What changed in this filing

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Item 1A. Risk Factors

2025-12-23 compared with 2024-12-30 · 64 added, 54 removed, 425 unchanged (22% of the section changed)

Risk Factors.

ISSC Risk Factors

1A Risk Factors

Risks Related to Our Business and Industry

If the Company fails to enhance existing products, or to develop and achieve market acceptance for flat panel displays, flight control computers, display generators, flight management systems, autothrottle technology and other new products that meet customer requirements, its business, financial condition and results of operation may be affected adversely.

The Company spends a large portion of its research and development efforts in developing and marketing the FPDS, FMS, ThrustSense® Autothrottle and complementary products.

The Company spends a large portion of its research and development efforts in developing and marketing the FPDS, FMS, ThrustSense® Autothrottle, military display generators and flight control computers and other complementary products.

The Company’s ability to grow and diversify its operations through the introduction and sale of new products is dependent upon its continued success in product development and engineering activities, its sales and marketing efforts, its ability to acquire new products from strategic partnerships and acquisitions, 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 any products we develop in the future.

The Company cannot be certain that it will be able to develop, acquire, 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.

Sales growth will depend in part on market acceptance of and demand for FPDS, FMS, ThrustSense® Autothrottle, military display generators and flight control computers and any other products we develop in the future.

The Company cannot be certain that it will be able to develop, acquire, introduce or market its FPDS, FMS, ThrustSense® Autothrottle, military display generators and flight control computers 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 and potential partners.

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Similarly, due to the nature of the Company’s products, potential customers may not be willing to expend the resources and effort required to replace existing competitive technology and parts with the Company’s products.

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

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

Our products must continue to evolve as the industry evolves, and simultaneously continue to comply with government standards.

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These factors may be costly to the Company, and there is no assurance that the Company will be successful in its strategy.

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, the Company 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 approved by the FAA, the Company may need to obtain approval from EASA or other appropriate organizations to have them certified for installation outside the U.S.

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.

The Company cannot ensure that it will receive regulatory approval on a timely basis or at all.

Furthermore, new regulations or product standards, and changes to existing product standards could require the Company to change its products and underlying technology and expend significant costs to come into compliance.

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The evolving nature of these standards, along with the long duration of development, production and aftermarket support programs, creates uncertainty regarding program profitability, particularly with our aircraft engine products.

Development efforts divert resources from other potential investments in our businesses, and these efforts may not lead to the development of new technologies or products on a timely basis or meet the needs of our customers as fully as competitive offerings.

Development efforts divert resources from other potential investments in our businesses, and these efforts may not lead to the development of new technologies or products on a timely

basis or meet the needs of our customers as fully as competitive offerings.

In addition, the industries for our products or products that incorporate our technologies may not develop or grow as we anticipate.

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We may not be able to identify suitable acquisition, investment or strategic partnership candidates, or if we do identify suitable candidates in the future, we may not be able to complete transactions with such partners on commercially favorable terms, or at all.

Our ability to find partners to further our growth strategy is likely to be affected by factors outside of our control in the aerospace industry such as pilot unions, pilot shortages and labor strikes, including other economic and geopolitical factors.

Our ability to find partners to further our growth strategy is likely to be affected by factors outside of our control in the aerospace industry such as the activities of pilot unions, pilot shortages and labor strikes, along with other economic and geopolitical factors.

Any one of these factors may impede our ability to find strategic partners.

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potential unknown liabilities associated with a business that we acquire or in which we invest, including environmental liabilities;

and production delays associated with consolidating acquired facilities and manufacturing operations.

potential margin dilution and production delays associated with consolidating acquired facilities and manufacturing operations.

Any past or future acquisition could also result in such risks.

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Historically, the Company’s revenue and operating results have varied from quarter to quarter, and may continue to vary, which may adversely affect our business, financial condition and results of operations, and cause our stock price to decline.

As such, our historical

results of operations should not be relied upon as accurate indications of future performance.

As such, our historical results of operations should not be relied upon as accurate indications of future performance.

Variance in the Company’s revenue may be caused by multiple factors, including:

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Reduced confidence in the safety and reliability of the air transportation services industry could lead to a reduction in demand for the Company’s products and services, particularly if such accidents or disasters were due to a safety fault.

The F-16 program comprises a material portion of our revenue and reductions or delays in funding for this program and risks related to performance, schedule, cost and requirements of the program could adversely affect our performance.

The F-16 program, which consists of multiple production and sustainment contracts, is our largest program and represented 36.7% of our total consolidated net sales in 2025.

A decision by the U.S.

Government, international partners, or FMS customer countries to cut spending on this program or reduce or delay planned orders would have an adverse impact on our business and results of operations.

Given the size and complexity of the F-16 program, we anticipate that there will be continual reviews related to aircraft performance, program and delivery schedule, cost and requirements as part of the DoD, Congressional and international countries’ oversight and budgeting processes.

Challenges and risks associated with this program include supplier performance, contract approval and receiving

funding for contracts on a timely basis, the level of cost associated with life cycle operations, sustainment and potential contractual obligations, inflation-related cost pressures, the ability to improve affordability and potential competition from next-generation or other platforms.

We also may not be successful in making hardware upgrades and other modernization capabilities in a timely manner, including as a result of dependencies on suppliers, which could increase costs and create schedule delays.

Our ability to capture and retain future F-16 growth in development, production and sustainment is dependent on the success of our efforts to achieve F-16 customer affordability, supply chain improvements, continued reliability improvements and other efficiencies, some of which are outside our control.

Public health events and conditions could adversely affect our business, financial condition and operating results.

We face a wide variety of risks related to public health crises, epidemics, pandemics or similar events.

If a new health epidemic or outbreak were to occur, we could experience broad and varied effects similar to the impact of COVID-19, including adverse impacts to our workforce and supply chain, inflationary pressures and increased costs, schedule or production delays, market volatility and other financial ramifications.

If any of these were to occur, our future results and performance could be adversely impacted.

Due to the inherent nature of our products and the industry in which we operate, a product safety failure or quality issue could seriously harm our business.

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

During fiscal year 2024 the Company derived 36% of its revenue from a limited number of customers.

During the fiscal year ended September 30, 2025 the Company derived 57 % of its revenue from a limited number of customers.

The Company continues to expect a relatively small number of customers to account for a majority of its revenue for the foreseeable future.

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government or any foreign government, as the market for the Company’s products is highly competitive.

Our customers may terminate their contracts with us at any time.

Our customers may terminate their contracts with us at any time which would adversely affect our business.

In general, the Company’s customer contracts typically contain provisions which permit the customer to terminate the agreement for their convenience, at any time.

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government agencies in connection with government aircraft retrofit or OEM contracts.

Defense spending may be impacted by various factors, including the changing political environment and shifts in domestic and international markets and priorities, and ongoing and emerging conflicts.

The military and defense market is significantly dependent upon government budget trends, particularly the U.S.

Department of Defense budget.

In addition to normal business risks, our procurement of products and services are subject to unique risks largely beyond our control.

Department of Defense budgets could be negatively impacted by several factors, including, but not limited to, a change in defense spending policy, the U.S.

government’s budget deficits, spending priorities (for example, shifting funds to efforts to combat the impact of the pandemic or efforts to assist Ukraine in the Russia and Ukraine conflict), the cost of sustaining the U.S.

military presence internationally, possible political pressure to reduce U.S.

government military spending and the ability of the U.S.

government to enact appropriations bills and other relevant legislation.

The impact of any such reductions in defense appropriations and/or reductions in U.S.

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In the past few years, the government has not been able to complete its budget process before the end of its fiscal year, resulting in government shutdowns, as well as insufficient funding for government agencies.

For example, in October 2025, the U.S.

federal government shut down for 43 days.

We anticipate the federal budget, debt ceiling, regulatory environment and potential tax reform will continue to be subject to debate and compromise shaped by, among other things, the current administration and Congress, heightened political tensions, the global security environment, inflationary pressures and macroeconomic conditions.

Additionally, the administration continues to take steps to evaluate government-wide and defense-specific staffing and procurement, which includes assessing mission priorities, procurement methods, program performance and other factors and then potentially taking action based on those assessments.

In particular, the administration has issued executive orders aimed at deregulating the Department of Defense’s procurement process to achieve a more efficient and nimble procurement process.

If the Company and its products are unable to successfully compete with its competitors in any reformed procurement environment, or if the administration’s efforts result in the Company facing a disadvantage in contracting decisions due to its size, history, product mix or any other factor, such reforms could result in impacts to both our current and future business prospects and financial performance.

As a result, our sales revenue in the retrofit market are vulnerable to both delays in funding and reductions in spending.

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government are terminated, our business, financial condition and results of operations would be substantially adversely affected.

Geopolitical factors and changes in policies and regulations could adversely affect our internal business.

Geopolitical factors and changes in policies and regulations could adversely affect our business.

Our international sales and operations are sensitive to changes in foreign national priorities, foreign government budgets, and regional and local political and economic factors, including volatility in energy prices or supply, political or civil unrest, changes in threat environments and political relations, military conflicts, geopolitical uncertainties, and changes in U.S.

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Our international sales and operations are also sensitive to changes in foreign government laws, regulations and policies, including those related to tariffs, sanctions, embargoes, export and import controls and other trade restrictions.

Events such as increased trade

restrictions or retaliatory trade policies, renegotiation of existing trade agreements, or regime change can affect demand for our products and services, the competitive position of our products, our supply chain, and our ability to manufacture or sell products in certain countries.

Events such as increased trade restrictions or retaliatory trade policies, renegotiation of existing trade agreements, or regime change can affect demand for our products and services, the competitive position of our products, our supply chain, and our ability to manufacture or sell products in certain countries.

Further, operations in emerging market countries are subject to additional risks, including volatility in gross domestic product and rates of economic growth, government instability, cultural differences (such as employment and business practices), the imposition of exchange and capital controls, and risks associated with exporting components manufactured in those countries for incorporation into finished products completed in other countries.

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, financial condition or liquidity.

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, financial condition or liquidity.

In addition, given the role of our defense businesses in the support of the national security interests of the U.

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government include certain classified information, which imposes security requirements that limit our ability to discuss our performance on these contracts, including any specific risks, disputes and claims.

The Company could be subjected to losses in the event that the Company suffers cost overruns or contractual penalties in connection with fixed-price contracts or service arrangements to perform specified design and EDC services.

During fiscal year 2024 approximately 5% percent of the Company’s total sales were derived from fixed-price EDC arrangements with customers to perform specified design and EDC services related to its products.

The Company could be subjected to unanticipated losses in the event that the Company suffers cost overruns or contractual penalties in connection with fixed-price contracts or service arrangements to perform specified design and EDC services.

During the fiscal year ended September 30, 2025, approximately 7% percent of the Company’s total sales were derived from fixed-price EDC arrangements with customers to perform specified design and EDC services related to its products.

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

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Lower earnings caused by cost overruns could furthermore have a negative impact on the Company’s business, financial condition and results of operations.

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, 2024, 35% of the

Company’s backlog was expected to be filled beyond the end of the 2025 fiscal year, 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 any given quarter, and may not be predictable with any degree of certainty.

Substantially all of the contracts in our backlog may be canceled or modified at the election of the customer, and certain of our contracts may individually represent a significant portion of our revenue.

Reductions in backlog due to cancellation by a customer could significantly reduce the revenue that we actually receive from contracts in backlog.

Similarly, contracts included in our backlog may not be profitable for other reasons, such as reduction in orders or issues with a customer’s operations.

Consequently, our backlog in not an entirely accurate predictor of future revenue.

If our backlog fails to materialize, our business, financial condition and results of operations could be materially and adversely affected.

The Company relies on third-party suppliers for components of its products, including several sole source suppliers, and any interruption in the supply of these components could hinder its ability to deliver products on a timely basis.

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and energy supply constraints, including as a result of war or other geopolitical actions, natural disaster (including the effects of climate change), health pandemic or other business continuity events, or transport and distribution issues, any of which could further negatively impact our ability to meet our commitments to customers or increase our operating costs and therefore incrementally affect our results of operations, financial condition and liquidity.

Our subcontractors and third-party suppliers may fail to produce high quality work, which may result in a failure of our products or services and a violation of applicable law.

Our subcontractors and third-party suppliers may fail to deliver high quality materials, products or services, which may result in a failure of our products or services and a violation of applicable law.

The suppliers the Company depends on may not be able to timely deliver a sufficient number of components on that are of a reliable quality on commercially reasonable terms.

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

The Company 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 depends on key personnel to manage its business effectively, and an inability to attract and retain 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 that the Company will be able to retain such employees, and the loss of important personnel could damage its ability to execute its business strategy.

There can be no assurance that the Company will be able to attract or retain such employees, and the loss of important personnel could damage its ability to execute its business strategy.

Competition for skilled personnel is intense, and the Company may not be able to attract or retain additional qualified employees.

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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 business, financial condition and results of operations.

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

The Company has limited experience in marketing and distributing its products internationally, which may limit the Company’s ability to penetrate international markets and increase international sales.

The Company plans to derive increasing revenues from sales outside the U.S., particularly in Europe and Asia.

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

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

In the future, the Company may be required to conduct sales in foreign countries local currencies, 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.

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We must also hire and train qualified personnel to manage our foreign operations.

We may experience difficulties in recruiting, training, managing, and retaining an international staff, and specifically staff related to sales management and sales personnel, which may impact in sales productivity in foreign markets.

We may experience difficulties in recruiting, training, managing, and retaining an international staff, specifically sales management and sales personnel, which may impact sales productivity in foreign markets.

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

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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.

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, including, in particular, the DoD.

Cybersecurity threats—which include, but are not limited to, computer viruses, ransomware, break-ins, sabotage, spyware, other 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.

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.

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Threat actors (such as ransomware groups) are becoming increasingly sophisticated and using tools and techniques that are designed to circumvent security controls, to evade detection and to remove or obfuscate forensic evidence.

Our and our customers, suppliers and other third-parties’ technology systems and networks may be damaged, disrupted, or compromised by malicious events, such as cyberattacks (including computer viruses, ransomware, and other malicious and destructive code, phishing attacks, and denial of service attacks), physical or electronic security breaches, natural disasters, fire, power loss, terrorism, war, telecommunications and electrical failures, hacking, cyberattacks, phishing attacks and other social engineering schemes, employee theft or misuse, human error, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized access or use by persons inside our organization, or persons with access to systems inside our organization.

access or use by persons inside our organization, or persons with access to systems inside our organization.

Such attacks or security breaches may be perpetrated by internal bad actors, such as employees or contractors, or by third parties.

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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.

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

The aerospace industry is highly regulated by the U.S.

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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.

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.

Although the Company has obtained approvals to install its products from most foreign civil aviation authorities, including the European Union, United Kingdom and China, which require the Company to comply with applicable aviation laws in such foreign jurisdictions, there can be no assurance that the Company will be able to maintain such approvals in the future.

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government and its agencies, such as the Defense Contract Audit Agency (“DCCA”).

These agencies routinely review contract performance and compliance with applicable laws, regulations and standards.

agencies routinely review contract performance and compliance with applicable laws, regulations and standards.

Systems that are subject to review include, but are not limited to, cybersecurity systems, accounting systems, and purchasing systems.

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administrative policy may lead to significant increases in tariffs for imported goods among other possible changes.

President-elect Donald Trump has indicated that his administration is likely to impose significant tariffs on imported goods.

President-elect Donald Trump has indicated that his administration is likely to

impose significant tariffs on imported goods.

The imposition of such tariffs may strain international trade relations and increase the risk that foreign governments implement retaliatory tariffs on goods imported from the United States.

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Our common stock has experienced, and may experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock.

Our common stock has experienced and may continue to experience price fluctuations, which could cause you to lose a significant portion of your investment and interfere with our efforts to grow our business.

Our common stock has experienced and may continue to experience significant price fluctuations, which could cause you to lose a significant portion of your investment and interfere with our efforts to grow our business.

Stock markets are subject to significant price fluctuations that may be unrelated to the operating performance of particular companies, and accordingly the market price of our common stock may change frequently and by large margins.

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There are risks associated with our outstanding and future indebtedness.

The Company has indebtedness pursuant to loan agreements and lines of credit with PNC Bank, National Association, and may pursue additional sources of credit or borrowed money in the future under these existing credit facilities and/or enter into new financing arrangements.

The Company has indebtedness pursuant to loan agreements and lines of credit with JP Morgan Chase Bank, N.A.

and may pursue additional sources of credit or borrowed money in the future under these existing credit facilities and/or enter into new financing

arrangements.

We may fail to pay these or additional future obligations, as and when required.

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In addition, all the agreements governing our indebtedness subject us to continued compliance with certain financial and negative covenants.

The Company was in compliance with all applicable covenants throughout and at September 30, 2024.

A breach of any of our covenants under our operative agreements could result in a default under such an agreement.

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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