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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission File No. 0-31157

INNOVATIVE SOLUTIONS AND SUPPORT, INC.
(Exact name of registrant as specified in its charter)

(610) 646-9800
(Registrant's telephone number, including area code)

         Securities registered pursuant to Section 12(b) of the Act:

         Securities registered pursuant to Section 12(g) of the Act:None

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act Yes o    No ý

         Note: Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or section 15(d) of the Exchange Act from their obligations under those sections.

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).). Yes oý    No o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," "non-accelerated filer," and "smaller reporting company," in Rule 12b-2 of the Exchange Act. (Check one):

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yeso Noý

         The aggregate market value of the Registrant's common stock held by non-affiliates of the Registrant as of March 31, 20102012 (the last business day of the registrant's most recently completed second quarter) was approximately $80.1$45.4 million. Shares of common stock held by each executive officer and director and by each person who owns 10% or more of ourthe Registrant's outstanding common stock have been excluded since such persons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

         As of December 04, 2010,November 30, 2012, there were 16,770,41516,583,037 outstanding shares of the Registrant's Common Stock

Documents Incorporated by Reference

         Portions of the Registrant's Proxy Statement for the 20112012 Annual Meeting of Shareholders to be filed prior to January 28, 201025, 2013 are incorporated by reference into Part III of this Report. Such Proxy Statement, except for the parts therein which have been specifically incorporated by reference, shall not be deemed "filed" for the purposes of this Report on Form 10-K.

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INNOVATIVE SOLUTIONS AND SUPPORT, INC.

20102012 Annual Report on Form 10-K

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FORWARD LOOKING STATEMENTS

        This report contains forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. We have based these1934, as amended (the "Exchange Act"). These forward looking statements are based largely on our current expectations and projections about future events and trends affecting our business.the business, are not guarantees of future performance and involve a number of risks, uncertainties and assumptions that are difficult to predict. In this report, the words "believe,"anticipates," "believes," "may," "will," "estimate,"estimates," "continue,"continues," "anticipate,"anticipates," "intend,"intends," "forecast,"forecasts," "expect,"expects," "plan,"plans," "could," "should," "is"would,""is likely" and similar expressions, as they relate to ourthe business or ourto its management, are intended to identify forward looking statements, but they are not exclusive means of identifying them. Unless the context otherwise requires, all references herein to "IS&S," "the Registrant," "the Company," "we," "us" or "our" are to Innovative Solutions and Support, Inc. and its consolidated subsidiaries.

        The forward looking statements in this report are only predictions and actual events or results may differ materially. In evaluating such statements, a number of risks, uncertainties and other factors could cause our actual results, performance, financial condition, cash flows, prospects and opportunities to differ materially from those expressed in, or implied by, the forward-lookingforward looking statements. These risks, uncertainties and other factors include those set forth in Item 1A (Risk Factors) of this Annual Report on Form 10-K and the following factors:

•

the availability of government funding;



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the impact of general economic trends on ourthe Company's business;



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



•

difficulties in developing and producing ourthe Company's COCKPIT/IP™IP® Flat Panel Display System or other planned products or product enhancements;



•

market acceptance of ourthe Company's flat panel display systems, or COCKPIT/IP™ Flat Panel Display SystemIP® or other planned products or product enhancements;



•

our ability to gain regulatory approval of our products in a timely manner;



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failure to retain/recruit key personnel;



•

continued market acceptance of ourthe Company's air data systems and products;



•

the availabilityability to gain regulatory approval of government funding;products in a timely manner;



•

delays in receiving components from third party suppliers;



•

the competitive environment;environment and new product offerings from competitors;



•

the bankruptcy or insolvency of one or more key customers;



•

new product offerings from competitors;



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protection of intellectual property rights;



•

ourfailure to retain/recruit key personnel;



•

a cyber security incident;



•

the ability to service the international market;



•

potential future acquisitions; and



•

other factors disclosed from time to time in ourthe Company's filings with the United States Securities and Exchange Commission.Commission (the "SEC").

        Except as expressly required by the federal securities laws, we undertakethe Company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise after the date of this report. Our resultsResults of operations in any past period should not be considered indicative of the results to be expected for future periods. Fluctuations in operating results may also result in fluctuations in the price of ourthe Company's common stock.

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Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Form 10-K. The Company does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events, circumstances or changes in expectations after the date of this Form 10-K, or to reflect the occurrence of unanticipated events. The forward-looking statements in this document are intended to be subject to the safe harbor protection provided by Sections 27A of the Securities Act of 1933, as amended (the "Securities Act") and 21E of the Exchange Act.

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

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PART I

Item 1.    Business

Overview

        Innovative Solutions and Support, Inc. (the "Company," or "IS&S" or "we") was founded in 1988. The Company is a systems integrator that designs, manufactures and sells Flat Panel Display Systems, Flight Information Computersflight guidance and advanced monitoringcockpit display systems to the Department of Defense (DoD), government agencies, defense contractors, commercial air transport carriers,for original equipment manufacturers (OEMs),("OEMs") and corporate/general aviation markets.retrofit applications. The Company supplies integrated Flight Management Systems ("FMS") and advanced Global Positioning System ("GPS") receivers for precision reduced carbon footprint navigation.

        Increasingly, the Company is increasingly positioning itself as a system integrator; thisintegrator, which capability provides the Company with the potential to generate more substantive orders over a broader product base. The Company has demonstrated an ability to incorporate added electronic flight bag functionality such as electronic flight bags, charting and mapping systems into its Flat Panel Display SystemSystems ("FPDS") product line. OurThe strategy, as both a manufacturer and integrator, is to leverage the latest technologies developed for the personal computer and telecommunications industries into advanced and cost-effective solutions for both the general aviation, industrycommercial, the United States Department of Defense ("DoD")/governmental and DoD. We believe thisforeign military markets. This approach, combined with ourthe Company's industry experience, enables usIS&S to develop high-quality products and systems, reduce substantially reduce product time to market and achieve cost advantages over products offered by ourits competitors.

        For several years the Company has been working with advances in technology to provide pilots increasing amounts ofwith more information thatto enhance both the safety and efficiency of flying. These advances have come together in the Company'sflying, and has developed its COCKPIT/IP™ (CockpitIP® Cockpit Information Portal or CIP)("CIP") product line, referred to as Flat Panel Display System product line("FPDS"), that incorporates proprietary technology, low cost, reduced power consumption, decreased weight, and increased functionality. The Company's Flat Panel Display SystemCompany believes the FPDS product line is suited to address market demand that we believe will be driven by regulatory mandates, new technologies, and agingthe high cost of maintaining aging/obsolete equipment on airplanes that have been in service for up to fifty years. We believeIS&S believes that the transition to Flat Panel Display SystemsFPDS as part of airplane retrofit requirements continues. Thiswill continue. The shift in regulatory and technological environment is illustrated by the dramatic increase in the number of Wide Area Augmentation System (WAAS)("WAAS") approach qualified airports. Aircraft equipped with our Flat Panel Display Systemthe Company's FMS and FPDS product line (equipped with a WAAS enabled navigator) will be qualified to land at such airports and comply with upcoming Federal Aviation Administration ("FAA") mandates for Required Navigation Performance ("RNP"), and Automatic Dependent Surveillance-Broadcast ("ADS-B") navigation, a fact which we believeIS&S believes will further increase the demand for ourthe Company's products.

        In fiscal 2010, IS&S announced it received FAA certificationsells to both the retrofit market and OEMs. Customers include the DoD and its commercial contractors, aircraft operators, aircraft modification centers, foreign militaries, and various OEMs. Occasionally, IS&S sells its products directly to DoD; however, the Company sells its products primarily to commercial customers for its Class 3 Electronic Chartsend use in DoD programs. Sales to defense contractors are made on commercial terms, although some of the termination and XM Satellite Weather upgradeother provisions of government contracts are applicable to the AVIO NG integrated cockpit system of thethese contracts.

        In October 2012 Eclipse Aerospace, Inc. (EAI) EA500 Very Light Jet.placed a production order with IS&S commenced sales to EAIfor an initial fifty ship sets of the upgrade for installation on existing aircraft. IS&S introduced and began sales of increased functionality for its COCKPIT/IP™ Flat Panel Display System for application on the B757/B767 platform. The company also received additional Transport Canada Supplement Type Certificate (STC) certificationa three hundred ship set contract for the B757 to further addressIS&S advanced avionics suite for the needsproduction model Eclipse 550. IS&S is the supplier of that market.

        In fiscal 2009, IS&S announced it began delivering a new product to the U.S. military: high resolution, 20 inch diagonal displays. These displays are used in the rear of the aircraft by tactical mission officers. The Company also initiated shipments of the Flat Panel Display System being marketed by CessnaPrimary Flight and Multi-Function Displays as well as the "AdViz" cockpit upgrade solution for legacy Citation 500/501, 550/551, S550 and 560 aircraft. "AdViz" provides access to navigational aids such as XM Weather, navigation charts, remote radio tuning, and enhanced video all while improving reliability and reducing weight. IS&S received an amended Supplement Type Certificate (STC) on the PC-12 Flat Panel DisplayIntegrated Flight Management System ("IFMS") for the WAAS program with LateralEclipse Jet. The advanced avionics suite will include Dual Flight Management systems, Auto Throttles, Synthetic Vision, integrated Terrain Awareness System ("TAWS") and Vertical Precision Performance with a fully coupled auto-pilot. The company also received a Supplemental Type Certificate (STC) for RVSM Compliance of its PC-12 Flat Panel DisplayEnhanced Vision System in fiscal 2009.

        In fiscal 2008, IS&S announced an addition to its COCKPITt/IP^TM Flat Panel Display System product line: the IS&S Vantage COCKPIT/IP™ Flat Panel Display System, an open architecture flat("EVS").

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panel display system        In August 2012, the FAA issued its Supplemental Type Certificate ("STC") to IS&S for its FPDS for use on Classic B-737 aircraft. This certification enables IS&S to expand its marketing of its FPDS to owners of B737 in the United States.

        In October 2011, Eclipse Aerospace Inc. selected IS&S to design and develop the advanced avionics suite for the production model Eclipse 550.

        In July 2011, the National Nuclear Security Administration ("NNSA") awarded IS&S a contract for the complete Systems Integration and Cockpit Avionics upgrade of their B737-400 classic aircraft. Upon completion, this upgrade will provide NNSA full Communication Navigation Surveillance/Air Traffic Management ("CNS/ATM") capabilities and similar efficiency and performance to the B737 Next Generation ("NG") at the fraction of the cost of a new aircraft. This program complements the IS&S FPDS contracts for more than 400 B757/B767 aircraft with more than 160 aircraft already in revenue service. The upgrade for the B737-300/-400/-500 series aircraft and the existing B757/B767 FPDS are platforms for compliance with NextGen and Single European Sky ATM Research ("SESAR") requirements, is Controller Pilot Data Link Communication ("CPDLC"), RNP, ADS-B and in-Trail capable, of interfacing with most third party avionics.provides power and weight savings, and reduces fuel consumption and CO₂ emissions.

        In June 2011, Boeing awarded IS&S a contract to design and develop the Aerial Refueling Operator Control and Display Units ("AROCDU") for the KC-46A Tanker Program.

        In March 2011, IS&S announced it received FAA STC for its FMS and dual GPS receivers for the Eclipse Aerospace, Inc. ("EAI") Twin-Engine Jet. The Vantage system can be retrofitted into a variety of airframes. The Company launched a Wide AreaIS&S FMS displays controls all major systems on the aircraft and includes improvements to e-Chart, mapping and satellite weather functionality and precision navigation. Eclipse Twin-Engine Jet operators are now able to upgrade their aircraft within Integrated Flight Management System through EAI.

        In February 2011, the FAA issued its Technical Standard Order authorization ("TSO") to IS&S for its Beta-3 Global Positioning System ("GPS")—Satellite Based Augmentation System (WAAS) program with Lateral("SBAS") Receiver. This certification enabled IS&S to expand its product offering to include a GPS in its FPDS. Additionally, the FAA also issued a TSO in March 2011 for the IS&S Class Gamma 3 FMS and Vertical Precision Performance with a fully coupled auto-pilotType 2 FAA Letter of Acceptance ("LOA") that allows IS&S to provide navigation data. The combination of these certifications enables IS&S to be a flight management system provider to its customers.

        In December 2010, the European Aviation Safety Agency ("EASA"), the European counterpart of the FAA issued its Supplemental Type Certificate ("STC") to IS&S for the B757 FPDS. Further, in August 2011, IS&S obtained an STC from EASA for its PC-12 COCKPIT/IP™ Flat Panel Display System. WAAS capability allows PC-12 operatorsB767 FPDS. These certifications enable IS&S to fly precision approaches at smaller airports. This capability is also available on other aircraft platforms. IS&S received amended Supplemental Type Certificates (STC) for the Boeing 757/767 platform from the Federal Aviation Administration (FAA) adding increased functionalityexpand its marketing of its B757 and B767 FPDS to the COCKPIT/IP™ Flat Panel Display System. The Company increased the volume of work it is conducting for Homeland Security's Pilatus PC-12 and Lockheed Martin C-130 fleets.customers in Europe.

Our Industry

        A wide range of information including airspeed and altitude, is critical for proper and safe operation of aircraft. With advances in technology, new types of information to assist pilots are becoming available for display in cockpits, such as satellite based weather and ground terrain maps, are becoming available for display in cockpits. We believemaps. The Company believes that aircraft cockpits will increasingly become information centers, capable of delivering additional information that is either mandated by regulation or demanded by pilots to assist in the safe and efficient operation of aircraft.

        There are three general types of flight data: aircraft heading and altitude information, flight critical aircraft control data, and navigation data. Aircraft heading and altitude information includes aircraft speed, altitude, and rates of ascent and descent. Flight critical aircraft control information includes engine data such as fuel and oil quantity, and other engine measurements. Navigation data includes radio position, flight management, Global Positioning System (GPS)GPS, and alternative source information; which is information not originating on the aircraft, including weather depiction maps, GPS navigation, and surface terrain maps. Air data calculations are based primarily on air pressure measurements derived from sensors on the

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aircraft. Engine data are determined by measuring various indices such as temperature, volume, revolutions per minute (RPM)("RPM"), and pressure within an aircraft's engines and other mechanical equipment. GPS and alternative source information isare derived typically derived from satellites or equipment located on land and fed by satellite or radio signals to the aircraft. Pilots can thenpresently display this information in the cockpit for reference and enhanced position awareness.

        Traditionally, flight data and other cockpit information were displayed on a series of separate analog mechanical instruments. In the early 1980s, digital displays using Cathode Ray Tubes (CRT)("CRT") began to replace some individual analog instruments. ThePresently, the industry now offers high resolution color flat panels using Active Matrix Liquid Crystal Displays (AMLCD)("AMLCD") to replace traditional analog instruments or CRT displays. We expectIS&S expects that the ability to display more information in a space efficient and customizedcustom platform will become increasingly important if additional information, such as weather depiction maps, traffic information, and surface terrain maps, becomebecomes mandated by regulation or demanded by pilots. Accordingly, we believethe Company believes flat panel displays, which can integrate and display a "suite" of information, will increasingly replace individual instruments and CRTs as the method for delivering and orderingdisplaying information displayed in cockpits.

        EquipmentIn the past, equipment data, such as engine and fuel related information, were traditionally displayed on conventional analog mechanical instruments. Engine and fuel instruments provide information on engine activity, including oil and hydraulic pressures, and temperature. These instruments are clustered throughout an aircraft's cockpit. Engine and fuel instruments tend to be replaced more frequently than other instruments due to increased obsolescence problems and normal wear-and-tear. AsInasmuch as information displayed by this instrumentationthese instruments is vital for safe and efficient flight, aircraft operators continue to purchase individual conventional engine and fuel instruments to replace older or non-functioning instruments.as replacements. Increasingly, operators are replacing their individual instrument clusters of analog mechanical instruments with integrated COCKPIT/IP™ Flat Panel Display Systems.

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        As the skies and airports are becomingbecome more crowded, the aviation industry and its regulators are concentrating on new technologies, procedures, and regulations that allow more aircraft to operate in the skies and on the ground safely, efficiently and with less impact on the environment. These new technologies and procedures, such as traffic avoidance, ground awareness, increased precision of navigation and vertical position, runway incursion prevention, and increased digital communication, will require innovation and intuitive methods to display situational awareness information for the pilots. The Company believes that flat panel displays areprovide the best methodsolution to handle these and future requirements.

Strategy

        OurThe Company's objective is to become a leading supplier and integrator of cockpit information. We believe ourinformation, and believes that its industry experience and reputation, our technology and products, and our business strategy provide athe basis to achieve this objective. Key elements of ourthe Company's strategy include:

•

Retrofit focus.Focusing on retrofits.  We believe offering cockpitCockpit avionics upgrades for existing aircraft is of great interest in today'sthe present economic environment. RetrofittingThe retrofit of an aircraft with the COCKPIT/IP™ Flat Panel Display SystemIP® FPDS is cost effective compared to acquiringthe acquisition of a new aircraft and yet can provide the same functionality. When the economy returns to more robust levels, we believethe Company believes that lead times to acquire new aircraft will lengthen and demand for retrofits will continue as operators update their existing fleets to provide needed lift capacity.



•

Establishing leadership in the flat panel display market.  We expectIS&S expects that over the next several years, many aircraft will be retrofitted with flat panel displays.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, we believethe Company believes that flat panel displays will increasingly replace individual analog and digital instruments, and CRTs. We also believe ourThe Company believes the COCKPIT/IP™IP® has significant benefits over flat panel displays currently offered by competitors, including lower cost, larger size, reduced weight, enhanced viewing angles, and a broadbroader array of functions. OurThe

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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 believethe Company believes that these advantages will allow usIS&S to generate significant revenues from ourthe COCKPIT/IP™IP® product, and increase market share. DemandIn addition, demand for new aircraft, FAA mandates to upgrade older aircraft and obsolescence issues on older aircraft will fuelcontribute to this growth.



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Continuing our engineering and product development successes.  We developedIS&S develops innovative products by combining ourits avionics, engineering, and design expertise with commercially available technologies, components, and products from non-aviation applications, including the personal computer and telecommunications industries. OurThe Company's COCKPIT/IP™ Flat Panel Display SystemIP® FPDS is an example of ourthe ability to engineer products through the selective application of non-avionic technology. Our researchResearch and development ("R&D") expenses were $5.2$2.7 million, $5.3$5.5 million and $10.3$5.2 million for fiscal years ended September 30, 2012, 2011 and 2010, 2009respectively. During fiscal 2012, 2011 and 2008, respectively.2010 revenues related to Engineering—Modification and Development ("EMD") revenues accounted for 26%, 2% and 7%, respectively, of total sales. Against these EMD revenues, the Company's R&D resources charged $4.7 million, $0.2 million, and $0.8 million for fiscal years ended September 30, 2012, 2011 and 2010, respectively to cost of sales for EMD revenues.



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Maintaining our leadership in air data markets.  We believe we areThe Company believes that it is one of the largest suppliers of air data products to the U.S. retrofit market. Significant demandDemand remains to retrofit aging military aircraft with newer, more advanced and more supportable air data systems. Additionally, upgrading business jetsaircraft with higher performance engines is driving a need for more sophisticated air data products supplied by us.the Company.



•

Increasing our sales to the DoD, other government agencies, defense contractors, commercial air transport and corporate/general aviation markets.  We strengthenedIS&S has extended its efforts to diversify our sales to include all aviation end user markets, of the aviation industry, particularlyespecially legacy military aircraft programs and the commercial air transport market. This includesaircraft. In the commercial air transport market, these efforts have addressed national andcarriers, regional carriers, and other fleet operators,operators. The Company has also targeted the corporate/general aviation market, primarily through aircraft

Tableboth for retrofits and original equipment, and has won new and ongoing retrofit programs and two OEM programs. One of Contents

modification centers,which is Eclipse Aerospace and the OEM market. We continueother of which is not public. The Company continues to build a sales and marketing force dedicated to expanding our sales efforts toaddress these markets while at the same time maintaining our position as a provider of avionics products for the DoD.

more effectively.



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Expanding our international presence.  We planIS&S plans to increase ourits international sales by adding sales and marketing personnel and foreign offices.personnel. As large flat panel displays become more prevalent, we believethe Company believes that European and other international aircraft operators and aircraft modification centers will accelerate retrofitting activities, thereby increasing demand for large flat panel displays. Presently, we areIS&S has obtained approval from the EASA for installing the FPDS in Europe for the process ofB757/B767 aircraft and will continue obtaining EASA approvalapprovals for other European installations.installations as applicable.



•

GrowthGrowing through acquisitions or joint ventures.  WeIS&S may pursue strategic acquisitions or joint ventures as a means of growing ourto expand the business with respect toenhanced technology, distribution, customerscustomer base, or products. WeThe Company may seek to acquire developers or suppliers of complementary products, technology, or information, or we mayto acquire suppliers of similar products as a means of increasing ourits product offerings and market share.

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Products

        Our currentCurrent line of products includes:

Flat Panel Display Systems

        In recent years color flat panel displays have been introduced into aircraft cockpits. Flat Panel Displayspanel displays are Liquid Crystal Display (LCD)("LCD") screens that can replicate the display of one or a suite of analog or digital displays on one screen. LikeAs with other instrumentation, flat panel displays can be installed in new aircraft or used to replace existing displays in aircraft already in use.legacy aircraft. LCDs are also used for security monitoring on-board aircraft and as tactical workstations on military aircraft. The flat panel product line also presents numerous advantages for presentation of engine performance data. During fiscal 2012, 2011 and 2010 2009revenues related to FPDS accounted for 87%, 79% and 2008 we derived 68%, 75% and 77% respectively, of our total revenues from sales of Flat Panel Display Systems.sales.

        We developed a Flat Panel Display System thatThe Company's FPDS can replace conventional analog and digital displays used currently used in a cockpit and can display additional information thatwhich is not now commonly displayed in the cockpit. Ourcockpit with conventional analog and digital displays. The COCKPIT/IP™IP® is capable of displaying nearly all types of air data, engine and fuel data, altitude, heading and navigational data, and alternative source information. As technology and information delivery systems develop further, develop, additional information will be displayed in the cockpit, such as surface terrain maps and data link messaging, will be displayed inmessaging. IS&S designed the cockpit. We designed our COCKPIT/IP™IP® to be capable of displaying information generated from a variety of sources, including ourits Reduced Vertical Separation Minimum (RVSM)("RVSM") air data system, engine and fuel instrumentation, and third-party data and information products.

        The Company's new Integrated Multifunction Standby Unit ("IMSU") can be installed in a variety of fixed wing aircraft and helicopters. The IMSU measures, processes, and displays altitude, attitude, airspeed, slip/skid, and navigation display information into an intuitive and concise single instrument display. The IMSU incorporates an integral Inertial Measurement Unit ("IMU") and includes an air data module to measure static and total pressure for independent display of altitude, airspeed, and Mach number. The unit also has an optional battery module that provides one hour of operation of the unit during emergency conditions or complete electrical system failures.

From time to time, customers may order one or more flat panel display systemsFPDSs customized to their particular requirements. Depending on the amount of non-recurring engineering effort needed to accommodate the customized request,Typically, the Company has and will continue to charge a feecharges for added development cost. This will result insource of revenue to the Company that is characterized as Engineering- modification and developmentEMD on the income statement.statement of operations. Consistent with this approach, engineering costcosts incurred in the performance of customizing the flat panel display system will be allocated from Operating expenses (Research and development) to Cost of Sales (Engineering—modification and development) and will beFPDSs are included in the Company's gross profit calculations.

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Air Data Systems and Components

        OurThe Company's air data products calculate and display various measures such as aircraft speed, altitude, and rate of ascent and descent. The functionality of ourThese air data systems useproducts utilize advanced sensors to gather air pressure data and use customized algorithms to interpret data, thus allowing the system to calculate altitude more accurately calculate altitude.accurately. During fiscal 2010, 2009,2012, 2011, and 2008 we derived 32%, 25%, and 23%, respectively, of our total revenues from2010, sales of air data systems and related products.components accounted for 13%, 21%, and 32%, respectively, of total revenues.

        We sellIS&S sells individual components as well as partial and complete air data systems. OurThe components and systems include:

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



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



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altitude displays, which convey aircraft altitude measurements;