What changed in this filing

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Item 1A. Risk Factors

2021-12-22 compared with 2020-12-22 · 213 added, 500 removed, 73 unchanged (91% of the section changed)

Risk Factors.

Each reader should carefully consider the risks, uncertainties

and other factors described below, in addition to the other information set forth in this report, because they could materially

and adversely affect the Company’s business, operating results, financial condition, cash flows, prospects, and the value

of an investment in IS&S common stock.

An investment in our common stock involves various risks, including

risks related to the items listed below.

However, you are urged to carefully consider all of the matters discussed in this Part

I, Item 1A of this Report under the caption “Risk Factors”

(not just those discussed in this summary) in considering

our business and prospects.

Each reader should carefully consider the risks, uncertainties and other factors described below, in addition to the other information set forth in this report, because they could materially and adversely affect the Company’s business, operating results, financial condition, cash flows, prospects, and the value of an investment in IS&S common stock.

An investment in our common stock involves various risks, including risks related to the items listed below.

However, you are urged to carefully consider all of the matters discussed in this Part I, Item 1A of this Report under the caption “Risk Factors” (not just those discussed in this summary) in considering our business and prospects.

IS&S-Specific Risk Factors

The Company faces risks relating to:

continued market acceptance of the Company’s air data systems and other products;

● continued market acceptance of the Company’s air data systems and other products;

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

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● the possibility that IS&S may lose one or more key customers;

the self-insured portion of IS&S’

employee medical insurance program;

● the self-insured portion of IS&S’ employee medical insurance program;

● our lack of substantial backlog;

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IS&S-Specific Risk Factors

Growth of the Company’s customer base could be limited

by delays or difficulties in completing development and introduction of planned products or product enhancements.

If IS&S fails

to enhance existing products, or to develop and achieve market acceptance for flat panel displays, flight management systems, autothrottle

technology and other new products that meet customer requirements, its business, reputation and statements of income may be affected

Currently, IS&S spends a large portion of its R&D

efforts in developing and marketing the FPDS, FMS, ThrustSense®

Autothrottle and complementary products.

The Company’s

ability to grow and diversify its operations through introduction and sale of new products is dependent upon its continued success

in product development and engineering activities, its sales and marketing efforts, and its ability to obtain necessary regulatory

approvals to sell such products.

Sales growth will depend in part on market acceptance of and demand for the FPDS, FMS, ThrustSense®

Autothrottle and future products.

IS&S cannot be certain that it will be able to develop, introduce or market its FPDS, FMS,

ThrustSense®

Autothrottle or other new products or product enhancements in a timely or cost-effective manner, or that any new

products or product enhancements will receive market acceptance or necessary regulatory approval.

In addition, the Company’s

business is dependent upon maintaining its reputation and relationships with existing customers.

If the Company’s performance

does not meet its customers’

expectations, the Company’s reputation and its relationships could be damaged, which may

have a material adverse impact on the Company’s business and statements of income, including reductions in sales.

In seeking new customers, the Company may have difficulty in

displacing the products of incumbent competitors.

IS&S cannot be assured that potential customers will accept its products

or that existing customers will not abandon them.

Contracts can be terminated by many of the Company’s

customers at any time and, therefore, may not result in sales.

IS&S’s contracts, including contracts with government

agencies, includes various terms and conditions that impose certain requirements on IS&S, including the ability of the government

agency or general contractor to alter the price, quantity or delivery schedule of the products.

Additionally, government agencies

and general contractors typically retain the right to terminate the contract at any time at their convenience.

Upon alteration

or termination of these contracts, IS&S is entitled typically to an equitable adjustment to the contract price so that

it would be compensated for delivered items and allowable costs incurred.

However, because these contracts can be terminated for

convenience, the Company cannot be assured that its backlog will result in sales.

The Company enters into fixed-price contracts or service

arrangements to perform specified design and EDC services related to its products that could subject IS&S to losses in the

event the Company incurs cost overruns on its projects.

During fiscal year 2020, approximately 4%

percent of the Company’s total sales were from fixed-price EDC arrangements with customers to perform specified design and

EDC services related to its products.

These arrangements allow IS&S to benefit by recovering some of its product development

costs, but it carries the risk of potential cost overruns.

If the Company’s initial cost estimates are incorrect, it can

incur potentially large one time charges and losses on these contracts.

These EDC arrangements can expose the Company to potential

losses because the customer may compel IS&S to complete a project or, in the event of a termination for default, pay the incremental

cost of its replacement by another provider.

Because some of these projects involve new technologies and applications, and can

last for more than a year, unforeseen events such as technological difficulties, fluctuations in the price of raw materials, problems

with subcontractors, and cost overruns can result in the contractual price becoming less favorable or even unprofitable to IS&S

Furthermore, if the Company does not meet project deadlines or if its products do not meet customer specifications,

it may need to renegotiate contracts on less favorable terms, be forced to pay penalties or liquidated damages, or suffer losses

if the customer exercises its right to terminate.

The Company’s results of operations are dependent on its ability to maximize

earnings from the EDC service arrangements.

Lower earnings caused by cost overruns could have a negative impact on the Company’s

financial condition, operating results, and cash flows.

A portion of IS&S sales come from government contracts,

which could be adversely affected by continued high U.S.

Growth of the Company’s customer base could be limited by delays or difficulties in completing development and introduction of planned products or product enhancements.

If IS&S fails to enhance existing products, or to develop and achieve market acceptance for flat panel displays, flight management systems, autothrottle technology and other new products that meet customer requirements, its business, reputation and statements of income may be affected adversely.

Currently, IS&S spends a large portion of its R&D efforts in developing and marketing the FPDS, FMS, ThrustSense® Autothrottle and complementary products.

The Company’s ability to grow and diversify its operations through introduction and sale of new products is dependent upon its continued success in product development and engineering activities, its sales and marketing efforts, and its ability to obtain necessary regulatory approvals to sell such products.

Sales growth will depend in part on market acceptance of and demand for the FPDS, FMS, ThrustSense® Autothrottle and future products.

IS&S cannot be certain that it will be able to develop, introduce or market its FPDS, FMS, ThrustSense® Autothrottle or other new products or product enhancements in a timely or cost-effective manner, or that any new products or product enhancements will receive market acceptance or necessary regulatory approval.

In addition, the Company’s business is dependent upon maintaining its reputation and relationships with existing customers.

If the Company’s performance does not meet its customers’ expectations, the Company’s reputation and its relationships could be

damaged, which may have a material adverse impact on the Company’s business and statements of income, including reductions in sales.

In seeking new customers, the Company may have difficulty in displacing the products of incumbent competitors.

IS&S cannot be assured that potential customers will accept its products or that existing customers will not abandon them.

Contracts can be terminated by many of the Company’s customers at any time and, therefore, may not result in sales.

IS&S’s contracts, including contracts with government agencies, includes various terms and conditions that impose certain requirements on IS&S, including the ability of the government agency or general contractor to alter the price, quantity or delivery schedule of the products.

Additionally, government agencies and general contractors typically retain the right to terminate the contract at any time at their convenience.

Upon alteration or termination of these contracts, IS&S is entitled typically to an equitable adjustment to the contract price so that it would be compensated for delivered items and allowable costs incurred.

However, because these contracts can be terminated for convenience, the Company cannot be assured that its backlog will result in sales.

The Company enters into fixed-price contracts or service arrangements to perform specified design and EDC services related to its products that could subject IS&S to losses in the event the Company incurs cost overruns on its projects.

During fiscal year 2021, approximately 1% percent of the Company’s total sales were from fixed-price EDC arrangements with customers to perform specified design and EDC services related to its products.

These arrangements allow IS&S to benefit by recovering some of its product development costs, but it carries the risk of potential cost overruns.

If the Company’s initial cost estimates are incorrect, it can incur potentially large one time charges and losses on these contracts.

These EDC arrangements can expose the Company to potential losses because the customer may compel IS&S to complete a project or, in the event of a termination for default, pay the incremental cost of its replacement by another provider.

Because some of these projects involve new technologies and applications, and can last for more than a year, unforeseen events such as technological difficulties, fluctuations in the price of raw materials, problems with subcontractors, and cost overruns can result in the contractual price becoming less favorable or even unprofitable to IS&S over time.

Furthermore, if the Company does not meet project deadlines or if its products do not meet customer specifications, it may need to renegotiate contracts on less favorable terms, be forced to pay penalties or liquidated damages, or suffer losses if the customer exercises its right to terminate.

The Company’s results of operations are dependent on its ability to maximize earnings from the EDC service arrangements.

Lower earnings caused by cost overruns could have a negative impact on the Company’s financial condition, operating results, and cash flows.

A portion of IS&S sales come from government contracts, which could be adversely affected by continued high U.S.

federal budget deficits.

Government contracts are also subject to special

risks as a result of the U.S.

government’s audit practices.

A portion of IS&S sales has been, and is expected to continue

to be, from defense contractors or government agencies in connection with government aircraft retrofit or OEM contracts.

to government contractors and government agencies could decline as a result of DoD spending cuts and general budgetary constraints

which may become more severe as the federal budget deficit remains high.

Government contracts are also subject to special risks as a result of the U.S.

government’s audit practices.

A portion of IS&S sales has been, and is expected to continue to be, from defense contractors or government agencies in connection with government aircraft retrofit or OEM contracts.

Sales to government contractors and government agencies could decline as a result of DoD spending cuts and general budgetary constraints which may become more severe as the federal budget deficit remains high.

In addition, the U.S.

government regularly conducts investigations,

inquiries and audits into its suppliers’

compliance with procurement regulations and performance under the relevant government

If an investigation reveals or an audit finds that the Company violated applicable law or regulations, its government

contracts could be terminated and it could be restricted from future procurement activities.

Moreover, if an investigation, inquiry

or audit finds that the Company acted improperly or was involved in illegal activities, the Company could be subject to civil penalties,

criminal penalties, and administrative sanctions.

As a result, the Company’s reputation could be harmed even if the allegations

were later determined to be false.

Reductions in government expenditures could adversely affect

IS&S business.

government regularly conducts investigations, inquiries and audits into its suppliers’ compliance with procurement regulations and performance under the relevant government contracts.

If an investigation reveals or an audit finds that the Company violated applicable law or regulations, its government contracts could be terminated and it could be restricted from future procurement activities.

Moreover, if an investigation, inquiry or audit finds that the Company acted improperly or was involved in illegal activities, the Company could be subject to civil penalties, criminal penalties, and administrative sanctions.

As a result, the Company’s reputation could be harmed even if the allegations were later determined to be false.

Reductions in government expenditures could adversely affect IS&S business.

Reductions in funding of the DoD and U.S.

defense spending could

have significant consequences to the Company’s business and industry.

While the full impact of such reductions is not determinable,

the impact of any resulting reductions in defense appropriations, and/or reductions in U.S.

defense spending could result in delays

in procurement of products and services due to lack of funding, and negatively affect the IS&S’s revenues, financial

condition and results of operations.

loss of a key customer or a significant deterioration in the financial condition of a key customer could have a material

adverse effect on the Company’s results of operations.

The Company’s revenue is concentrated with a limited number

of customers.

defense spending could have significant consequences to the Company’s business and industry.

While the full impact of such reductions is not determinable, the impact of any resulting reductions in defense appropriations, and/or reductions in U.S.

defense spending could result in delays in procurement of products and services due to lack of funding, and negatively affect the IS&S’s revenues, financial condition and results of operations.

The loss of a key customer or a significant deterioration in the financial condition of a key customer could have a material adverse effect on the Company’s results of operations.

The Company’s revenue is concentrated with a limited number of customers.

During fiscal year 2021 IS&S derived 59% of revenue from the top five customers.

IS&S expects a relatively

small number of customers to account for a majority of its revenues for the foreseeable future.

As a result of the concentrated

customer base, a loss of one or more of these customers or a dispute or litigation with one of these key customers could affect

adversely its revenue and results of operations.

The Company monitors and evaluates the credit status of its customers and attempts

to adjust sales terms as appropriate.

Despite these efforts, a significant deterioration in the financial condition or bankruptcy

filing of a key customer could affect adversely the Company’s business, results of operations, and financial condition.

addition, the Company is subject to credit risk associated with the concentration of accounts receivable from its key customers.

If any of the Company’s top customers were to become bankrupt or insolvent or otherwise were unable to pay for the products

and services provided by the Company, including as a result of the impact of the COVID-19 pandemic on their businesses or

financial conditions, then the Company may incur significant write-offs of accounts receivable, incur other impairment charges

or result in a significant loss of expected revenues, which may have a material adverse effect on the Company’s results of

We self-insure a significant portion of our employee

medical insurance program, which may expose us to unpredictable costs and negatively affect our financial performance.

We self-insure a

significant portion of our employee medical insurance program and related benefit claims.

The estimated liability for the

self-funded portion of our insurance program is determined actuarially, based on claims filed historically, demographic factors

and an estimate of claims incurred but not yet reported.

We maintain stop loss insurance coverage to limit our exposure for the

self-funded portion of our health insurance program both on a per employee and aggregate basis, and liabilities associated with

these losses include estimates of both claims filed and losses incurred but not yet reported.

Unanticipated changes in any applicable

actuarial assumptions or management estimates underlying our recorded liabilities for these losses could result in materially different

amounts of expense than expected under these programs, which could have a material adverse effect on our financial condition and

results of operations.

In addition, the premiums for this coverage could increase in the future, or we could be forced to raise

our self-insured retention amounts.

If these expenses increase, or if we experience a claim in excess of our reserve and/or coverage

limits, it could also have a material adverse effect on our financial condition and results of operation.

IS&S expects a relatively small number of customers to account for a majority of its revenues for the foreseeable future.

As a result of the concentrated customer base, a loss of one or more of these customers or a dispute or litigation with one of these key customers could affect adversely its revenue and results of operations.

The Company monitors and evaluates the credit status of its customers and attempts to adjust sales terms as appropriate.

Despite these efforts, a significant deterioration in the financial condition or bankruptcy filing of a key customer could affect adversely the Company’s business, results of operations, and financial condition.

In addition, the Company is subject to credit risk associated with the concentration of accounts receivable from its key customers.

If any of the Company’s top customers were to become bankrupt or insolvent or otherwise were unable to pay for the products and services provided by the Company, including as a result of the impact of the COVID-19 pandemic on their businesses or financial conditions, then the Company may incur significant write-offs of accounts receivable, incur other impairment charges or result in a significant loss of expected revenues, which may have a material adverse effect on the Company’s results of operations.

We self-insure a significant portion of our employee medical insurance program, which may expose us to unpredictable costs and negatively affect our financial performance.

We self-insure a significant portion of our employee medical insurance program and related benefit claims.

The estimated liability for the self-funded portion of our insurance program is determined actuarially, based on claims filed historically, demographic factors and an estimate of claims incurred but not yet reported.

We maintain stop loss insurance coverage to limit our exposure for the self-funded portion of our health insurance program both on a per employee and aggregate basis, and liabilities associated with these losses include estimates of both claims filed and losses incurred but not yet reported.

Unanticipated changes in any applicable actuarial assumptions or management estimates underlying our recorded liabilities for these losses could result in materially different amounts of expense than expected under these programs, which could have a material adverse effect on our financial condition and results of operations.

In addition, the premiums for this coverage could increase in the future, or we could be forced to raise our self-insured retention amounts.

If these expenses increase, or if we experience a claim in excess of our reserve and/or coverage limits, it could also have a material adverse effect on our financial condition and results of operation.

We currently operate without a substantial backlog.

During periods of economic uncertainty, the rate of customer

orders can quickly decrease, and a substantial backlog may help promote greater efficiency in production, facilitate business planning

and improve revenue visibility.

As of September 30, 2020, none of the Company’s backlog was expected to be filled beyond

fiscal 2021, which is below the Company’s historical expectations and may result in lower revenues in future periods.

a result, future revenue will be dependent on orders booked and shipped in that quarter, and may not be predictable with any degree

of certainty.

Furthermore, certain contracts may represent a significant portion of our revenue and profits for a quarter such

that the loss or deferral of even one such contract could adversely affect our revenue and profitability.

The Company has limited experience in marketing and distributing

its products internationally.

IS&S plans to derive increasing revenues from sales outside

the United States, particularly in Europe and Asia.

During periods of economic uncertainty, the rate of customer orders can quickly decrease, and a substantial backlog may help promote greater efficiency in production, facilitate business planning and improve revenue visibility.

As of September 30, 2021, 4% of the Company’s backlog was expected to be filled beyond fiscal 2022, which is below the Company’s historical expectations and may result in lower revenues in future periods.

As a result, future revenue will be dependent on orders booked and shipped in that quarter, and may not be predictable with any degree of certainty.

Furthermore, certain contracts may represent a significant portion of our revenue and profits for a quarter such that the loss or deferral of even one such contract could adversely affect our revenue and profitability.

The Company has limited experience in marketing and distributing its products internationally.

IS&S plans to derive increasing revenues from sales outside the United States, particularly in Europe and Asia.

Risks inherent in doing business internationally include:

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laws affecting the activities of U.S.

companies abroad, including the

Foreign Corrupt Practices Act of 1977, as amended;

companies abroad, including the Foreign Corrupt Practices Act of 1977, as amended;

● difficulty with staffing and managing widespread operations;

● the impact of recessions in economies outside the United States;

variances and unexpected changes in local laws and regulations.

Currently, all of the Company’s international sales are

denominated in U.S.

An increase in the dollar’s value compared to other currencies could render the Company’s

products less competitive in the international markets.

In the future, IS&S may be required to conduct sales in the foreign

country’s local currency, thus exposing it to fluctuations and volatility in exchange rates that could adversely affect its

operating results.

Further, as we pursue customers in Asia and other less developed markets throughout the world, our potential

inability to ensure the creditworthiness of counterparties could impose additional risks and affect our overall profitability.

Emerging market operations in particular can present many risks, including cultural differences (such as employment and business

practices), volatility in gross domestic product, economic and government instability, and the imposition of exchange controls

and capital controls.

While these factors and their impact are difficult to predict,

any one or more of them could have a material adverse effect on our competitive position, results of operations, cash flows or

financial condition.

The Company’s competition includes other manufacturers

of air data systems and flight information displays against whom it may not be able to compete successfully.

The markets for the Company’s products are intensely competitive

and subject to rapid technological change.

Competitors include Honeywell International Inc., Collins Aerospace, Thales Defense

& Security, Inc., Garmin Ltd.

● variances and unexpected ch anges in local laws and regulations.

Currently, all of the Company’s international sales are denominated in U.S.

An increase in the dollar’s value compared to other currencies could render the Company’s products less competitive in the international markets.

In the future, IS&S may be required to conduct sales in the foreign country’s local currency, thus exposing it to fluctuations and volatility in exchange rates that could adversely affect its operating results.

Further, as we pursue customers in Asia and other less developed markets throughout the world, our potential inability to ensure the creditworthiness of counterparties could impose additional risks and affect our overall profitability.

Emerging market operations in particular can present many risks, including cultural differences (such as employment and business practices), volatility in gross domestic product, economic and government instability, and the imposition of exchange controls and capital controls.

While these factors and their impact are difficult to predict, any one or more of them could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

The Company’s competition includes other manufacturers of air data systems and flight information displays against whom it may not be able to compete successfully.

The markets for the Company’s products are intensely competitive and subject to rapid technological change.

Competitors include Honeywell International Inc., Collins Aerospace, Thales Defense & Security, Inc., Garmin Ltd.

and GE Aviation Systems.

All these competitors have substantially greater financial, technical,

and human resources than does IS&S.

In addition, these competitors have much greater experience in and resources for marketing

their products.

As a result, these competitors may be able to respond more quickly to new or emerging technologies and customer

preferences, or to devote greater resources to development, promotion and sale of their products than IS&S can.

The Company’s

competitors may have greater name recognition and more extensive customer bases.

Such competition could result in price reductions,

fewer customer orders, reduced gross margins, and loss of market share.

All these competitors have substantially greater financial, technical, and human resources than does IS&S.

In addition, these competitors have much greater experience in and resources for marketing their products.

As a result, these competitors may be able to respond more quickly to new or emerging technologies and customer preferences, or to devote greater resources to development, promotion and sale of their products than IS&S can.

The Company’s competitors may have greater name recognition and more extensive customer bases.

Such competition could result in price reductions, fewer customer orders, reduced gross margins, and loss of market share.

General Risk Factors

The ongoing COVID-19 pandemic may adversely affect IS&S.

The ongoing global outbreak of coronavirus, which was declared

a pandemic by the World Health Organization on March 11, 2020 and a national emergency by the President of the United States on

March 13, 2020, has caused and is continuing to cause business slowdowns and shutdowns and turmoil in the financial markets both

in the United States and abroad.

IS&S is monitoring the impact of the COVID-19 pandemic on its business, including how it has

impacted and will impact the Company’s employees, customers, suppliers and distribution channels.

The COVID-19 pandemic,

as well as the quarantines and other governmental and non-governmental restrictions that have been imposed throughout the world

in an effort to contain or mitigate the spread of the coronavirus, has created significant volatility, uncertainty and disruption

which may adversely affect IS&S’

business and has caused and is continuing to cause significant market turbulence and

disruption that may continue for some time even after business restrictions are lifted and the threat of the coronavirus diminishes.

For example, governmental authorities in several jurisdictions have recently implemented or reimplemented orders mandating the

cessation of all business activity that is deemed non-essential and, although the Company’s business has to date been deemed

essential in many affected markets, there is a risk that these shutdown orders will be extended or expanded or that similar shutdown

orders will be implemented in other regions.

the Company has not yet seen a material impact from the COVID-19 pandemic on its business, financial position, liquidity, or ability

to service customers or maintain critical operations, the nature and magnitude of this unprecedented crisis’

ultimate impact

on the Company will depend on numerous evolving factors, future developments and cascading effects of the coronavirus pandemic

that the Company is not able to predict, including:

the duration and severity of the COVID-19 pandemic and the international actions

and business restrictions that are being undertaken and implemented as a result of it;

governmental, business and other responses

to the COVID-19 pandemic, including the promotion of “social distancing,”

the issuance of shelter in place orders and

restrictions on the Company’s operations, and the possibility that government officials may mandate that the Company

provide products or services;

the possibility that the COVID-19 pandemic will directly or indirectly delay the issuance of required

government approvals, including necessary certifications from the FAA;

potential disruptions in the Company’s supply chain;

the impact of the COVID-19 pandemic on the Company’s ability to execute its short term and long-term business strategies

and initiatives;

the extent to which forced remote working arrangements reduce the Company’s ability to manage its business

the extent to which staffing shortages due to members of the Company’s workforce being quarantined or exposed

to the coronavirus may be detrimental to the Company’s operations;

and the possibility that federal or state governments

(including government agencies such as the Treasury Department, the Small Business Administration or the SEC) could promulgate

new statutes, regulations, guidance or relief measures, or rescind or modify existing statutes, regulations, guidance or relief

measures, in a way that is detrimental to the Company or its business in light of the Company’s prior Paycheck Protection

Program loan.

In addition, while the Company cannot predict the magnitude

of the impact that the COVID-19 pandemic will have on its customers and suppliers or their financial conditions, any material effect

on the Company’s customers or suppliers could adversely impact the Company.

For example, the Company’s customers or

suppliers may themselves assert, or attempt to terminate various agreements and arrangements with us on the basis of, contractual

force majeure provisions, and any termination of a significant commercial agreement may adversely harm our operations.

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 will result in other

suspensions, delays or order cancellations by the Company’s customers or suppliers.

Additionally, the COVID-19 pandemic and

related travel restrictions and other containment efforts have had a significant impact on the travel industry, which may result

in reduced demand for products in the general aviation and commercial air transport markets and therefore for the Company’s

products and systems.

The impact of the COVID-19 pandemic may also exacerbate other risk factors described under this Part I, Item

1A of this Report, any of which could have a material effect on the Company.

For example, the risks associated with potential cybersecurity

threats may be magnified given that many of the Company’s employees are currently working remotely using personal electronic

devices and home internet connections.

The extent of the impact of the COVID-19 pandemic on the Company’s

business is highly uncertain and difficult to predict, as information is rapidly evolving with respect to the duration and severity

of the COVID-19 pandemic.

At this point, the Company cannot reasonably estimate the duration and severity of the COVID-19 pandemic

or its overall impact on the Company’s business.

If IS&S is unable to respond to rapid technological change,

its products could become obsolete and its reputation could suffer.

Future generations of flat panel displays, air data systems,

engine and fuel displays, flight management systems and autothrottle technology which embody new technologies or new industry standards

could render the Company’s products obsolete.

The market for aviation products is subject to rapid technological change,

new product introductions, changes in customer preferences, and evolving industry standards and government regulations.

The Company’s

future success will depend on its ability to:

The ongoing global outbreak of coronavirus, which was declared a pandemic by the World Health Organization on March 11, 2020 and a national emergency by the President of the United States on March 13, 2020, has caused and is continuing to cause business slowdowns and shutdowns and turmoil in the financial markets both in the United States and abroad.

IS&S is monitoring the impact of the COVID-19 pandemic on its business, including how it has impacted and will impact the Company’s employees, customers, suppliers and distribution channels.

The COVID-19 pandemic, as well as the quarantines and other governmental and non-governmental restrictions that have been imposed throughout the world in an effort to contain or mitigate the spread of the coronavirus, has created significant volatility, uncertainty and disruption which may adversely affect IS&S’ business and has caused and is continuing to cause significant market turbulence and disruption that may continue for some time even after business restrictions are lifted and the threat of the coronavirus diminishes.

For example, governmental authorities in several jurisdictions have recently implemented or reimplemented orders mandating the cessation of all business activity that is deemed non-essential and, although the Company’s business has to date been deemed essential in many affected markets, there is a risk that these shutdown orders will be extended or expanded or that similar shutdown orders will be implemented in other regions.

While the Company has not yet seen a material impact from the COVID-19 pandemic on its business, financial position, liquidity, or ability to service customers or maintain critical operations, the nature and magnitude of this unprecedented crisis’ ultimate impact on the Company will depend on numerous evolving factors, future developments and cascading effects of the coronavirus pandemic that the Company is not able to predict, including:

the duration and severity of the COVID-19 pandemic and the international actions and business restrictions that are being undertaken and implemented as a result of it;

governmental, business and other responses to the COVID-19 pandemic, including the promotion of “social distancing,” the issuance of shelter in place orders and restrictions on the Company’s operations, and the possibility that government officials may mandate that the Company provide products or services;

the possibility that the COVID-19 pandemic will directly or indirectly delay the issuance of required government approvals, including necessary certifications from the FAA;

potential disruptions in the Company’s supply chain;

the impact of the COVID-19 pandemic on the Company’s ability to execute its short term and long-term business strategies and initiatives;

the extent to which forced remote working arrangements reduce the Company’s ability to manage its business effectively;

the extent to which staffing shortages due to members of the Company’s workforce being quarantined or exposed to the coronavirus may be detrimental to the Company’s

and the possibility that federal or state governments (including government agencies such as the Treasury Department, the Small Business Administration or the SEC) could promulgate new statutes, regulations, guidance or relief measures, or rescind or modify existing statutes, regulations, guidance or relief measures, in a way that is detrimental to the Company or its business in light of the Company’s prior Paycheck Protection Program loan.

In addition, while the Company cannot predict the magnitude of the impact that the COVID-19 pandemic will have on its customers and suppliers or their financial conditions, any material effect on the Company’s customers or suppliers could adversely impact the Company.

For example, the Company’s customers or suppliers may themselves assert, or attempt to terminate various agreements and arrangements with us on the basis of, contractual force majeure provisions, and any termination of a significant commercial agreement may adversely harm our operations.

Earlier 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 will result in other suspensions, delays or order cancellations by the Company’s customers or suppliers.

Additionally, the COVID-19 pandemic and related travel restrictions and other containment efforts have had a significant impact on the travel industry, which may result in reduced demand for products in the general aviation and commercial air transport markets and therefore for the Company’s products and systems.

The impact of the COVID-19 pandemic may also exacerbate other risk factors described under this Part I, Item 1A of this Report, any of which could have a material effect on the Company.

For example, the risks associated with potential cybersecurity threats may be magnified given that many of the Company’s employees are currently working remotely using personal electronic devices and home internet connections.

The extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, as information is rapidly evolving with respect to the duration and severity of the COVID-19 pandemic.

At this point, the Company cannot reasonably estimate the duration and severity of the COVID-19 pandemic or its overall impact on the Company’s business.

If IS&S is unable to respond to rapid technological change, its products could become obsolete and its reputation could suffer.

Future generations of flat panel displays, air data systems, engine and fuel displays, flight management systems and autothrottle technology which embody new technologies or new industry standards could render the Company’s products obsolete.

The market for aviation products is subject to rapid technological change, new product introductions, changes in customer preferences, and evolving industry standards and government regulations.

The Company’s future success will depend on its ability to:

● embrace rapidly changing technologies;

adapt the Company’s products to evolving industry standards and government regulations;

develop and introduce timely, high-quality, cost effective new products and product enhancements to address the increasingly

sophisticated needs of its customers.

If IS&S fails to modify or improve its products in response

to evolving industry standards and government regulations, its products could rapidly become obsolete.

The Company’s products are currently subject to direct

regulation by the FAA and other equivalent organizations.

The Company’s products, as they relate to aircraft applications,

must be approved by the FAA, EASA, or other equivalent organizations before they can be installed in an aircraft.

To be certified, IS&S

must demonstrate that its products are accurate and able to maintain certain levels of repeatability over time.

Although the certification

requirements of the FAA and EASA are substantially similar, no formal reciprocity exists between the two regulators.

even though the Company’s products are FAA approved, the Company may need to obtain approval from EASA or other appropriate

organizations to have them certified for installation outside the United States.

Significant delay in receiving certification for newly developed

products or enhancements to the Company’s products, or the loss of certification for its existing products, could result

in lost sales or delays in sales.

Furthermore, new regulations or product standards, and changes to existing product standards

could require IS&S to change its products and underlying technology.

IS&S cannot ensure that it will receive regulatory

approval on a timely basis or at all.

IS&S relies on third-party suppliers for components of

its products, including any necessary raw materials, and any interruption in the supply of these components could hinder its ability

to deliver products on a timely basis.

The Company’s manufacturing process consists primarily

of assembling components purchased from its supply chain.

The suppliers may not continue to be available to IS&S, including

as a result of the impact of the COVID-19 pandemic on their businesses or financial conditions.

If the Company is unable to maintain

relationships with key third-party suppliers, the development and distribution of its products could be delayed until equivalent

components can be obtained and integrated into the products.

In addition, substitution of certain components from other manufacturers

may require product redesign or FAA, EASA or other approvals, which could delay the Company’s ability to ship products, and

any increase in component costs, including the costs of any necessary raw materials, in the Company’s supply chain could

adversely affect the Company’s results of operations.

Inasmuch as the Company’s products utilize sophisticated

technology and are deployed in complex aircraft cockpit environments, problems with these products may arise that could harm the

Company’s reputation for quality assurance and, consequently, its business prospects.

The Company’s products use complex system designs and

components that may contain errors, omissions, or defects, particularly when the Company incorporates new technologies into its

products or when it releases new versions or enhancements of its existing products.

Despite the Company’s quality assurance

process, errors, omissions or defects could occur in its current products, in new products, or in new versions or enhancements

of existing products.

● adapt the Company’s products to evolving industry standards and government regulations;

● develop and introduce timely, high-quality, cost effective new products and product enhancements to address the increasingly sophisticated needs of its customers.

If IS&S fails to modify or improve its products in response to evolving industry standards and government regulations, its products could rapidly become obsolete.

The Company’s products are currently subject to direct regulation by the FAA and other equivalent organizations.

The Company’s products, as they relate to aircraft applications, must be approved by the FAA, EASA, or other equivalent organizations before they can be installed in an aircraft.

To be certified, IS&S must demonstrate that its products are accurate and able to maintain certain levels of repeatability over time.

Although the certification requirements of the FAA and EASA are substantially similar, no formal reciprocity exists between the two regulators.

Accordingly, even though the Company’s products are FAA approved, the Company may need to obtain approval from EASA or other appropriate organizations to have them certified for installation outside the United States.

Significant delay in receiving certification for newly developed products or enhancements to the Company’s products, or the loss of certification for its existing products, could result in lost sales or delays in sales.

Furthermore, new regulations or product standards, and changes to existing product standards could require IS&S to change its products and underlying technology.

IS&S cannot ensure that it will receive regulatory approval on a timely basis or at all.

IS&S relies on third-party suppliers for components of its products, including any necessary raw materials, and any interruption in the supply of these components could hinder its ability to deliver products on a timely basis.

The Company’s manufacturing process consists primarily of assembling components purchased from its supply chain.

The suppliers may not continue to be available to IS&S, including as a result of the impact of the COVID-19 pandemic on their businesses or financial conditions.

If the Company is unable to maintain relationships with key third-party suppliers, the development and distribution of its products could be delayed until equivalent components can be obtained and integrated into the products.

In addition, substitution of certain components from other manufacturers may require product redesign or FAA, EASA or other approvals, which could delay the Company’s ability to ship products, and any increase in component costs, including the costs of any necessary raw materials, in the Company’s supply chain could adversely affect the Company’s results of operations.

Inasmuch as the Company’s products utilize sophisticated technology and are deployed in complex aircraft cockpit environments, problems with these products may arise that could harm the Company’s reputation for quality assurance and, consequently, its business prospects.

The Company’s products use complex system designs and components that may contain errors, omissions, or defects, particularly when the Company incorporates new technologies into its products or when it releases new versions or enhancements of its existing products.

Despite the Company’s quality assurance process, errors, omissions or defects could occur in its current products, in new products, or in new versions or enhancements of existing products.

IS&S may be required to redesign or recall those products or pay damages.

Such an event could result

in the following:

Such an event could result in the following:

● delay or loss of revenues;

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● diversion of development resources;

damage to the Company’s reputation;

● damage to the Company’s reputation;

● increased service and warranty costs;

● litigation costs.

Although IS&S carries product liability insurance, this

insurance may not be adequate to cover its losses in the event of a large product liability claim.

In addition, IS&S may

not be able to maintain such insurance in the future.

The Company’s success depends on its ability to protect

its proprietary rights against potential risk of infringement.

If IS&S is unable to protect and enforce its intellectual property

rights, it may be unable to compete effectively.

The Company’s success and ability to compete will depend

in part on its ability to obtain and maintain patent or other protection for its technology and products, both in the United States

and internationally.

Although IS&S carries product liability insurance, this insurance may not be adequate to cover its losses in the event of a large product liability claim.

In addition, IS&S may not be able to maintain such insurance in the future.

The Company’s success depends on its ability to protect its proprietary rights against potential risk of infringement.

If IS&S is unable to protect and enforce its intellectual property rights, it may be unable to compete effectively.

The Company’s success and ability to compete will depend in part on its ability to obtain and maintain patent or other protection for its technology and products, both in the United States and internationally.

In addition, IS&S must operate without infringing the proprietary rights of others.

As of September 30, 2021, IS&S holds 50 U.S.

patents and has 8 U.S.

patent applications pending relating to its technology.

In addition, the Company holds 102 international patents and

has 12 international patent applications pending.

IS&S cannot be certain that patents will be issued on any of its present

or future applications.

In addition, existing patents or future patents may not adequately protect the Company’s technology

if they are not broad enough or are successfully challenged, or if other entities are able to develop competing methods without

violating its patents.

If IS&S is not successful in protecting its intellectual property, competitors could begin to offer

products that incorporate its technology.

Patent protection involves complex legal and factual questions, and, therefore, is highly

In addition, the Company holds 124 international patents and has 11 international patent applications pending.

IS&S cannot be certain that patents will be issued on any of its present or future applications.

In addition, existing patents or future patents may not adequately protect the Company’s technology if they are not broad enough or are successfully challenged, or if other entities are able to develop competing methods without violating its patents.

If IS&S is not successful in protecting its intellectual property, competitors could begin to offer products that incorporate its technology.

Patent protection involves complex legal and factual questions, and, therefore, is highly uncertain.

Litigation relating to intellectual property is often very time consuming and expensive.

If a successful claim of patent

infringement were made against IS&S, and if the Company were unable to develop non-infringing technology, or to license the

infringed or similar technology on a timely and cost-effective basis, the Company might not be able to produce and sell some of

its products.

Further, IS&S has incurred, and may continue to incur, significant legal and other costs in defense of its

intellectual property.

IS&S depends on key personnel to manage its business

effectively, and an inability to retain its key employees and plan for management succession could adversely impact the Company’s

ability to compete.

The Company’s success depends on the efforts, abilities,

and expertise of its senior management and other key personnel.

There can be no assurance IS&S will be able to retain such

employees, and the loss of some could damage its ability to execute its business strategy.

The Company intends to continue hiring

key management, engineering, and sales and marketing personnel.

Competition for skilled personnel is intense, and IS&S may

not be able to attract or retain additional qualified personnel.

Company’s future success will depend in part on its ability to implement and improve its operational, administrative and

financial systems and controls and to manage, train and expand its employee base.

IS&S cannot provide assurance that current

and planned personnel levels, systems, procedures, and controls will be adequate to support its current and future customer base.

If a successful claim of patent infringement were made against IS&S, and if the Company were unable to develop non-infringing technology, or to license the infringed or similar technology on a timely and cost-effective basis, the Company might not be able to produce and sell some of its products.

Further, IS&S has incurred, and may continue to incur, significant legal and other costs in defense of its intellectual property.

IS&S depends on key personnel to manage its business effectively, and an inability to retain its key employees and plan for management succession could adversely impact the Company’s ability to compete.

The Company’s success depends on the efforts, abilities, and expertise of its senior management and other key personnel.

There can be no assurance IS&S will be able to retain such employees, and the loss of some could damage its ability to execute its business

The Company intends to continue hiring key management, engineering, and sales and marketing personnel.

Competition for skilled personnel is intense, and IS&S may not be able to attract or retain additional qualified personnel.

The Company’s future success will depend in part on its ability to implement and improve its operational, administrative and financial systems and controls and to manage, train and expand its employee base.

IS&S cannot provide assurance that current and planned personnel levels, systems, procedures, and controls will be adequate to support its current and future customer base.

In such a circumstance, the Company may not be able to fully capitalize on existing and potential market opportunities.

Any delays or difficulties encountered could impair the Company’s ability to attract new customers or maintain its relationships

with existing customers.

Any delays or difficulties encountered could impair the Company’s ability to attract new customers or maintain its relationships with existing customers.

In addition, effective succession planning is important to our long-term success.

Failure to ensure effective

transfer of knowledge and smooth transitions involving senior management and other key personnel could hinder our strategic planning

and execution.

The Company’s revenue and operating results may vary

significantly from quarter to quarter, which may cause its stock price to decline.

The Company’s revenue and operating results may vary significantly

from quarter to quarter because of a number of factors, including, but not limited to:

Failure to ensure effective transfer of knowledge and smooth transitions involving senior management and other key personnel could hinder our strategic planning and execution.

The Company’s revenue and operating results may vary significantly from quarter to quarter, which may cause its stock price to decline.

The Company’s revenue and operating results may vary significantly from quarter to quarter because of a number of factors, including, but not limited to:

● demand for products and/or delivery schedule changes by its customers;

● capital expenditure budgets of aircraft owners and operators, and appropriation cycles of the U.S.

changes in the use of the Company’s products, including air data systems, flat panel displays, flight management systems

and autothrottle technology;

● changes in the use of the Company’s products, including air data systems, flat panel displays, flight management systems and autothrottle technology;

● delays in introducing or obtaining government approval for new products;

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● costs related to possible acquisition of technologies or businesses.

A cyber security incident or other technology disruption

could have a negative impact on our business.

face certain security threats and technology disruptions, including threats to our information technology (“IT”) infrastructure,

attempts to gain access to our or our customers’

proprietary or classified information, threats of terrorism events, and

failures of our technology tools and systems.

Our IT networks and related systems are critical to the operation of our business

and essential to our ability to successfully perform day-to-day operations.

We are also involved with IT systems for certain customers

and other third parties, for which we face similar security threats as for our own, in particular the DoD.

In particular, cybersecurity

threats—which include, but are not limited to, computer viruses, spyware and malware, attempts to access information,

denial of service attacks and other electronic security breaches—are persistent and evolve quickly.

In general, such threats

have increased in frequency, scope and potential impact in recent years.

Further, a variety of technological tools and systems,

including both company-owned IT and technological services provided by outside parties, support our critical functions.

These technologies,

as well as our products, are subject to failure and the user’s inability to have such technologies properly supported, updated,

expanded or integrated into other technologies and, in certain cases, may contain open source and third-party software which may

unbeknownst to us contain defects or viruses that pose unintended risks.

These risks, if not effectively mitigated or controlled,

could materially harm our business or reputation.

While we believe that we have implemented appropriate measures and controls,

there can be no assurance that such actions will be sufficient to prevent disruptions to critical systems, unauthorized release

of confidential information or corruption of data.

The security measures we have implemented may become subject

to third-party security breaches, employee error, malfeasance, faulty password management or other irregularities.

third parties may attempt to fraudulently induce employees or customers into disclosing user names, passwords or other sensitive

information, which may in turn be used to access our IT systems.

A cyber security incident or other technology disruption could have a negative impact on our business.

We face certain security threats and technology disruptions, including threats to our information technology (“IT”) infrastructure, attempts to gain access to our or our customers’ proprietary or classified information, threats of terrorism events, and failures of our technology tools and systems.

Our IT networks and related systems are critical to the operation of our business and essential to our ability to successfully perform day-to-day operations.

We are also involved with IT systems for certain customers and other third parties, for which we face similar security threats as for our own, in particular the DoD.

In particular, cybersecurity threats—which include, but are not limited to, computer viruses, spyware and malware, attempts to access information, denial of service attacks and other electronic security breaches—are persistent and evolve quickly.

In general, such threats have increased in frequency, scope and potential impact in recent years.

Further, a variety of technological tools and systems, including both company-owned IT and technological services provided by outside parties, support our critical functions.

These technologies, as well as our products, are subject to failure and the user’s inability to have such technologies properly supported, updated, expanded or integrated into other technologies and, in certain cases, may contain open source and third-party software which may unbeknownst to us contain defects or viruses that pose unintended risks.

These risks, if not effectively mitigated or controlled, could materially harm our business or reputation.

While we believe that we have implemented appropriate measures and controls, there can be no assurance that such actions will be sufficient to prevent disruptions to critical systems, unauthorized release of confidential information or corruption of data.

The security measures we have implemented may become subject to third-party security breaches, employee error, malfeasance, faulty password management or other irregularities.

For example, third parties may attempt to fraudulently induce employees or customers into disclosing user names, passwords or other sensitive information, which may in turn be used to access our IT systems.

These security systems cannot provide absolute security.

extent we were to experience a breach of our systems and were unable to protect sensitive data, such a breach could materially

damage business partner and customer relationships, and curtail or otherwise impact the use of our IT systems.

Moreover, if a security

breach of our IT systems affects our computer systems or results in the release of personally identifiable or other sensitive information

of customers, business partners, employees and other third parties, our reputation and brand could be materially damaged, use of

our products and services could decrease, and we could be exposed to a risk of loss, litigation and potential liability.

Such an event could require significant

management attention and resources, negatively impact our reputation among our customers and the public and challenge our eligibility

for future work on sensitive or classified systems, which could have a material adverse effect on our business, financial condition

and results of operations.

Litigation with customers, employees and others could harm

our reputation and impact operating results.

the ordinary course of business, we may be involved in lawsuits and regulatory actions with customers, employees and others.

Additionally,

we may be subject to employment-related claims alleging discrimination, harassment, wrongful termination and wage issues, including

those relating to overtime compensation.

We are susceptible to claims filed by customers alleging responsibility for breaches of

contract or from product defects, and we are also subject to lawsuits filed by patent holders alleging patent infringement.

types of claims, as well as other types of lawsuits to which we are subject from time to time, can distract management’s

attention from core business operations and impact operating results, particularly if a lawsuit results in an unfavorable outcome,

or could harm the Company’s reputation with customers, employees, investors and others.

Tax changes could affect the Company’s effective

tax rate and future profitability.

The Company’s future results could be affected negatively

by changes in the effective tax rate as a result of changes in the overall profitability and changes to statutory tax rates in

the United States and in other jurisdictions, changes in tax legislation, and the results of audits and examinations of previously

filed tax returns.

In addition, adverse changes in the underlying profitability and financial outlook of our operations or future

changes in tax law could lead to changes in the value of tax assets or liabilities that we currently or in the future may hold,

which could materially affect our results of operations.

Further, the nature and impact of any future changes to tax law, and the

resulting impact on our business, financial condition and results of operations, are uncertain.

Company is subject to various laws and regulations.

Changes to, or failure by the Company to comply with, these laws

and regulations could have a significant impact on the Company’s business and operations.

Company is subject to, and must comply with, various laws and regulations, including, but not limited to, the product-related

and other regulations of the FAA and the EASA, U.S.

government procurement regulations, the rules and regulations of the SEC, and

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.

Failure to comply with all applicable laws

could result in investigation and remediation costs to the Company and could adversely impact the operations and profits of the

In addition, the evolving and at times overlapping regulatory regimes to which the Company is subject may change at any

time, including as a result of the upcoming change in the U.S.

To the extent we were to experience a breach of our systems and were unable to protect sensitive data, such a breach could materially damage business partner and customer relationships, and curtail or otherwise impact the use of our IT systems.

Moreover, if a security breach of our IT systems affects our computer systems or results in the release of personally identifiable or other sensitive information of customers, business partners, employees and other third parties, our reputation and brand could be materially damaged, use of our products and services could decrease, and we could be exposed to a risk of loss, litigation and potential liability.

Such an event could require significant management attention and resources, negatively impact our reputation among our customers and the public and challenge our eligibility for future work on sensitive or classified systems, which could have a material adverse effect on our business, financial condition and results of operations.

Litigation with customers, employees and others could harm our reputation and impact operating results.

In the ordinary course of business, we may be involved in lawsuits and regulatory actions with customers, employees and others.

Additionally, we may be subject to employment-related claims alleging discrimination, harassment, wrongful termination and wage issues, including those relating to overtime compensation.

We are susceptible to claims filed by customers alleging responsibility for breaches of contract or from product defects, and we are also subject to lawsuits filed by patent holders alleging patent infringement.

These types of claims, as well as other types of lawsuits to which we are subject from time to time, can distract management’s attention from core business operations and impact operating results, particularly if a lawsuit results in an unfavorable outcome, or could harm the Company’s reputation with customers, employees, investors and others.

Tax changes could affect the Company’s effective tax rate and future profitability.

The Company’s future results could be affected negatively by changes in the effective tax rate as a result of changes in the overall profitability and changes to statutory tax rates in the United States and in other jurisdictions, changes in tax legislation, and the results of audits and examinations of previously filed tax returns.

In addition, adverse changes in the underlying profitability and financial outlook of our operations or future changes in tax law could lead to changes in the value of tax assets or liabilities that we currently or in the future may hold, which could materially affect our results of operations.

Further, the nature and impact of any future changes to tax law, and the resulting impact on our business, financial condition and results of operations, are uncertain.

The Company is subject to various laws and regulations.

Changes to, or failure by the Company to comply with, these laws and regulations could have a significant impact on the Company’s business and operations.

The Company is subject to, and must comply with, various laws and regulations, including, but not limited to, the product-related and other regulations of the FAA and the EASA, U.S.

government procurement regulations, the rules and regulations of the SEC, and 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.

Failure to comply with all applicable laws could result in investigation and remediation costs to the Company and could adversely impact the operations and profits of the Company.

In addition, the evolving and at times overlapping regulatory regimes to which the Company is subject may change at any time, including as a result of the upcoming change in the U.S.

presidential administration.

Any changes to existing laws or regulations,

or the adoption of new laws or regulations, could increase our compliance costs and operating costs.

In addition, failure to timely

comply with regulatory changes could cause payments to be withheld and/or an impact on future business.

The economic effects of “Brexit”

may affect relationships

with existing and future customers and could have an adverse impact on our business, financial condition, operating results and

June 2016, the United Kingdom (the “U.K.”) held a referendum in which voters approved an exit from the European Union

(“E.U.”), commonly referred to as “Brexit.”

On January 31, 2020, the U.K.

officially left the E.U.

to Brexit, with a transitional period during which the U.K.

remains bound to the E.U.’s rules and regulations, which is set

to expire on December 31, 2020.

The ultimate impact on the Company’s business as a result of Brexit will depend, in

part, on the outcome of tariff, trade, regulatory and other negotiations and on the ultimate manner and timing of the U.K.’s

final withdrawal from the E.U.

following the transitional period.

As a result of the referendum, the global

markets and currencies have been adversely impacted, including a sharp decline in the value of the British pound as compared to

Any changes to existing laws or regulations, or the adoption of new laws or regulations, could increase our compliance costs and operating costs.

In addition, failure to timely comply with regulatory changes could cause payments to be withheld and/or an impact on future business.

The economic effects of the United Kingdom’s exit from the European Union may affect relationships with existing and future customers and could have an adverse impact on our business, financial condition, operating results and cash flows.

In June 2016, the United Kingdom (the “U.K.”) held a referendum in which voters approved an exit from the European Union (“E.U.”), commonly referred to as “Brexit.” The U.K.

formally exited the E.U.

on January 30, 2020, which exit was followed by a transitional period which ended on December 31, 2020.

On December 24, 2020, the E.U.

agreed to terms of a trade and cooperation agreement which sets out the terms of their future relationship (the “Trade Agreement”).

The Trade Agreement offers U.K.

businesses preferential access to each other’s markets, ensuring imported goods will be free of tariffs and quotas.

However, economic relations between the U.K.

will now be on more restricted terms than before and there remains uncertainty around the post-Brexit regulatory environment, as the provisions of the Trade Agreement do not cover the services sector.

As a result of Brexit, the global markets and currencies have been adversely impacted, including a decline in the value of the British pound as compared to the U.S.

A potential devaluation of the local currencies of our international customers relative to the U.S.

impair the purchasing power of our international customers and could cause international customers to decrease their volume of

orders or cancel orders completely.

may also lead to legal uncertainty and potentially divergent national laws and regulations as the U.K.

dollar may impair the purchasing power of our international customers and could cause international customers to decrease their volume of orders or cancel orders completely.

Brexit may also lead to legal uncertainty and potentially divergent national laws and regulations as the U.K.

determines which E.U.

to replace or replicate, and those laws and regulations may be cumbersome, difficult or costly in terms of compliance.

effects of Brexit, among others, could adversely affect our business, financial condition, operating results and cash flows.

Volatility and weakness in capital markets may adversely

affect credit availability and related financing costs, which could adversely affect IS&S.

Bank and capital markets can experience

periods of volatility and disruption.

laws to replace or replicate, and those laws and regulations may be cumbersome, difficult or costly in terms of compliance.

Any of these effects of Brexit, among others, could adversely affect our business, financial condition, operating results and cash flows.

Volatility and weakness in capital markets may adversely affect credit availability and related financing costs, which could adversely affect IS&S.

Bank and capital markets can experience periods of volatility and disruption.

During these periods of volatility and disruption, risks to IS&S include:

declines in revenues and profitability from reduced orders, payment delays or other factors caused by the economic problems

of customers;

● declines in revenues and profitability from reduced orders, payment delays or other factors caused by the economic problems of customers;

● reprioritization of government spending away from defense programs in which IS&S participates;

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● disruptions in supplies associated with any financial constraints faced by vendors.

If the Company fails to maintain an effective system of internal

control over financial reporting, it may not be able to accurately report its financial condition, results of operations or cash

flows, which may adversely affect investor confidence in the Company and, as a result, the value of the Company’s common

The Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley

Act”) requires, among other things, that the Company maintain effective internal control over financial reporting and disclosure

controls and procedures.

Under Section 404 of the Sarbanes-Oxley Act, the Company is required to furnish a report by management

on, among other things, the effectiveness of the Company’s internal control over financial reporting.

This assessment must

include disclosure of any material weaknesses identified by management in the Company’s internal control over financial reporting.

A material weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting

that results in more than a reasonable possibility that a material misstatement of annual or interim financial statements will

not be prevented or detected on a timely basis.

Section 404 of the Sarbanes-Oxley Act also generally requires an attestation

from the Company’s independent registered public accounting firm on the effectiveness of the Company’s internal control

over financial reporting.

The Company’s compliance with Section 404 requires

that it compile the system and process documentation necessary to perform an appropriate evaluation.

During the evaluation and

testing process, if the Company identifies one or more material weaknesses in its internal control over financial reporting, it

will be unable to assert that its internal control over financial reporting is effective.

The Company cannot assure you that there

will not be material weaknesses or significant deficiencies in its internal control over financial reporting in the future.

failure to maintain internal control over financial reporting could severely inhibit the Company’s ability to accurately

report its financial condition, results of operations or cash flows.

If the Company is unable to conclude that its internal control

over financial reporting is effective, or if its independent registered public accounting firm determines the Company has a material

weakness or significant deficiency in its internal control over financial reporting once that firm begin its reviews, the Company

could lose investor confidence in the accuracy and completeness of its financial reports, the market price of its common stock

could decline, and it could be subject to sanctions or investigations by NASDAQ, the Securities and Exchange Commission or other

regulatory authorities.

Failure to remedy any material weakness in the Company’s internal control over financial reporting,

or to implement or maintain other effective control systems required of public companies, could also restrict the Company’s

future access to the capital markets.

If the Company fails to maintain an effective system of internal control over financial reporting, it may not be able to accurately report its financial condition, results of operations or cash flows, which may adversely affect investor confidence in the Company and, as a result, the value of the Company’s common stock.

The Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”) requires, among other things, that the Company maintain effective internal control over financial reporting and disclosure controls and procedures.

Under Section 404 of the Sarbanes-Oxley Act, the Company is required to furnish a report by management on, among other things, the effectiveness of the Company’s internal control over financial reporting.

This assessment must include disclosure of any material weaknesses identified by management in the Company’s internal control over financial reporting.

A material weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting that results in more than a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

Section 404 of the Sarbanes-Oxley Act also generally requires an attestation from the Company’s independent registered public accounting firm on the effectiveness of the Company’s internal control over financial reporting.

The Company’s compliance with Section 404 requires that it compile the system and process documentation necessary to perform an appropriate evaluation.

During the evaluation and testing process, if the Company identifies one or more material weaknesses in its internal control over financial reporting, it will be unable to assert that its internal control over financial reporting is effective.

The Company cannot assure you that there will not be material weaknesses or significant deficiencies in its internal control over financial reporting in the future.

Any failure to maintain internal control over financial reporting could severely inhibit the Company’s ability to accurately report its financial condition, results of operations or cash flows.

If the Company is unable to conclude that its internal control over financial reporting is effective, or if its independent registered public accounting firm determines the Company has a material weakness or significant deficiency in its internal control over financial reporting once that firm begin its reviews, the Company could lose investor confidence in the accuracy and completeness of its financial reports, the market price of its common stock could decline, and it could be subject to sanctions or investigations by NASDAQ, the Securities and Exchange Commission or other regulatory authorities.

Failure to remedy any material weakness in the Company’s internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict the Company’s future access to the capital markets.

Unresolved Staff Comments.

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

What changed 10-K

Item 1A. Risk Factors