the latest technologies developed for the computer and telecommunications industries into advanced and cost-effective solutions for the general aviation, commercial air transport, United States Department of Defense (“DoD”)/governmental and foreign military markets. This approach, combined with the Company’s industry experience, is designed to enable IS&S to develop high-quality products and systems, to reduce product time to market, and to achieve cost advantages over products offered by its competitors.

For several years the Company has been working with advances in technology to provide pilots with more information to enhance both the safety and efficiency of flying and has developed its COCKPIT/IP® Cockpit Information Portal (“CIP”) product line, that incorporates proprietary technology, lowlower cost relative to the competition, reduced power consumption, decreased weight, and increased functionality. The Company believes the CIP product line is suited to address market demand that will be driven by regulatory mandates, new technologies, and the high cost of maintaining aging/obsolete equipment on airplanes that have been in service for up to fifty years. The Company has incorporated Electronic Flight Bag (“EFB”) functionality, such as charting and mapping systems, into its FPDS product line.

The Company has developed an FMS that combines the savings long associated with in flightin-flight fuel optimization in enroute flight management combined with the precision of satellite-based navigation required to comply with the regulatory environments of both domestic and international markets. The Company believes that the FMS, coupled withalongside its FPDS and CIP product linelines, is well suited to address market demand driven by certain regulatory mandates, new technologies, and the high cost of maintaining aging and obsolete equipment on aircraft that willmay be in service for up to fifty years. The shift in the regulatory and technological environment is illustrated by the dramatic increase in the number of Space Based Augmentation System (“SBAS”) or Wide Area Augmentation System (“WAAS”) approach qualified airports, particularly as realized through Localizer Performance with Vertical guidance (“LPV”) navigation procedures. Aircraft equipped with the Company’s FMS, and FPDS product line (equipped with aand SBAS/WAAS/LPV enabled navigator)navigator, will be qualified to land at such airports and towill comply with upcoming Federal Aviation Administration (“FAA”) mandates for Required Navigation Performance, (“RNP”), and Automatic Dependent Surveillance-Broadcast (“ADS-B”) navigation, a fact whichnavigation. IS&S believes this will further increase the demand for the Company’s products. The Company’s FMS/FPDS product line is designed for new production and retrofit applications into general aviation, commercial air transport and military transport aircraft. In addition, the Company offers what we believe to be a state of the artstate-of-the-art ISU, integrating the full functionality of the primary and navigation displays into a small backup-powered unit. This ISU builds on the Company’s legacy air data computer to form a complete next-generation cockpit display and navigation upgrade offering to the commercial and military markets.

More recently, theThe Company has developed and received certification from the FAA on its NextGen Flight Deck featuring its ThrustSenseThrustSense® Integrated PT6 Autothrottle (patent pending) (“ThrustSenseThrustSense® Autothrottle”) for retrofit in the Pilatus PC-12. The NextGen Flight Deck features Primary Flight and Multi-Function Displays and ISUs, as well as an Integrated FMS and Electronic Flight BagEFB System. The innovative avionics suite includes dual flight management systems, autothrottles, synthetic vision and enhanced vision. The NextGen enhanced avionics suite is available for integration into other business aircraft with Non-FADEC and FADEC engines.

The ThrustSenseCompany 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. ThrustSense® also ensures aircraft envelope protection and engine protection during all phases of flight reducing pilot workload and increasing safety. The Company has signed a multi-year agreement with Textron Aviation, Inc. (“Textron”) to supply ThrustSense® on the King Air 360 and King Air 260. ThrustSense® is also available for retrofit on King Airs through Textron service centers and third-party service centers. The Company has also developed an FAA-certified safety mode feature for its King Air ThrustSense® Autothrottle, LifeGuard™, which provides critical Vmc_a protection that proportionally reduces engine power to maintain directional control during an engine-out condition.

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We believe the ThrustSense® Autothrottle is innovative in that it is the first autothrottle developed for a turbo prop that allows a pilot to automatically control the power setting of the engine. The autothrottle computes and controls appropriate power levels thereby reducing overall pilot workload. The system computes thrust, holds selected speed/torque, and implements appropriate speed and engine limit protection. When engaged by the pilot, the autothrottle system adjusts the throttles automatically to achieve and hold the selected airspeed guarded by a torque/temperature limit mode. The Autothrottleautothrottle system takes full advantage of the integrated cockpit utilizing Weightweight and Balancebalance information for optimal control settings and enabling safety functions like a Turbulenceturbulence control mode.

IS&SThe Company sells to both the OEM and the retrofit markets. Customers include various OEMs, commercial air transport carriers and corporate/general aviation companies, DoD and its commercial contractors, aircraft operators, aircraft modification centers, government agencies, and foreign militaries. Occasionally, IS&S sells its products directly to DoD; however, the Company sells its products primarily to commercial customers for end use in DoD programs. Sales to defense contractors are generally made on commercial terms, although some of the termination and other provisions of government contracts are applicable to these contracts.

The Company’s retrofit projects are generally pursuant to either a direct contract with a customer or a subcontract with a general contractor to a customer (including government agencies).

Customers have been and may continue to be affected by the uncertainchanges in economic conditions that currently exist both in the United States and abroad. Such conditionschanges may cause customers to curtail or delay their spending on both new and existing aircraft. Factors that can impact general economic conditions and the level of spending by customers include, but are not limited to, the impact of the ongoing COVID-19 pandemic, general levels of consumer spending, increases in fuel and energy costs, conditions in the real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence, and other macroeconomic factors that affect spending behavior. Furthermore, spending by government agencies may be reduced in the future if tax revenues decline, including as a result of currently proposed tax reform legislation in the United States.decline. If customers curtail or delay their spending or are forced to declare bankruptcy or liquidate their operations because of adverse economic conditions, the Company’s revenues and results of operations would be affected adversely. However,For example, in the 2020 fiscal year, certain of the Company’s customers temporarily suspended product deliveries as a result of the COVID-19 pandemic, and while these deliveries subsequently resumed, there is a possibility that the COVID-19 pandemic (including as a result of the impact of any newer variants or strains of SARS-CoV-2) will result in other suspensions, delays or order cancellations by the Company’s customers or suppliers.

On the other hand, the Company believes that in an uncertainadverse economic environment,conditions, customers that may have otherwise elected to purchase newly manufactured aircraft may be interested instead in retrofitting existing aircraft as a cost-effective alternative, thereby creating a market opportunity for IS&S.

The ongoing COVID-19 pandemic is nevertheless a significant event, driver of market trends, and source of uncertainty that may ultimately have a direct or indirect material impact on the Company’s business, financial position, liquidity, or ability to service customers or maintain critical operations. In direct response to the COVID-19 pandemic, the Company has taken specific actions to seek to ensure the safety of its employees, including temperature monitoring, frequent sanitization of workspaces, observance of social distancing protocols, and other increased safety measures.

Industry

A wide range of information is critical for proper and safe operation of aircraft. With advances in technology, new types of information to assist pilots are becoming available for display in cockpits, such as satellite-based weather, ground terrain maps, and ADS-B navigation. The Company believes that aircraft cockpits will become more complete information centers, capable of delivering additional information that is either mandated by regulation or demanded by pilots to assist in the safe and efficient operation of aircraft. The flight deck will continue to adapt technologies which are stepping-stones for complete autonomy. The Company believes that the market will continue to embrace the initial phases of autonomous flight.

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The Company classifies flight data into four general types: aircraft heading and altitude information, flight critical aircraft control data, navigation data, and maintenance and aircraft health data. Aircraft heading and altitude information includes;includes aircraft speed, altitude, and rates of ascent and descent. Flight critical aircraft control information includes;includes engine data, such as fuel and oil quantity, and other engine measurements. Navigation data includes;includes radio position, flight management, GPS, and alternative source information (i.e., information not originating on the aircraft, including weather depiction maps, GPS navigation, and surface terrain maps). Maintenance and aircraft health data includes on-board sensors and programs to measure parameters related to the health of a system on the aircraft. Air data calculations are based primarily on air pressure measurements derived from sensors on the aircraft. Engine data are determined by measuring various indices such as temperature, volume, revolutions per minute, (“RPM”), and pressure within an aircraft’s engines and other mechanical equipment. GPS and alternative source information are derived typically from satellites or equipment located on land and transmitted by satellite or radio signals to the aircraft. Maintenance and aircraft health data measure multiple parameters on various products and interface with various components to manage, measure, and report on the health, reliability and usability of a system. This information is displayed in the cockpit for reference, enhanced position awareness, and reduced support logistics on properly equipped aircraft.

Traditionally, flight data and other cockpit information were displayed on a series of separate analog mechanical instruments. In the early 1980s, Cathode Ray Tubes (“CRT”) and digital displays using monochromatic Liquid Crystal Displays (“LCD”) began to replace some individual analog instruments. Presently, the industry offers high resolution color flat panels using Active Matrix Liquid Crystal Displays (“AMLCD”) to replace traditional analog instruments, CRT or LCD displays. IS&S expects that the ability to display more information in an efficient space and custom platform will become increasingly important if additional information, such as weather depiction maps, traffic information, surface terrain maps, datalink messaging, and surveillance displays, becomes mandated by regulation or demanded by pilots. Accordingly, the Company believes flat panel displays, which can integrate and display a “suite” of information, will replace individual instrumentsinstrument CRTs and LCDs on legacy aircraft.

In the past, equipment data, such as engine and fuel-related information, were displayed on conventional analog mechanical instruments. Engine and fuel instruments provide information on engine activity, including oil and hydraulic pressures, and temperature. These instruments are clustered throughout an aircraft’s cockpit. Engine and fuel instruments tend to be replaced more frequently than other instruments due to obsolescence and normal wear-and-tear. Aircraft operators continue to purchase individual conventional engine and fuel instruments as replacements because the information that these instruments display is vital for safe and efficient flight. Increasingly, operators are replacing their clusters of analog mechanical instruments with integrated Engine Instrument Display Systems (“EIDS”) or a FPDS packages.

As the skies and airports become more crowded, the aviation industry and its regulators are concentrating on new technologies, procedures, and regulations that allow more aircraft to operate in the skies and on the ground safely, efficiently, and with less impact

on the environment. These new technologies and procedures, such as traffic avoidance, ground awareness, increased precision of navigation and vertical position, runway incursion prevention, and increased digital communication, will require innovation and intuitive methods to display situational awareness information for the pilots. The Company believes that flat panel displays provide the besta strong solution to these requirements.

the growing need for innovation and new methods in this area.

Strategy

The Company’s objective is to become a leading supplier and integrator of cockpit information, and believes that its industry experience and reputation, technology and products, and business strategy provide the basis to achieve this objective. Key elements of the Company’s strategy include:

·Focusing on retrofits. Cockpit avionics upgrades for existing aircraft isTable of great interest in the present environment. The retrofit of an aircraft with the COCKPIT/IP® FPDS, FMS, and ISU system components is cost effective compared to the acquisition of a new aircraft and can provide equivalent functionality to that of new aircraft.Contents

·Introduction of Autothrottle to General Aviation Market. IS&S saw the lack of an available autothrottle system on turboprop aircrafts as a great unmet need in the marketplace and over the last two years has invested in the development of a sophisticated turboprop autothrottle. ThrustSense, IS&S’s new turboprop autothrottle with patent pending technology, is highly effective, is less complex and less costly than other available products and offers very sophisticated sensing and adds multiple safety features that we believe even exceeds those of much more expensive jet systems. The Company received the first supplemental type certificate (“STC”) ever granted by the Federal Aviation Administration (“FAA”) for a turboprop autothrottle in July 2017. IS&S plans to capitalize on being the first to market and introduce the product to owners and operators of turboprop aircraft.

·Establishing leadership in the flat panel display market. IS&S expects that many aircraft will be retrofitted with flat panel displays over the next several years. Given the versatility, visual appeal, and lower cost of displaying a series of instruments and other flight relevant information on a single flat panel, the Company believes that flat panel displays will increasingly replace individual analog and digital instruments, LCDs and CRTs. The Company believes that the COCKPIT/IP® has significant benefits over competitive flat panel displays, including lower cost, larger size, reduced weight, enhanced viewing angles, and a broader array of functions. The Company’s patented and proprietary Integrity Checking Processor and Zooming features provide increased situational awareness, reliability, performance, and utility to the owner/operator. Accordingly, the Company believes that these advantages will allow IS&S to generate significant revenues from the COCKPIT/IP® product, and to increase market share. In addition, demand for new aircraft, FAA mandates and obsolescence issues on older aircraft will contribute to this growth.

·Continuing engineering and product development successes. IS&S develops innovative products by combining its avionics, engineering, and design expertise with commercially available technologies, components, and products from non-aviation applications, including the personal computer and telecommunications industries. The Company’s COCKPIT/IP® system components present examples of its ability to engineer products through the selective application of non-avionic technology. In addition, as permitted by law, IS&S applies for and registers its patents and trademarks for the technology and products it develops in the United States and various countries around the world to protect its intellectual property. Research and development (“R&D”) expenses were $4.5 million, $4.9 million and $2.7 million for fiscal years ended September 30, 2017, 2016 and 2015, respectively. During fiscal 2017, 2016 and 2015 revenues related to Engineering Development Contracts (“EDC”) accounted for 4%, 4% and 27%, respectively, of total sales. In support of these EDC programs, the Company charged $0.4 million, $0.4 million, and $4.7 million for fiscal years ended September 30, 2017, 2016 and 2015, respectively to cost of sales.

·Maintaining leadership in air data markets. The Company believes that it is one of the largest suppliers of air data products to the U.S. retrofit market. The pressures on DoD procurement budget make the retrofit of aging military aircraft with newer, more advanced, and more supportable air data systems more attractive. In addition, higher performance engines in business aircraft are creating a need for more sophisticated air data products which the Company supplies.

·Increasing sales to DoD, other government agencies, defense contractors, commercial air transport and corporate/general aviation markets. IS&S has extended its efforts to diversify sales to include all aviation end user markets, especially legacy military programs and commercial air transport aircraft. In the commercial air transport market, the Company has addressed national carriers, regional carriers, and other fleet operators. The Company has targeted the corporate/general aviation market, both for retrofits and original equipment, and has ongoing retrofit programs and two OEM programs with Eclipse Aerospace, Inc. (“Eclipse”) and Pilatus Aircraft Limited (“Pilatus”).

·Expanding international presence. IS&S plans to increase its international sales by adding sales and marketing personnel. The Company believes that European and other international aircraft operators and aircraft modification centers will retrofit legacy in-service aircraft with large flat panel displays. IS&S obtained approval from the European Aviation Safety Agency (“EASA”) for installing the FPDS in Europe for the B757/B767 aircraft and expects to obtain EASA approvals for other European aircraft types.

Products

Current lines of products include:

Flat Panel Display Systems

Flat panel displays are AMLCD screens that can replicate the display of one or a suite of analog or digital displays on one screen. Flat panel displays can replace existing displays in legacy aircraft. AMLCDs are used also for security monitoring on-board aircraft and as tactical workstations on military aircraft. The flat panel product line offers numerous advantages for presentation of engine performance data. During fiscal years 2017, 2016 and 2015, revenues related to FPDS accounted for 89%, 95% and 98%, respectively,

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The Company’s FPDS can replace conventional analog and digital displays and can display additional information which is not commonly displayed in the cockpit with conventional analog and digital displays. The COCKPIT/IP®IP® is capable of displaying nearly all types of air data, engine and fuel data, altitude, heading and navigational data, maintenance and aircraft health data, and alternative source information. As technology and information delivery systems develop further, additional information will be displayed in the cockpit, such as surface terrain maps and data link messaging. IS&S designed the COCKPIT/IP®IP® to be capable of displaying information from a variety of sources, including its Reduced Vertical Separation Minimum (“RVSM”) air data system, engine and fuel instrumentation, and third-party data and information products.

From time to time, customers may order one or more FPDSs customized to their particular requirements. Typically, the Company charges for the added development cost. This revenue is reported as EDCEngineering Development Contracts (“EDC”) on the consolidated statements of operations. Engineering costs incurred in customizing the FPDSs are included in cost of sales.

Flight Management Systems

The IS&S NextGen Flight Management System is an easily installed navigation and performance computer that complements the IS&S Flat Panel Display System upgrade for commercial air transport aircraft. The FMS interfaces with the IS&S, SBAS, and GPS Global Positioning System (“GPS”) to provide a GPS basedGPS-based navigation solution. The GPS receiver is located remotely depending on space availability. To minimize use of cockpit space and ease installation efforts, the FMS is housed in an ARINC 739B compliant Multifunction and Control Display Unit (MCDU)(“MCDU”).

Each FMS/MCDU has an LCD display, keyboard, mode and function keys, line select keys and annunciator lights, and supports ethernet data loading. The flight crew can manually or datalink waypoint flight plans, routes or user-defined waypoints on the IS&S FMS and modify and update these plans via the FMS/MCDU screen. Once the flight plan data is entered, the MCDU computes the most economical flight profiles and provides steering commands for use by the aircraft control system to fly the airplane along the desired route.

The FMS/MCDU package incorporates a robust navigation database capable of storing today’s global database with ample growth for the future. Flight crews can utilize the data in the navigation database to create, edit and modify flight plans for display on the FPDS. The navigation data includes airways, jet routes, Standard Instrument Departure, (“SID”), Standard Terminal Arrival Route, (“STAR”), and company stored routes.

The FMS/MCDU is ARINC 739B compliant, which provides an interface option for other cockpit equipment such as SATCOM, ACARS, CMU, HUD, and a printer. The interface to the IS&S FPDS is provided via Ethernet.ethernet. The IS&S EFB is integrated with the FMS/MCDU and FPDS where the control selection of the EFB features and applications are handled via the FMS/MCDU. The display is a five inchfive-inch LCD with VGA resolution. The touchscreen display uses LED backlighting and is sunlight readable.

Integrated Standby Unit

The Company’s new ISU incorporates the measurement and display of attitude, altitude, airspeed, and navigation data into a single standby/backup navigation instrument for military, commercial air transport and corporate/general aviation applications. The ISU has

an integral Inertial Measurement Unit that includes accelerometer, gyro, and magnetometer triads. The unit also includes an integral air data measurement module for measurement of static and total pressure for display of altitude, airspeed, and mach number.

The ISU is a highly reliable and accurate standby navigation system that is based on IS&S’s merger of COCKPIT/IP® display technology and RVSM air data products coupled with the latest breakthroughsmodern technology in MEMS Gyros withthat have exceptional stability. An IS&S proprietary algorithm provides for accurate computation of attitude, heading and air data parameters. The unit includes a triaxial magnetometer that is designed to be tolerant to the local soft iron effects.

The display uses a familiar Primary Flight Display format to reduce pilot workload. Logistics and maintenance savings are realized due to increased reliability and a reduction in LRUs.line-replaceable units. The unit is equipped with built-in test and display of navigational aid and maintenance data.

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Air Data Systems and Components/Integrated Standby Unit with Autothrottle

The Company’s air data products calculate and display various measures such as aircraft speed, altitude, and vertical rate of change. These air data products utilize advanced sensors to gather air pressure data and customized algorithms to interpret data, thus allowing the system to calculate altitude more accurately. During fiscal 2017, 2016, and 2015, sales of air data systems and components accounted for 11%, 5% and 2%, respectively, of total sales.

IS&S sells individual components and partial and complete air data systems. The components and systems include:

·                  digital air data computers, which calculate various air data parameters such as altitude, airspeed, vertical speed, angle of attack and other information derived from the measure of air pressure;

·                  integrated air data computers and display units, which calculate and convey air data information;

·                  altitude displays, which convey aircraft altitude measurements;

·                  airspeed displays, which convey various airspeed measurements including vertical airspeed and rates of ascent and descent; and

·                  altitude alerters which allow pilots to select a desired cruising altitude and which provide warnings to pilots when an unacceptable deviation occurs.

Engine and Fuel Displays

IS&S develops, manufactures and markets engine and fuel displays. These solid-state multifunction displays convey information with respect to fuel and oil levels, and engine activity, such as oil and hydraulic pressure and temperature. They include individual and multiple displays installed throughout the cockpit. The displays can be used in conjunction with the Company’s engine and fuel data equipment or that of other manufacturers.

Engine and fuel displays are vital to safe flight. In addition, accurate conveyance of engine and fuel information is critical for monitoring engine stress and parts maintenance. Engine and fuel displays tend to be replaced more frequently than other displays and have been slow to incorporate new technology since their introduction because of their low cost, standard design and universal use.

IS&S believes that its air data engine and fuel displays are extremely reliable, have been designed to be programmable, and are easily adaptable easily without major modification to most modern aircraft. These products have been installed on B727, B737, C-130H, DC-9, DC-10, P-3, F-16 and A-10 aircraft.

Integrated Global Navigation System

The Company’s Integrated Global Navigation System (“IGNS”) product is an alternative for adding GPS navigation capability to legacy aircraft through the OEM FMS without the high cost of upgrading the current FMS.

This product includes RNP and RNAV approaches via the certified IS&S Beta 3 GPS and leverages components of the Company’s Flat Panel Display SystemFPDS to provide annunciation to the pilot during GPS procedures.

Autothrottle – ThrustSense®

The ThrustSenseIS&S Autothrottle, allowsThrustSense®, is a full regime autothrottle, from takeoff to landing phases of flight including go around. ThrustSense® combines full-authority digital engine control (“FADEC”) functionality with low and high-speed protection for the Pilatus PC-12 and Beechcraft King Air series aircraft. IS&S believes ThrustSense® improves safety and performance for Pratt and Whitney PT6-powered single and multi-engine aircraft. In the case of multi-engine aircraft, such as the Beechcraft King Air, ThrustSense® provides Vmc_a protection during an engine out condition. The system is light weight, installs with minimal downtime and provides the user with high value for performance. IS&S believes ThrustSense® can attain fuel savings of 3% and when flying constant angle-of-attack the fuel savings can be as much as 10%. The Company in April 2019 received certification from the FAA for, its ThrustSense® Autothrottle for retrofit in the King Air, dual turbo prop PT6 powered aircraft. The Company has signed a multi-year agreement with Textron to supply ThrustSense® on their new production aircraft, the King Air 360 and King Air 260. ThrustSense® is also available for retrofit on King Airs through Textron service centers and third-party service centers.

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The IS&S ThrustSense® Autothrottle is designed to ensure stabilized approaches by controlling speeds during descent. During high pilot workload, the autothrottle is designed to automatically controlprevent the power settingairplane from becoming dangerously slow or fast and protects against overtorque and overtemp, thereby enhancing the safety and capability of your aircraft.

Control of the engine.autothrottle is housed in an easy-to-install ISU that provides standby functionality on a high-resolution LCD display. The autothrottle computesThrustSense® Autothrottle is designed to avoid structural modifications to the existing throttle quadrant. ThrustSense® has MEL Relief and controls appropriate power levels reducing pilot workload.On Condition Maintenance.

ThrustSense Autothrottle computes thrust, holds selected speed/torque, and implements appropriate limit protection. When engaged by the pilot, the autothrottle system adjusts the throttles automatically to achieve and hold the selected airspeed guarded by a torque/temperature limit mode. ThrustSense’s Engine Out Thrust Control automatically adjusts remaining engine power if the airspeed falls below minimum-control airspeed (Vmc). The pilot can maintain control as the autothrottle mitigates the adverse yaw allowing the aircraft to safely accelerate under full control.

The autothrottleIS&S believes ThrustSense® can be adapted to virtually all PT6 powered aircraftaircrafts with the IS&S Flight Instrument Standby.ISU. The StandbyISU executes software to control the autothrottle actuator. In addition the ISU calculates, processes and displays altitude, attitude, airspeed, slip/skid, and navigation display information, which IS&S believes is presented in a logical and concise single instrument display. It features a highhigh- resolution LCD display with full LED backlighting, thereby improving reliability and full sunlight readability to the pilot. The graphics arepilot, and fully anti-aliased with unprecedented accuracy and detail.graphics.

TheIS&S believes the autothrottle retrofit and standby are easily installed; withinstalled, and typical installation takingcan take less than a dayweek with minimum modifications to the existing flight deck.

Other potential benefits of the ThrustSenseThrustSense® Autothrottle include:

·                  safety enhancements and pilot workload reduction;

·                  potential life-saving enhancements in multi-engine aircraft;

·                  full-authority digital engine (“FADEC”)-like engine protection;

·                  does not require replacement of the existing throttle quadrant (major cockpit modification) due to the patent pending compact and safe actuation mechanism; and

·                  broader applications for retrofit in FADEC or non-FADEC Turbofan and Turboprop aircraft.

Utilities Management System

Announced in 2013, IS&S provides the Utilities Management System (“UMS”) for the Pilatus PC-24 which is nearing certification.has been certified and delivered. The IS&S UMS integrates utilitya wide range of aircraft functions, which are commonly supported by multiple individual controllers. The UMS-24 will monitormonitors aircraft sensors and aircraft control aircraft systems as required to achieve system functionality. This open architecture system allows Pilatus to design and/or refine control and monitoring algorithms, in-house.

IS&S believes there is quite a bit of interest in its UMS from other aircraft manufacturers as well. The UMS is an innovative design that controls 20 plus aircraft systems such as navigation, auto-flight, landing gear, surface positions, fire protection, ice/rain protection, electrical loads, lighting, environmental conditions, cabin pressurization, and oxygen systems based on OEM custom configuration.

The UMS is a Data Concentrator and Processing Unit (“DCPU”) that allows manufacturers to configure and program specific applications on a ARINC 653 operating system andin an open architecture platform. The UMS acts as the aircraft central maintenance computer allowing for a maximum of six DCPUs to be included in the communication ring. The system provides a significant power and weight saving over the use of federated boxes and utilizes the latest IS&S technological advancements in avionics circuit design.

Customers

The Company’s customers include the United States government (including DoD, the Department of Interior (“DOI”) and the Department of Homeland SecuritySecurity), Air Transport Services Group Inc. (“DHS”ATSG”), Amazon.com, Inc., American Airlines, Inc. (“AAI”AAL”), Boeing, Deutsche Post DHL Group (“DHL”), Eclipse, FedEx Corporation (“FedEx”), Icelandair, L-3 Communications,L3Harris Technologies, Inc., Lockheed Martin Corporation, Pilatus, Sierra Nevada Corporation (“Sierra Nevada”), Textron, and the Department of National Defense (Canada), among others.

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The Company’s revenue is concentrated with a limited number of customers. In fiscal year 2017,2022, the three largest customers, Sierra Nevada, Pilatus, ATSG and DHLTextron accounted for 16%22%, 12% and 10% of total revenue, respectively. In fiscal year 2016, the three largest customers, Sierra Nevada, Jet2.com and DHL accounted for 13%, 12%11% and 11% of total revenue, respectively. In fiscal 2015,year 2021, the two largest customers, Pilatus and EclipseTextron accounted for 20% and 15%17% of total revenue, respectively. In fiscal year 2020, the three largest customers, Pilatus, Dayton T. Brown, Inc., and Kalitta Air accounted for 33%, 12% and 10% of total revenue, respectively.

Retrofit Market

Historically, a majoritymost of the Company’s sales have come from the retrofit market, which IS&S has pursued because of its continued growth in response to the need to support the world’s aging fleet of aircraft. The design and airframe structure of many types of older aircraft generally exceeds the technology and technical capabilities of the original cockpit instruments and avionics. The Company has

developed products that enable owners and operators to upgrade their aircraft by retrofitting them with IS&S products at a competitive cost and with equipment that provides cockpit displays with capabilities and technology equivalent to new aircraft.

IS&S expects its main customers in the retrofit market will continue to be:

·                  the DoD and defense contractors,

·                  aircraft operators, and

·                  aircraft modification centers.

Department of Defense and Defense Contractors. The Company sells its products directly to the DoD and to domestic and international defense contractors for end use on military aircraft retrofit programs. DoD programs generally take one of two forms: a subcontract with a prime government contractor, such as Boeing, Lockheed Martin, or L-3 Communications,L3Harris Technologies, Inc. or a direct contract with the appropriate government agency, such as the U.S. Air Force. The government’s desire for cost-effective retrofit of its aircraft has led it to purchase commercial off-the-shelf equipment rather than to develop specially designed products, which are usually more costly and take longer to implement. These retrofit contracts tend to be on arms-length commercial terms, although some termination and other provisions of government contracts are typically applicable to these contracts, as described under “Government Regulation” below. Each government agency or general contractor retains the right to terminate a contract at any time at its convenience. Upon such alteration or termination, IS&S is entitled typically to be compensated for already delivered items and reimbursement for allowable costs incurred.

Aircraft Operators. The Company sells its products to aircraft operators, including commercial airlines, cargo carriers, and business and general aviation aircraft owners or suppliers, primarily for retrofitting of aircraft owned or operated by these customers. The Company’s commercial fleet customers include or have included, among others, AAI, ABX Air,AAL, ATSG, FedEx and Icelandair. IS&S sells these customers a range of products from FPDS to air data systems.

Aircraft Modification Centers. Aircraft modification centers, which repair and retrofit private aircraft, represent the primary retrofit market for private and corporate jets. IS&S has established relationships with a number ofseveral aircraft modification centers throughout the United States, which act as distribution outlets and installation centers for the Company’s products.

OEM MarketOriginal Equipment Manufacturers

Since 2009, IS&S has been providing, through Eclipse, enhanced capability through retrofitssigned a multi-year agreement with Textron to numerous owners ofsupply ThrustSense® on their new production aircraft, produced by Eclipse Aviation Inc., the assets of which were acquired by EclipseKing Air 360 and King Air 260 as described above in 2009. On April 15, 2015, Eclipse merged with Kestrel Aircraft to form One Aviation. IS&S is also developing“Products-Autothrottle – ThrustSense®”. The Company has developed and manufacturingmanufactures the UMS for Pilatus’ PC-24 aircraft under a multi-year production contract as described above under “-Products-Utility“Products-Utilities Management System”. IS&SThe Company also markets its products to other original equipment manufacturersOEMs including, among others, Boeing and Lockheed Martin.

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Backlog

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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. The year over year decrease of $1.5 million was the result of booking of $15.7 million in new business, offset by $17.2 million in recognized revenue. Air data product backlog as of September 30, 2017 increased $1.1 million from September 30, 2016, and FPDS backlog as of September 30, 2017 decreased by $2.6 million from September 30, 2016, reflecting decreased FPDS sales during 2017. The backlog excludes potential future sole-source production orders from products developed under the Company’s EDC programs, including the Pilatus PC-24, the KC-46A and the KC-46A, all of which the Company expects to enter into extended production phases.Textron King Air 360 and King Air 260 ThrustSense® Autothrottle programs. Although the Company believes that the orders included in backlog are firm, most of the backlog involves orders that can be modified or terminated by the customer. As of September 30, 2017, none2022, 16% of the Company’s backlog was expected to be filled beyond fiscal 2018.2023.

Engineering Development

The Company invests a largesignificant percentage of its sales on engineering development, both Research & Development (“R&D&D”) and EDC. At September 30, 2017,2022, approximately 31%22% of the Company’s employees were engineers engaged in various engineering development projects. Total engineering development expense is comprised ofcomprises both internally funded R&D and product development and design charges related to specific customer contracts. Engineering development expense consists primarily of payroll-related expenses of employees engaged in EDC projects, engineering related product materials and equipment, and subcontracting costs. R&D charges incurred for product design, product enhancements, and future product development are expensed as incurred. Product development and design charges related to specific customer contracts are charged to cost of sales-EDC based on the method of contract accounting (either percentage-of-completionrecognized over time or completed contract)at a point in time) applicable to such contracts.

Sales and Marketing

IS&S focuses its sales efforts on passenger and cargo carrying aircraft operators, general aviation owner/operators, MRO/dealer networks, distributors, avionics integrators, aircraft modification centers, the DoD, DoD contractors, and OEMs. Periodically, the Company evaluates its sales and marketing efforts with respect to these focus areas and, where appropriate, makes use of third-party sales representatives who receive compensation through commissions based on performance. We currentlyAs of September 30, 2022, we have eighttwelve representatives worldwide that are actively selling IS&S products.

We are continuing to expand our maintenance, repair and overhaul (“MRO”) dealer network to address worldwide markets for Boeing 737, 757 and 767, Pilatus PC-12’s, Beechcraft King Air models and other aircraft types. We have added major MRO’s like Lufthansa Technik AG in 2016 and Western Aircraft, LevAero, Pro Star Aviation and Epps Aviation in 2017,established a dealer network for ThrustSense®, and we are in the process of exploring adding more MRO dealerships in Australia, Brazil, Spain, Switzerland and the United States.

States and internationally.

Our marketing efforts have focused on applicable markets establishing and maintaining key customer rapport using social media, email campaigns, key market influencers, advertisements, trade shows, web casts, direct mailers, digital and direct mailers.social media. Our Autothrottle offering on the Pilatus PC-12 hasand King Air have been favorably featured in multiple articles in major publications over the past year.

several years.

The Company’s believeCompany believes its ability to provide prompt and effective repair and upgrade service is critical to its marketing efforts. The Company’s customer service program offers a 24-hour customer hotline. The Company services its customers utilizing either field service engineers or its in-house repair and upgrade facility. The Company may lend spare units to customers when it is repairing or overhauling their equipment. IS&S provides customers with a standard two-year warranty on new products. The Company offers customers extended warranties of varying lengths beyond the two years for additional fees.

The Company believes its ability to provide an installation service is critical to its marketing efforts. The Company’s Repair Station provides a mobile STC Installation Team to install the PC-12 and King Air ThrustSense® Autothrottle systems beginning in June 2022.

The majorityMost of the Company’s sales, personnel and assets are located within the United States. In fiscal year 2017, 2016years 2022, 2021 and 20152020 net sales outside the United States amounted to $2.6$11.1 million, $8.2$8.4 million and $6.6$9.4 million, respectively.

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Government Regulation

FAA regulations govern the manufacture and installation of the Company’s products in aircraft owned and operated in the United States,States. Both the IS&S manufacturing facility and the IS&S facility is FAA certified.repair station are FAA-certified. The most significant product and installation regulations are Technical Standard Orders (“TSOs”), Parts Manufacturer Approvals (“PMA”), and Supplemental Type Certificate (“STCs”),STCs, which establish the minimum operational performance standards. For example, in March 2015 and July 2015, respectively,April 2019, the FAA issued its TSO authorization and STC for the Company’s B757ThrustSense® Autothrottle for retrofit in the King Air dual prop PT6 powered aircraft. In February 2019, the FAA issued its TSO authorization and STC for the Company’s B767 Integrated Standby Unit to be used on B757B767 aircraft in the United States, and in December 2014, the FAA issued a TSO and STC to IS&S for a high definition Integrated Flat Panel Display System for use on Pilatus PC-12 type aircraft in the United States.

Generally, sales of IS&S products to European or other non-U.S. owners of aircraft require approval of European Aviation Safety Agency (“EASA”),EASA, or other relevant governmental agencies. EASA certification requirements for the manufacture and installation of the Company’s products in European owned aircraft mirror FAA regulations, and its process for European certification is similar to that of the FAA. For example, in August 2015,September 2021, EASA and the EASATransport Canada Civil Aviation issued an STC onSTCs for the Company’s B757 Integrated Standby Unit to be used on B757ThrustSense(R) Full Regime Autothrottle for King Air series aircraft in the European Community.

Union and Canada, respectively.

In addition to product relatedproduct-related regulations, IS&S is subject to U.S. Governmentgovernment procurement regulations with respect to the sale of the Company’s products to government entities or government contractors. The government agency or general contractor retains the right to terminate a contract at any time at its convenience. Upon such alteration or termination, IS&S is generally entitled to an equitable adjustment to the contract price, so that the Company receives the purchase price for products or services already delivered, and reimbursement for allowable costs incurred and for termination related costs.

The Company’s business is also impacted by various other laws and regulations, including, but not limited to, local, state, federal, and international tax codes, import and export controls and customs laws, employment and employment-related laws, environmental laws, intellectual property laws, and consumer protection statutes. The Company from time to time incurs costs in the ordinary course of business in connection with maintaining compliance with these evolving and at times overlapping regulatory regimes.

Manufacturing, Assembly and Materials Acquisition

The Company’s manufacturing activities consist primarily of assembling and testing components and subassemblies and integrating them into finished systems. Typically, the Company purchases components for products, including any necessary raw materials, from third-party suppliers, several of which are sole source, and assembles them in a clean room environment. Many of the components purchased are standard products, although certain parts are made to the Company’s specifications.

Although there are a limited number of suppliers of particular components, management believes other suppliers could provide similar components on comparable terms.

When appropriate, IS&S enters into long-term supply agreements and uses its relationships with long-term suppliers to improve product quality and availability, and to reduce delivery times and product costs. In addition, the Company identifies alternative suppliers for important component parts. Generally, the introduction of component parts from new suppliers into existing products requires FAA certification of the entire finished product if the newly sourced component varies significantly from the original drawings and specifications. IS&S has not experienced significant delays in delivery of products caused by the inability to obtain either component parts or FAA approval of products incorporating new component parts.

Quality Assurance

Product quality is of vital importance. The Company is ISO 9001 and AS9100CAS9100D certified. These standards represent an international consensus on effective management practices with the goal of ensuring that a company can deliver its products and related services consistently in a manner that meets or exceeds customer quality requirements. IS&S’s certification to these standards allows the Company to represent to customers that it maintains high qualityhigh-quality industry standards in the education of its employees and in the design and manufacture of its products. In addition, the Company’s products undergo extensive and documented quality control testing prior to being delivered to customers.

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Competition

The market for the Company’s products is highly competitive. Competitors vary in size and resources, and substantially all of the Company’s competitors are much larger than IS&S and have substantially greater resources. With respect to air data systems and related products, the Company’s principal competitors include Honeywell International Inc. (“Honeywell”), Rockwell Collins Inc.,Aerospace, Thales Communications,Defense & Security, Inc. (“Thales”), and Garmin Ltd. (“Garmin”). With respect to flat panel displays, principal competitors currently include Honeywell RockwellInternational Inc., Collins Aerospace, L3Harris Technologies, Inc., L-3 Communications, Garmin Ltd. and GE Aviation Systems (“GEAS”).Systems. However, as the flat panel display industry evolves and the demand for flat panel displays increases, IS&S may face future competition in this area from other suppliers.

The Company believes that the principal competitive factors in its markets are cost, development cycle time, responsiveness to customer preferences, product quality, technology, and reliability. IS&S believes that its significant and long-standing customer relationships reflect the Company’s ability to compete favorably with respect to these factors.

Intellectual Property and Proprietary Rights

IS&S relies on patents to protect its proprietary technology. As of September 30, 2017,2022, the Company holds 3914 U.S. patents and has 83 U.S. patent applications pending relating to its technology. In addition, IS&S holds 7840 international patents and has 242 international patent applications pending. Certain of these patents and patent applications cover technology relating to air data measurement systems and others cover technology relating to flat panel display systems and other aspects of the COCKPIT/IP®IP® solution. While IS&S believes these patents have significant value in protecting its technology, it believes that the innovative skill, technical expertise, and know-how of the Company’s personnel in applying the technology reflected in its patents would be difficult, costly, and time consuming to reproduce.

While IS&S is not aware of any pending lawsuits against the Company alleging patent infringement or the violation of other intellectual property rights, it cannot be certain such infringement claims will not be asserted against the Company in the future.

EmployeesHuman Capital

As of September 30, 2017, IS&S had 93 employees. The Company’sOur people are the driving force behind our success, and our future success dependsand growth prospects depend on itsour ability to attract, train and retain highly qualified personnel. CompetitionWe are fortunate to have talented and outstanding employees, and we are proud of our diverse workforce and the broad range of skills and experiences that our people have. We work hard to cultivate a dynamic and enjoyable work environment full of opportunities to learn new skills, stressing teamwork and encouraging our employees to brainstorm, develop and refine new ideas to help us innovate and achieve our goals, and we maintain equity compensation plans and benefits packages designed to retain talented people who share our goals and interests. We also offer competitive salaries and generous benefits, including vacation, a 401(k) savings and retirement plan, health, dental, life, long-term disability insurance, an Employee Assistance Program (“EAP”), and health and dependent Flexible Spending Account programs. Additionally, we regularly review and reevaluate our recruitment strategies to ensure our practices align with our mission, purpose, and values. Nevertheless, competition for such qualified personnel is intense, and the Company may not be able to attract, train, and retain highly qualified personnel in the future.

We are an equal opportunity employer and a Vietnam Era Veterans’ Readjustment Assistance Act (“VEVRAA”) federal contractor. All qualified applicants receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability status, protected veteran status, or any other characteristic protected by law. We also comply with all applicable state and local laws governing nondiscrimination in employment and have a Code of Business Conduct and Ethics applicable to each employee, director, officer, contractor and consultant of the Company designed to ensure that we maintain the highest standards of business conduct in every aspect of our business and operations.

Safety is a vital aspect to the success of our people and business. We are proud of our employees’ collective commitment to secure and maintain safe work practices, in particular during the COVID-19 pandemic. Protecting the health and safety of our employees and their families has been a priority throughout the pandemic, and we have implemented temperature monitoring, frequent sanitization of workspaces, observance of social distancing protocols, and other increased safety measures in response to the pandemic.

As of September 30, 2022, IS&S had 81 employees (79 of whom were full-time employees). None of the Company’sour employees are currently represented by a labor union.union, nor are they subject to a collective bargaining agreement. We consider relations with our employees to be good.

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Executive Officers of the Registrant

The following is a list of the Company’s executive officers, their ages and their positions in each case.