What changed in this filing

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Item 1. Business

2025-12-23 compared with 2024-12-30 · 141 added, 129 removed, 126 unchanged (68% of the section changed)

As used in this Annual Report on Form 10-K, unless expressly stated otherwise or the context otherwise requires, the terms “ISSC” or “the Company”, “we”, “us” and “our”, refers to Innovative Solutions & Support and its subsidiaries.

Incorporated in Pennsylvania in 1988, ISSC is a vertically integrated provider of flight solutions and equipment to commercial air transport, general aviation markets, the United States Department of Defense (“DoD”) and allied foreign militaries.

As used in this Annual Report on Form 10-K, unless expressly stated otherwise or the context otherwise requires, the terms “IA” or “the Company”, “we”, “us” and “our”, refers to Innovative Solutions & Support, Inc.

dba Innovative Aerosystems and its subsidiaries.

Incorporated in Pennsylvania in 1988, IA is a vertically integrated provider of flight solutions and equipment to commercial air transport, general aviation markets, the United States Department of Defense (“DoD”) and allied foreign militaries.

On October 6, 2025, the Company rebranded and adopted our new trade name, Innovative Aerosystems.

We operate in one business segment that designs, develops, manufactures, sells and services avionics products and systems for retrofit applications and Original Equipment Manufacturers (“OEMs”).

In the fiscal year 2024 ended September 30, 2024, we reported net sales of $47.2 million, an increase of 35.6% on a year-over-year basis from $34.8 million in the fiscal year ended 2023, and net income of $7.0 increased 16.1% from $6.0 million in fiscal 2023.

In the fiscal year ended September 30, 2025, we reported net sales of $84.3 million, an increase of 78.6% on a year-over-year basis from $47.2 million in the fiscal year ended September 30, 2024, and net income of $15.6 million, an increase of 123.3% on a year-over-year basis from $7.0 million in the fiscal year ended September 30, 2024.

At September 30, 2025, our backlog was $77.4 million compared with $89.2 million at September 30, 2024.

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Backlog is converted into sales in future periods as work is performed or deliveries are made.

Our backlog does not include additional future orders that may be received under our current OEM contracts.

We expect to recognize approximately 44 % of our backlog over the next 12 months and approximately 92% over the next 24 months as revenue, with the remainder recognized thereafter.

During fiscal 2024, we made important progress on our commercial growth strategy highlighted by several key awards and contract wins across our commercial, military and business aviation markets.

During the fiscal year ended September 30, 2025, we made important progress on our commercial growth strategy, highlighted by several key awards and contract wins across our commercial, military and business aviation markets.

In October 2024, we announced our ThrustSense® Autothrottle system was selected by the US Army to be installed on their C-12 (B200) aircraft equipped with ProLine21 avionics suites®.

Deliveries of the IS&S ThrustSense Autothrottle system for this application began in September 2024, with ongoing installations anticipated.

Deliveries of the ThrustSense® Autothrottle system for this application began in September 2024, with ongoing installations anticipated.

In August 2024, we received a multi-million dollar production contract from a major aerospace company to supply our 19” Multifunction Display (MFD) with Integrated Mission Computer.

This order marks our latest OEM contract and builds on existing programs with Pilatus Aircraft (“Pilatus”) for the PC-24, Textron Aviation (“Textron”) for the King Air 260/360 and The Boeing Company (“Boeing”) for the KC-46A, KC-767 and the T-7A.

In June 2023, the Company entered into an Asset Purchase and License Agreement (the “June 2023 Honeywell Agreement”) with Honeywell International, Inc.

(“Honeywell”) pursuant to which Honeywell sold, assigned or licensed certain assets related to its inertial, communication and navigation product lines, including a sale of certain inventory, equipment and customer-related documents, an assignment of certain contracts and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its inertial, communication and navigation product lines to repair, overhaul, manufacture sell, import, export and distribute certain products to the Company for cash consideration of $35.9 million.

In July 2024, the Company entered into an exclusive license agreement and acquired additional key assets for certain communication and navigation product lines from Honeywell (the “July 2024 Honeywell Asset Acquisition”).

This transaction complements the previous Honeywell license and asset acquisition completed in June 2023.

Total consideration was $4.2 million in cash.

On September 27, 2024, the Company entered into a second Asset Purchase and License Agreement (the “September 2024 Honeywell Agreement”) with Honeywell, pursuant to which Honeywell sold, assigned or licensed certain assets related to its various generations of military display generators and flight control computers, including a sale of certain inventory, equipment and customer-related documents;

an assignment of certain contracts;

and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its various generations of military display generators and flight control computers to repair, overhaul, manufacture sell, import, export and distribute certain products to the Company for consideration of $14.2 million in cash.

The exclusive licensing of these product lines from Honeywell is a unique opportunity for the Company that enhances its current offerings in the air transport, military and business aviation markets.

In addition, there are potential cost synergies from better utilization of the Company’s skilled engineering team and its existing operational capacity.

The Company believes the September 2024 Honeywell Agreement will help to accelerate the Company’s growth and enhance its global reputation for delivering best price-for-performance product and service solutions.

This order marks our latest OEM contract and builds on existing programs with Pilatus for the PC-24, Textron for the King Air 260/360 and Boeing for the KC-46A, KC-767 and the T-7A

OUR BUSINESS MODEL

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As a systems integrator, we leverage our proven expertise in developing end-to-end systems that combine mechanical, electrical, software, and avionics components into an integrated solution.

Our activities as an integrator includes system design and analysis;

Our activities as an integrator include system design and analysis;

integration and testing;

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Currently, we support multiple OEM platforms, including those with the Boeing Company, Eclipse Aerospace, Lockheed Martin, and Pilatus Aircraft.

The Company manufactures, markets and sells a wide variety of high-value, advanced avionics solutions for commercial air transport, business aviation and military customers.

It sources its products through internal research and development efforts, in addition to opportunistic licensing and acquisition of mature product lines that complement the Company’s existing business.

The Company believes that the acquisition of additional product lines presents the opportunity for the Company to leverage potential cost synergies from better utilization of the Company’s skill engineering team and its existing operational capacity while expanding the Company’s customer base and providing opportunities for the Company to market its internally developed products to acquired Customers.

As the Company’s product offerings focus on individual avionics components and systems, it is able to market its products to both customers building new aircraft and customers engaged in the retrofit market.

We manufacture, market, and sell a wide range of high-value, advanced avionics solutions for commercial air transport, business aviation, and military customers.

We source our products through internal research and development, as well as through the opportunistic licensing and acquisition of mature product lines that complement our existing business.

We believe that acquiring additional product lines creates opportunities to leverage cost synergies through better utilization of our skilled engineering team and existing operational capacity, while also expanding our customer base.

These acquisitions also enable us to market our internally developed products to newly acquired customers.

As our product offerings focus on individual avionics components and systems, we are able to market our products to both original equipment manufacturers that are building new aircraft and customers participating in the retrofit market.

Our product portfolio consists of the following five categories:

Integrated Flight Deck Systems COCKPIT/IP® that include primary flight/navigation displays, crew alerting and engine displays, integrated standby instruments and mission displays;

Navigation Systems that includes flight management systems, mission computers, navigation radios and transponders.

Communication Systems that includes communication radios, audio panels and radio management units.

Sensors and Control Systems that includes air data computers, attitude and heading reference systems, magnetometers, inertial reference units, GPS receivers, utility management systems and flight control computers.

Advanced Flight Actuators that includes an array of linear and rotary smart-actuators for movement of aircraft levers and surfaces.

Navigation Systems that include flight management systems, mission computers, navigation radios and transponders;

Communication Systems that include communication radios, audio panels and radio management units;

Sensors and Control Systems that include air data computers, attitude and heading reference systems, magnetometers, inertial reference units, GPS receivers, utility management systems and flight control computers;

Advanced Flight Actuators that include an array of linear and rotary smart-actuators for movement of aircraft levers and surfaces.

Manufacturing Engineering & Design

We believe that our customers value our history of technological innovation, new product development and technical expertise across multiple platforms.

As of September 30, 2024, we held more than 120 U.S.

As of September 30, 2025, we held 171 U.S.

and international patents relating to our products and systems.

We invest heavily in engineering and development, with approximately 37 % of our full-time employees serving in engineering-related roles as of September 30, 2025.

We currently operate a 45,000 square foot design, manufacturing, and office facility in Exton, Pennsylvania.

ISSC is ISO 9001 and AS9100D 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.

The Company’s certification to these standards allows ISSC to represent to customers that it maintains high-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.

We are currently expanding our Exton facility to add 40,000 square feet of capacity.

The additional capacity will be used to support our commercial growth strategy, including opportunities to capitalize on our recent transactions with Honeywell.

The capacity expansion is expected to cost approximately $6 million.

We operate an 85,000-square-foot design, manufacturing, and office facility in Exton, Pennsylvania.

We are certified to both ISO 9001 and AS9100D, internationally recognized standards that define effective quality management practices.

These certifications demonstrate our rigorous processes for employee training, product design, and manufacturing, ensuring that products and related services consistently meet or exceed customer quality requirements.

All of our products also undergo extensive, fully documented quality-control testing before shipment.

In the quarter ended June 30, 2025, the Company completed construction of an additional 40,000 square feet of capacity at the Exton facility, expanding it to a total of 85,000 square feet.

This expansion is expected to increase IA’s manufacturing capacity by more than 300%, supporting our commercial growth strategy and enabling IA to capitalize on recent transactions with Honeywell.

We expect to leverage this more than three-fold increase in capacity to meet growing demand and scale production efficiently.

Sales & Marketing

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Most of our raw materials and component parts are generally available from multiple suppliers at competitive prices.

Disruptions in the global supply chain has resulted in delays in the availability of certain raw materials and increased raw material costs, among other costs such as labor, though the disruptions somewhat improved in fiscal 2024, resulting in a higher stabilization of costs, as fiscal 2024 progressed.

Our business has been adversely affected, though not materially, and could continue to be adversely affected in fiscal 2025 by disruptions in our ability to timely obtain raw materials and components from our suppliers in the quantities we require or on favorable terms.

Although we believe in most cases that we could identify alternative suppliers, or alternative raw materials or component parts, the lengthy and expensive aviation authority and OEM certification processes associated with aerospace products could prevent efficient replacement of a supplier, raw material or component part.

Disruptions in the global supply chain have resulted in delays in the availability of certain raw materials and increased raw material prices, among other costs, including labor.

As the fiscal year ended September 30, 2025 progressed, raw material price escalation moderated, although our ability to obtain raw materials and components in a timely and cost-efficient manner remains a strategic focus entering fiscal year 2026.

Although we continue to evaluate various opportunities to expand our procurement network, OEM certification processes associated with aerospace products could prevent efficient replacement of a supplier, raw material or component part.

The Company’s manufacturing activities consist primarily of assembling and testing components and subassemblies and integrating them into finished systems.

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

During fiscal year 2024, the Company had four suppliers, Honeywell, FilConn, APCT Inc and Brandywine Precision Inc.

that accounted for most of Company’s total inventory related purchases.

When appropriate, the Company enters into long-term supply agreements and uses its relationships with long-term suppliers to improve product quality and availability and reduce delivery times and product costs.

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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.

The Company has not experienced significant delays in delivery of products which could happen as a result of the inability to obtain either component parts or FAA approval of products incorporating new component parts.

OUR CUSTOMERS AND PRODUCT DISTRIBUTION

The Company’s customers include the U.S.

government (including the DoD, the Department of Interior and the Department of Homeland Security), Air Transport Services Group Inc.

(“ATSG”), Amazon.com, Inc., American Airlines, Inc.

(“AAL”), Boeing, Deutsche Post DHL Group, FedEx Corporation (“FedEx”), Icelandair, L3Harris Technologies, Inc.

federal government (including the DoD, the Department of Interior and the Department of Homeland Security), Air Transport Services Group Inc.

(“ATSG”), Amazon.com, Inc., American Airlines, Inc., Boeing, Deutsche Post DHL Group, FedEx Corporation (“FedEx”), Icelandair, L3Harris Technologies, Inc.

(“L3 Harris Technologies”), Lockheed Martin Corporation (“Lockheed Martin”), Pilatus, Sierra Nevada Corporation, Textron, and the Department of National Defense (Canada), among others.

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

In fiscal year 2024, our three largest customers, Pilatus, Textron and Honeywell accounted for 23%, 7% and 7% of total revenue, respectively.

In fiscal year 2023, the three largest customers,

Pilatus, ATSG and Textron accounted for 23%, 12% and 10% of total revenue, respectively.

In fiscal year 2022, the three largest customers, Pilatus, ATSG and Textron accounted for 22%, 22% and 11% of total revenue, respectively.

In the fiscal year ended September 30, 2025, our three largest customers, Lockheed Martin, Pilatus, and Boeing accounted for 36%, 8% and 5% of total revenue, respectively.

In the fiscal year ended September 30, 2024, our three largest customers, Pilatus, Textron and Honeywell accounted for 23%, 7% and 7% of total revenue, respectively.

In fiscal year ended September 30, 2023, the three largest customers, Pilatus, ATSG and Textron accounted for 23%, 12% and 10% of total revenue, respectively.

Retrofit Market

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The Company markets 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, AAL, ATSG, FedEx and Icelandair.

The Company’s commercial fleet customers include or have included, among others, American Airlines, Inc., ATSG, FedEx and Icelandair.

The Company sells these customers a range of products and services.

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Original Equipment Manufacturers

The Company has signed a multi-year agreement with Textron to supply ThrustSense® Autothrottles on their King Air 360 and King Air 260 production aircraft as described above in “Products - ThrustSense® Autothrottle”.

The Company has developed and manufactures the utilities management system for the Pilatus’ PC-24 aircraft under a multi-year production contract as described above under “Products - Utilities Management System.” The Company also markets its products to other OEMs including, among others, Boeing and Lockheed Martin.

The Company sells components to OEMs for use in original construction of aircraft.

The Company has signed a multi-year agreement with Textron to supply ThrustSense® Autothrottles for their King Air 360 and King Air 260 production aircraft.

The Company has also developed and manufactures the utilities management system for the Pilatus’ PC-24 aircraft under a multi-year production contract.

The Company also markets its products to other OEMs including, among others, Boeing and Lockheed Martin.

COMPETITIVE CONDITIONS

We experience competition in our aerospace and defense markets across suppliers of competitive products and services as well as with vertically integrated primes.

We believe that the principal points of competition in our markets are product quality, reliability, price, design and engineering capabilities, product development, conformity to customer specifications, timeliness of delivery, effectiveness of the distribution organization and quality of support after the sale.

We believe IA has demonstrated a track record of performance excellence across each of these areas that has resulted in long-standing customer relationships, often characterized by recurring contractual relationships.

With respect to our products, the Company’s principal competitors include Honeywell Aerospace, Collins Aerospace, GE Aerospace, Thales Defense & Security, Inc., Elbit Systems and Garmin Ltd.

OUR COMPETITIVE STRENGTHS

• Vertically integrated model.

IA can reduce its time-to-market through in-house design, manufacturing and testing capabilities;

full-service integration and repair capabilities;

and deep technical expertise.

• Systems integration expertise.

IA’s extensive system integration expertise is a key differentiator within the market and provides a compelling value to its Company’s customer base.

We believe this expertise enhances ease of installation, reduces aircraft downtime and reduces system complexity.

• Retrofit application expertise.

The average age of the global commercial airline fleet has been increasing over the last 20 years and reached a record level of 14.8 years in late 2024, according to the International Air Transport Association.

Extending an aircraft’s lifespan increases maintenance demands, since age brings wear and tear that requires more frequent and thorough inspections and replacement of parts that fail or reach their lifetime limits.

IA specializes in retrofitting older aircraft with state-of-the-art avionics, such as Flat Panel Display Systems and Autothrottles that significantly improve functionality and compliance with current aviation standards.

• Strong Product and IP Portfolio.

As of September 30, 2025, the Company held 46 U.S.

The Company also holds 125 international patents and has 17 trademarks.

Certain of these patents 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® product.

• Depth of experience in serving global customers.

IA has experience serving both commercial and military customers with global reach, including, among others, Amazon, American Airlines, BAE Systems, Boeing, DHL, Eclipse Aviation, FedEx, Lockheed Martin, Pilatus, and Textron.

INDUSTRY OUTLOOK

We operate in highly competitive markets.

Since our inception more than 35 years ago, our markets have experienced significant growth, leading to new entrants with considerable financial resources and scale.

During this time, IA has built a strong position with a portfolio of established, long-term customers that value our ability to deliver reliable, high-quality products that incorporate advanced technologies together with expert technical support, and a competitive, value-centric approach to product pricing.

We believe that, in times of adverse economic 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 enhancing the retrofit market opportunity for the Company.

A wide range of information is critical for the 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 Automatic Dependent Surveillance-Broadcast (“ADS-B”) navigation.

We believe that aircraft cockpits will continue evolving into comprehensive information centers, delivering an expanding range of data, whether mandated by regulation or demanded by pilots, to support the safe and efficient operation of aircraft.

We further expect the market to progress toward increasingly autonomous flight, with the flight deck integrating additional transitional technologies as the industry advances along the path to full autonomy.

Historically, equipment data, such as engine and fuel-related information, were displayed on 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.

Individual instruments tend to be replaced more frequently than the aircraft itself due to obsolescence and normal wear-and-tear.

Increasingly, operators are replacing their clusters of analog mechanical instruments with integrated display systems, such as IA’s panel displays.

As airspace and airport environments become increasingly congested, the aviation industry and its regulators are placing greater emphasis on technologies, procedures and regulatory frameworks designed to enable higher traffic capacity while maintaining or improving safety, operational efficiency and environmental performance.

Emerging technologies and procedures, including traffic-avoidance systems, ground-awareness tools, enhanced navigation and vertical-position accuracy, runway-incursion prevention technologies and expanded digital communication capabilities, are expected to require new and intuitive methods for presenting situational-awareness information to pilots.

The Company believes that its flat-panel display and other products are well suited to address these evolving requirements and to support the industry’s ongoing demand for improved cockpit information systems.

The foundation of our value creation framework is our focused business strategy which seeks to deliver stable commercial growth, including both organic and inorganic growth, operational excellence and disciplined capital allocation.

Key elements of the strategy include the following:

Targeted Growth

• Expand product line portfolio.

The Company believes that its new Liberty Flight Deck (LFD) will be a key driver of its next phase of growth.

The Liberty Flight Deck is a customer-centric, fully customizable design that can be tailored for most aircraft types, including large passenger and cargo, business aviation, and military applications.

Unique features within the LFD facilitate significant pilot workload reduction that we believe will eventually to lead to single operations in air transport (part 25) aircraft and full flight autonomy over time.

The Company develops innovative products by integrating its avionics, engineering, and design expertise with commercially available technologies, components, and products originating from non-aviation industries, including the personal computer and telecommunications sectors.

The Company’s COCKPIT/IP® system components illustrate its capability to incorporate selected non-avionic technologies into aviation applications.

For example, the Company identified an unmet need in the turboprop aircraft market arising from the absence of an available autothrottle system.

In response, the Company invested in the development of a turboprop autothrottle and subsequently introduced its ThrustSense® Autothrottle, which incorporates patented technologies.

The Company believes that its turboprop autothrottle offers an effective and comparatively less complex solution relative to other available systems and includes multiple sensing and safety features.

The Company intends to continue to pursue opportunities associated with its position as the first provider of an autothrottle system for turboprop aircraft.

• Focus on retrofit opportunity.

Given an aging global aircraft fleet, cockpit avionics upgrades for existing aircraft continue to be a significant opportunity for the Company.

We believe that retrofit of an aircraft with the COCKPIT/IP® FPDS, FMS and integrated standby unit system components is cost effective compared to the acquisition of a new aircraft and can provide similar functionality to that of new aircraft.

• Expand presence in flat panel display market.

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 anticipates that flat panel displays will continue to increasingly replace individual analog and digital instrument LCDs and cathode ray tubes.

The Company anticipates that its 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, we believe that these advantages will allow the Company to generate increased revenues from the COCKPIT/IP® product and increase our market share.

In addition, the Company expects that demand for new aircraft, FAA mandates and obsolescence issues on older aircraft will contribute to this growth.

• Evaluate potential acquisitions and strategic partnerships.

As a part of the Company’s growth strategy, we continuously evaluate acquisition opportunities and opportunities to make investments in complementary businesses, technologies, services or products.

In addition, we may enter into strategic partnerships with parties who can provide access to assets, additional product or services offerings, additional distribution or marketing synergies or additional industry expertise in order to enhance and expand the Company’s product offerings, technology and capabilities in its current and future products.

Any newly acquired products and technology may enable the Company to sell to a new group of buyers and introduce them to our broader range of products, particularly newly acquired product lines.

• Increase Military diversification.

military is actively moving away from excessive reliance on the traditional top five prime contractors (Boeing, General Dynamics, Lockheed Martin, Northrop Grumman, and RTX) through a strategic push for diversification, rapid acquisition of innovative technologies, and a concerted effort to leverage non-traditional suppliers and small businesses.

Consequently, the Company is expanding its presence in the military market by focusing on winning contracts for key domestic and FMS defense programs, such as the C130 avionics upgrades, which the Company believes will increase the potential for even greater military market penetration.

Improve Operational Efficiency

• Leverage insourcing initiatives.

The Company works to build on its legacy of strong operational execution to generate attractive margins through both increased operating leverage from greater revenues and internal margin initiatives.

The Company believes it can realize efficiencies in the manufacturing and repair of the acquired Honeywell products by insourcing the production of product sub-assemblies.

We also expect to benefit from greater fixed cost leverage as we utilize the manufacturing capacity at our Exton facility more effectively.

We intend to realize additional efficiencies through sourcing and procurement initiatives in an effort to drive cost savings.

Return-Focused Capital Allocation Strategy

Employ a disciplined, return-focused capital allocation strategy.

Our primary focus will be on capital deployment in support of our growth initiatives.

The Company remains committed to maintaining strong financial flexibility.

Recent Acquisitions

In June 2023, the Company entered into an Asset Purchase and License Agreement (the “June 2023 Honeywell Agreement”) with Honeywell International, Inc.

This transaction complemented the previous Honeywell license and asset acquisition completed in June 2023.

Total consideration was $4.2 million in cash.

an assignment of certain contracts;

The exclusive licensing of these product lines from Honeywell is a unique opportunity for the Company that enhances its current offerings in the air transport, military and business aviation markets.

In addition, there are potential cost synergies from better utilization of the Company’s skilled engineering team and its existing operational capacity.

INTELLECTUAL PROPERTY

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The Company develops and acquires new intellectual property on an ongoing basis.

As of September 30, 2025, the Company held 46 U.S.

The Company also holds 125 international patents and has 17 trademarks.

Based on the broad scope of the Company’s product lines, management believes that the loss or expiration of any single intellectual property right would not have a material effect on our consolidated financial statements.

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We do not have any employees represented by a union, and we believe that our relations with our employees are good.

We provide our team members with ongoing opportunities to share thoughts and perspectives on company and employment-related matters through surveys, all-hands meetings, and management open door policies.

We provide our team members with ongoing

opportunities to share thoughts and perspectives on company and employment-related matters through surveys, all-hands meetings, and management open door policies.

Our management, with oversight from the Compensation and Nominating & Corporate Governance Committee of our board of directors, monitors the hiring, retention, and management of our employees.

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Government contracts.

For example, costs such as those related to charitable contributions, advertising, interest expense,

and public relations are unallowable, and therefore not recoverable through sales.

For example, costs such as those related to charitable contributions, advertising, interest expense, and public relations are unallowable, and therefore not recoverable through sales.

During and after the fulfillment of a government contract, we may be audited in respect of the direct and allocated indirect costs attributed thereto.

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Government also has the ability to stop work under a contract for a limited period of time for its convenience.

In the event of a stop work order, we generally would be protected by provisions covering reimbursement for costs incurred on the contract to date and for costs associated with the temporary stoppage of work on the contract.

In the event of a stop work order, we generally would be protected by provisions covering reimbursement for costs incurred on the contract to date and

for costs associated with the temporary stoppage of work on the contract.

However, such temporary stoppages and delays could introduce inefficiencies for which we may not be able to negotiate full recovery from the U.S.

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Government is unable to make timely payments.

COMPETITIVE CONDITIONS

We experience competition in our aerospace and defense markets across suppliers of competitive products and services as well as with vertically integrated primes.

We believe ISSC has demonstrated a track record of performance excellence across each of these areas that has resulted in long-standing customer relationships, often characterized by recurring contractual relationships.

With respect to our products, the Company’s principal competitors include Honeywell Aerospace, Collins Aerospace, GE Aerospace, Thales Defense & Security, Inc., Elbit Systems and Garmin Ltd.

OUR COMPETITIVE STRENGTHS

• Vertically integrated model.

ISSC can reduce its time-to-market through inhouse design, manufacturing and testing capabilities;

full service integration and repair capabilities;

and deep technical expertise.

• Systems integration expertise.

IS&S’s extensive system integration expertise is a key differentiator within the market and provides a compelling value to its Company’s customer base.

We believe this expertise enhances ease of installation, reduces aircraft downtime and reduces system complexity.

• Retrofit application expertise.

The average age of the global commercial airline fleet has reached a record level of 14.8 years, according to the International Air Transport Association.

Extending an aircraft’s lifespan increases maintenance demands.

Since age brings wear and tear that requires more frequent and thorough inspections and replacement of parts that fail or reach their lifetime limits.

IS&S specializes in retrofitting older aircraft with state-of-the-art avionics, such as Flat Panel Display Systems and Autothrottles that significantly improve functionality and compliance with current aviation standards.

• Strong Product and IP Portfolio.

As of September 30, 2024, the Company held 47 U.S.

The Company holds 111 international patents and has 17 trademarks.

Certain of these patents 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® product.

• Depth of experience in serving global customer brands.

ISSC has experience serving both commercial and military customers with global reach, including, among others, Amazon, American Airlines, BAE Systems, Boeing, DHL, Eclipse Aviation, FedEx, Lockheed Martin, Pilatus, and Textron.

INDUSTRY OUTLOOK

We operate in highly competitive markets.

Since our inception more than 35 years ago, our markets have experienced significant growth, leading to new entrants with considerable financial resources and scale.

During this time, ISSC has built a strong position with a portfolio of established, long-term customers that value our ability to deliver reliable, high-quality products that incorporate advanced technologies together with expert technical support, and a competitive, value-centric approach to product pricing.

A wide range of information is critical for the proper and safe operation of aircraft.

The Company believes that aircraft cockpits will become more complete information centers that are 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.

We believe that the market will continue to migrate toward autonomous flight and that the flight deck will incorporate additional technologies that are stepping-stones on the path to complete autonomy.

Historically, equipment data, such as engine and fuel-related information, were displayed on 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.

Individual instruments tend to be replaced more frequently than the aircraft itself due to obsolescence and normal wear-and-tear.

Increasingly, operators are replacing their clusters of analog mechanical instruments with integrated display systems such as the IS&S panel displays.

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.

We believe that IS&S flat panel displays provide an attractive solution to the growing need for innovation and new methods in this area.

Key elements of the strategy include the following:

#1 - Targeted Commercial Growth

• Expand product line portfolio

The Company 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 are examples of its ability to engineer products using the selective application of non-avionic technology.

In 2016, ISSC recognized that the lack of an available autothrottle system on turboprop aircraft was an unmet need in the marketplace, leading it to invest in the development of a sophisticated turboprop autothrottle.

We believe that ThrustSense® Autothrottle, the Company’s turboprop autothrottle incorporating patented technology, is highly effective, less complex and less costly than other available products and offers sophisticated sensing and multiple safety features that even exceed those of some much more expensive jet autothrottle systems.

The Company intends to continue to capitalize on being the first to market an autothrottle to owners and operators of turboprop aircraft.

• Focus on retrofit opportunity

Given an aging global aircraft fleet, cockpit avionics upgrades for existing aircraft continue to be a significant opportunity for the Company.

• Expand presence in flat panel display market

Due to recent demand from cargo operators, we believe 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 instrument LCDs and cathode ray tubes.

The Company believes that its 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, we believe that these advantages will allow the Company to generate increased revenues from the COCKPIT/IP® product and increase our market share.

In addition, the Company believes that demand for new aircraft, FAA mandates and obsolescence issues on older aircraft will contribute to this growth.

• Evaluate potential acquisitions and strategic partnerships

As a part of the Company’s growth strategy, we continuously evaluate acquisition opportunities and opportunities to make investments in complementary businesses, technologies, services or products.

Any newly acquired products and technology may enable the Company to sell to a new group of buyers and introduce them to our broader range of products.

#2 - Improve Operational Efficiency

• The Company works to build on its legacy of strong operational execution to generate attractive margins through both increased operating leverage from higher revenues, and internal margin initiatives.

The Company believes it can realize efficiencies in the manufacturing and repair of the acquired Honeywell products by insourcing the production of product sub-assemblies.

We also expect to benefit from higher fixed cost leverage as we more effectively utilize the manufacturing capacity at our Exton facility.

We will also work to realize additional efficiencies through sourcing and procurement initiatives in an effort to drive cost savings.

#3 - Return-Focused Capital Allocation Strategy

• We employ a disciplined, return-focused capital allocation strategy.

Our primary focus will be on capital deployment in support of our growth initiatives.

The Company remains committed to maintaining strong financial flexibility.

Backlog, beginning of period

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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, 2024, 35% of the Company’s backlog was expected to be filled beyond fiscal year 2025.

At September 30, 2025, our backlog was $77.4 million compared with $89.2 million at September 30, 2024.

Backlog is converted into sales in future periods as work is performed or deliveries are made.

We expect to recognize approximately 44% of our backlog over the next 12 months and approximately 92% over the next 24 months as revenue, with the remainder recognized thereafter.

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 1. Business