
PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, shareholders' equity, cash flows, and comprehensive notes on accounting policies and acquisitions Condensed Consolidated Balance Sheets The condensed consolidated balance sheets show an increase in total assets and shareholders' equity from September 30, 2024, to June 30, 2025, primarily driven by increases in inventories, property and equipment, and additional paid-in capital and retained earnings | Metric | June 30, 2025 ($) | September 30, 2024 ($) | | :-------------------------------- | :------------ | :----------------- | | Total current assets | $39,811,433 | $34,685,698 | | Total assets | $91,784,588 | $82,382,261 | | Total current liabilities | $11,278,120 | $7,265,254 | | Total liabilities | $34,995,762 | $35,743,606 | | Total shareholders' equity | $56,788,826 | $46,638,655 | - Inventories increased significantly from $12.7 million at September 30, 2024, to $20.7 million at June 30, 20258 - Property and equipment, net, increased from $13.4 million at September 30, 2024, to $18.2 million at June 30, 20258 Condensed Consolidated Statements of Operations The statements of operations show substantial growth in net sales and net income for both the three and nine months ended June 30, 2025, compared to the same periods in 2024, primarily driven by product sales | Metric | 3 Months Ended June 30, 2025 ($) | 3 Months Ended June 30, 2024 ($) | 9 Months Ended June 30, 2025 ($) | 9 Months Ended June 30, 2024 ($) | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total net sales | $24,144,832 | $11,765,635 | $62,049,775 | $31,813,214 | | Gross profit | $8,582,235 | $6,279,821 | $26,459,915 | $17,385,346 | | Operating income | $3,514,332 | $2,037,120 | $11,842,470 | $5,295,369 | | Net income | $2,443,814 | $1,552,520 | $8,516,348 | $3,818,186 | | Basic EPS | $0.14 | $0.09 | $0.49 | $0.22 | | Diluted EPS | $0.14 | $0.09 | $0.48 | $0.22 | - Product net sales for the three months ended June 30, 2025, increased by 223.8% to $16.6 million from $5.1 million in the prior year10 - Product net sales for the nine months ended June 30, 2025, increased by 175.3% to $39.8 million from $14.4 million in the prior year10 Condensed Consolidated Statements of Shareholders' Equity The statements of shareholders' equity reflect an increase in total shareholders' equity, primarily driven by net income and share-based compensation, for both the three and nine months ended June 30, 2025, compared to the prior year | Metric | June 30, 2025 ($) | September 30, 2024 ($) | | :-------------------------- | :------------ | :----------------- | | Common Stock | $19,716 | $19,599 | | Additional Paid-In Capital | $56,954,206 | $55,320,500 | | Retained Earnings | $21,183,441 | $12,667,093 | | Total Shareholders' Equity | $56,788,826 | $46,638,655 | - Share-based compensation contributed $832,120 and $1.6 million to additional paid-in capital for the three and nine months ended June 30, 2025, respectively11116 - Net income for the nine months ended June 30, 2025, was $8.5 million, significantly increasing retained earnings1110 Condensed Consolidated Statements of Cash Flows The cash flow statements indicate a significant increase in net cash provided by operating activities for the nine months ended June 30, 2025, while investing activities shifted from a net cash provider to a net cash user, and financing activities continued to use cash | Cash Flow Activity | 9 Months Ended June 30, 2025 ($) | 9 Months Ended June 30, 2024 ($) | | :----------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $10,336,200 | $5,350,891 | | Net cash (used in) provided by investing activities | $(5,504,928) | $1,713,883 | | Net cash used in financing activities | $(4,768,490) | $(9,640,926) | | Net increase (decrease) in cash and cash equivalents | $62,782 | $(2,576,152) | - Purchases of property and equipment increased substantially to $5.5 million for the nine months ended June 30, 2025, from $511,927 in the prior year15 - Repayments of line of credit note decreased to $4.8 million for the nine months ended June 30, 2025, from $19.2 million in the prior year15 Notes to Condensed Consolidated Financial Statements The notes provide detailed explanations of the Company's accounting policies, significant transactions including recent acquisitions, financial instrument fair values, revenue recognition, and disclosures regarding income taxes, share-based compensation, earnings per share, commitments, related party transactions, and loan agreements 1. Summary of Significant Accounting Policies This section outlines the Company's core business as a vertically integrated provider of flight solutions and equipment, operating in one segment, detailing the basis of presentation, principles of consolidation, use of estimates, reclassification of service revenues, and accounting for business combinations, asset acquisitions, intangible assets, goodwill, fair value measurements, and revenue recognition under ASC 606 - IS&S is a vertically integrated provider of flight solutions and equipment for commercial air transport, general aviation, and military markets, operating in one business segment18 - The Company reclassified 'Customer service' and 'Engineering and development contracts' net sales and cost of sales into a single 'Services' category for consistent presentation22 Contract Balances | Contract Balance | September 30, 2024 ($) | June 30, 2025 ($) | | :------------------------------------------------------------------------------------------------ | :----------------- | :------------ | | Contract Assets | $1,680,060 | $1,135,671 | | Contract Liabilities | $340,481 | $2,529,533 | - Lockheed Martin accounted for 52% of net sales for the three months ended June 30, 2025, and 47% for the nine months ended June 30, 2025, indicating significant customer concentration51 2. Supplemental Balance Sheet Disclosures This section details the accounting for significant acquisitions, including the September 2024 and June 2023 Honeywell Agreements, and the July 2024 Honeywell Asset Acquisition, outlining purchase price allocations, acquired assets, and related measurement period adjustments, also providing breakdowns of inventories, prepaid expenses, intangible assets, property and equipment, and accrued expenses - The September 2024 Honeywell Agreement involved a $14.2 million cash consideration for military display generators and flight control computers assets, with preliminary purchase price allocation including $8.08 million in intangible assets and $2.63 million in goodwill6163 - The June 2023 Honeywell Agreement, a business combination, had a $35.9 million cash consideration for inertial, communication, and navigation product lines, with final allocation including $17.24 million in intangible assets and $4.07 million in goodwill687071 - The July 2024 Honeywell Asset Acquisition, an asset acquisition, involved $4.2 million in cash for communication and navigation product lines, allocating $2.6 million to property and equipment, $430,000 to customer relationships and backlog, and $1.24 million to indefinite-lived license agreements75 Intangible Assets | Intangible Asset Category | Gross Carrying Value (June 30, 2025) ($) | Net Carrying Value (June 30, 2025) ($) | | :-------------------------- | :----------------------------------- | :--------------------------------- | | License agreement | $9,790,000 | $9,790,000 | | Customer relationships | $12,604,327 | $10,209,051 | | Backlog | $4,850,000 | $4,122,500 | | Licensing and certification rights | $696,506 | $13,821 | | Total | $27,940,833 | $24,135,372 | - The Company changed the estimated useful lives of rotable assets from 5 years to 10 years, effective January 1, 2025, decreasing depreciation expense by $0.4 million ($0.02 per diluted share) for the three months and $0.7 million ($0.04 per diluted share) for the nine months ended June 30, 20258384 3. Income Taxes This section discusses the Company's effective tax rates for the three and nine months ended June 30, 2025 and 2024, and notes the potential impact of new tax reform provisions, such as the One Big Beautiful Bill Act (OBBB), on future financial results Effective Tax Rates | Period | Effective Tax Rate (2025) | Effective Tax Rate (2024) | | :-------------------------- | :------------------------ | :------------------------ | | Three Months Ended June 30 | 21.5% | 17.6% | | Nine Months Ended June 30 | 19.9% | 19.9% | - The effective tax rate for the three months ended June 30, 2025, increased to 21.5% from 17.6% in the prior year, primarily due to higher taxable earnings90175 - The recently signed One Big Beautiful Bill Act (OBBB) may affect the Company's effective tax rate and deferred tax assets due to provisions like elective deduction for domestic R&D and reinstatement of 100% first-year bonus depreciation88 4. Shareholders' Equity and Share-Based Payments This section details the Company's share-based compensation plans, including the 2019 Stock-Based Incentive Compensation Plan, 2024 RSU Bonus Grants, Market-Based Restricted Stock Units (MSUs), and Time Based Stock Options (MSOs), outlining the terms, grant-date fair values, and recognized compensation expenses for these awards - The 2019 Plan was amended on April 18, 2024, to include an additional 1,950,000 authorized shares, with 1,375,295 shares available for awards as of June 30, 202595 - 71,754 Restricted Stock Units (RSUs) were granted to key employees on February 19, 2025, vesting 50% on the one-year and 50% on the two-year anniversary98 - 201,000 Market-Based Restricted Stock Units (MSUs) were granted to the CEO, with vesting conditional on service and stock price appreciation targets ($10.00, $12.00, $14.00 per share), and the grant-date fair value was estimated at $1.1 million100102104 - 105,321 Time Based Stock Options (MSOs) were granted to the CEO and CFO, vesting over four years but exercisable only if the share price reaches $9.88 for 20 consecutive trading days, with an aggregate grant-date fair value of $474,998107108111 Share-Based Compensation Expense | Compensation Expense Type | 3 Months Ended June 30, 2025 ($) | 3 Months Ended June 30, 2024 ($) | 9 Months Ended June 30, 2025 ($) | 9 Months Ended June 30, 2024 ($) | | :------------------------------------------------------------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | MSU awards | $253,779 | — | $483,722 | — | | MSO awards | $85,111 | — | $98,757 | — | | Stock options and restricted stock awards (employees) | $355,653 | $191,623 | $769,304 | $566,952 | | Restricted stock awards (non-employee Board members) | $137,577 | $59,278 | $282,040 | $159,003 | | Total compensation expense (2019 Plan) | $832,120 | $250,901 | $1,633,823 | $725,955 | 5. Earnings Per Share This section provides the calculation of basic and diluted earnings per share, highlighting the dilutive effect of share-based awards and the number of anti-dilutive shares excluded from the calculation Earnings Per Share Calculation | Metric | 3 Months Ended June 30, 2025 ($) | 3 Months Ended June 30, 2024 ($) | 9 Months Ended June 30, 2025 ($) | 9 Months Ended June 30, 2024 ($) | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income | $2,443,814 | $1,552,520 | $8,516,348 | $3,818,186 | | Basic weighted average shares | 17,601,814 | 17,461,652 | 17,554,824 | 17,455,903 | | Dilutive effect of share-based awards | 233,934 | 5,607 | 154,971 | 20,186 | | Diluted weighted average shares | 17,835,748 | 17,467,259 | 17,709,795 | 17,476,089 | | Basic EPS | $0.14 | $0.09 | $0.49 | $0.22 | | Diluted EPS | $0.14 | $0.09 | $0.48 | $0.22 | - The dilutive effect of share-based awards significantly increased for the three and nine months ended June 30, 2025, compared to the prior year, reflecting new MSU and MSO grants118119 - 241,934 and 529,918 diluted weighted-average shares were excluded from EPS computation for the three months ended June 30, 2025 and 2024, respectively, due to anti-dilutive effects121 6. Commitments and Contingencies The Company is subject to various legal proceedings and claims in the ordinary course of business but does not believe any currently pending matters will have a material effect on its operations or financial position - The Company does not anticipate any material impact on its results of operations or financial position from current legal proceedings and claims123 7. Related Party Transactions This section discloses sales to a related party, AML Global Eclipse, LLC, and a consulting agreement with Peduzzi Associated, ltd., an entity associated with a board member, for business development services Related Party Sales | Related Party Sales | 3 Months Ended June 30, 2025 ($) | 3 Months Ended June 30, 2024 ($) | 9 Months Ended June 30, 2025 ($) | 9 Months Ended June 30, 2024 ($) | | :------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Sales to AML Global Eclipse, LLC | $55,317 | $110,000 | $72,197 | $203,000 | - The Company entered a consulting agreement with Peduzzi Associated, ltd. (PAL), an entity where board member Maj. General Dean serves as President, for $9,500 per month for DoD business development services125 8. Loan Agreement This section details the Company's loan agreements with PNC Bank, including a term loan and a revolving line of credit, which has been amended multiple times to increase the principal amount and extend maturity dates, providing expanded liquidity for acquisitions and working capital - The Company's revolving line of credit with PNC Bank was increased to an aggregate principal amount of $35 million with an expiration date of December 19, 2028132193 - As of June 30, 2025, the outstanding balance on the revolving line of credit was $23.3 million with an effective interest rate of 6.3% (or 6.4% as per MD&A)133194 - The Company was in compliance with all applicable loan covenants as of June 30, 2025133 9. Subsequent Events This section reports on subsequent events, including the market performance condition being met for certain MSUs granted to the CEO and the Company entering into a new $100 million committed credit agreement with JPMorgan Chase Bank, N.A., replacing the existing line of credit - On July 10, 2025, the market performance condition for 67,000 units of MSUs granted to the CEO was met, leading to their vesting135 - On July 18, 2025, the Company entered a new five-year, $100 million committed credit agreement with JPMorgan Chase Bank, N.A., replacing the existing $35 million line of credit136 - The new credit agreement includes a $30 million revolving loan facility, a $25 million term loan, a $45 million delayed draw term facility, and an option for an additional $25 million137 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition, cash flows, and results of operations, including a cautionary statement on forward-looking information, a company overview, discussion of ESG considerations, critical accounting policies, detailed analysis of operating results, liquidity, capital resources, and backlog CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This section warns readers about forward-looking statements in the report, emphasizing that they are based on current expectations and involve risks and uncertainties that could cause actual results to differ materially, also listing various risk factors that could impact the Company's future performance - Forward-looking statements are based on current expectations and projections, are not guarantees of future performance, and involve risks and uncertainties140 - Key risk factors include market acceptance of new products, competitive environment, supply chain disruptions, regulatory approvals, and the ability to integrate acquisitions142 - The Company does not undertake to publicly release revisions to forward-looking statements and does not endorse analyst forecasts142145 Objective The objective of this discussion is to analyze the Company's financial condition, cash flows, and results of operations from management's perspective, providing insights into events and uncertainties that may affect future financial outcomes - The discussion aims to provide an analysis of financial condition, cash flows, and results of operations from management's perspective146 - It should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024146 Company Overview Innovative Solutions and Support, Inc. (IS&S) is a systems integrator designing, developing, manufacturing, selling, and servicing avionics products for retrofit and OEM markets, strategically expanding its product base through acquisitions to leverage technology and achieve cost advantages, though the integration of these acquisitions is expected to cause revenue fluctuations - IS&S operates as a systems integrator, providing air data equipment, engine display systems, standby equipment, primary flight guidance, autothrottles, and cockpit display systems for retrofit and OEM applications147 - The Company's strategy focuses on leveraging computer and telecommunications technologies into advanced, cost-effective solutions for general aviation, commercial air transport, DoD/governmental, and foreign military markets148 - Recent acquisitions include the June 2023 Honeywell Agreement ($35.9 million cash), July 2024 Honeywell Asset Acquisition ($4.2 million cash), and September 2024 Honeywell Agreement ($14.2 million cash), expanding product lines in inertial, communication, navigation, military display generators, and flight control computers150151153 - The transition of military product line production from Honeywell to IS&S facilities is expected to cause significant revenue fluctuations in the short term, with an anticipated spike followed by a temporary dip154155 Environmental, Social and Governance Considerations The Company is committed to identifying and addressing ESG issues, focusing on diversity in talent recruitment, promoting long-term sustainability through aircraft upgrades and GPS receivers for reduced carbon footprint navigation, and enhancing the environmental impact of its operations - Management and the Board are committed to identifying, assessing, and understanding the potential impact of ESG issues and related risks160 - The Company supports long-term sustainability by upgrading existing aircraft (retrofit market) and offering GPS receivers that facilitate reduced carbon footprint navigation162 - The Company is an equal opportunity employer, committed to recruiting and developing a diversity of talent161 Critical Accounting Policies and Estimates This section highlights critical accounting policies and estimates, including revenue recognition, inventory valuation, and valuation of tangible and intangible assets acquired, also noting a change in the accounting estimate for the useful lives of rotable assets from 5 to 10 years, effective January 1, 2025, which prospectively decreased depreciation expense - Critical accounting policies and estimates include revenue recognition, inventory valuation, and valuation of tangible and intangible assets acquired163 - The Company changed the estimated useful lives of rotable assets from 5 years to 10 years, effective January 1, 2025, decreasing depreciation expense by $0.4 million ($0.02 per diluted share) for the three months and $0.7 million ($0.04 per diluted share) for the nine months ended June 30, 2025165166 RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2025 AND 2024 This section provides a detailed comparative analysis of the Company's financial performance for the three and nine months ended June 30, 2025, versus 2024, highlighting significant increases in net sales and net income, primarily driven by product sales from recent acquisitions, alongside changes in cost of sales, operating expenses, and gross margins Key Operating Metrics (% of Total Net Sales) | Metric (% of Total Net Sales) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Product Net Sales | 68.8% | 43.6% | 64.1% | 45.4% | | Services Net Sales | 31.2% | 56.4% | 35.9% | 54.6% | | Total Net Sales | 100.0% | 100.0% | 100.0% | 100.0% | | Gross Profit | 35.6% | 53.4% | 42.7% | 54.6% | | Operating Income | 14.6% | 17.3% | 19.1% | 16.6% | | Net Income | 10.2% | 13.2% | 13.7% | 12.0% | Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024 For the three months ended June 30, 2025, net sales increased by 105.2% to $24.1 million, primarily due to a 223.8% increase in product sales, largely from Honeywell military products, while gross margin decreased to 35.6% from 53.4% due to unfavorable product mix, R&D expenses decreased by 16.6%, SG&A expenses increased by 32.1% due to acquisition-related costs and increased headcount, and net income rose to $2.4 million from $1.6 million Three Months Operating Results | Metric | 3 Months Ended June 30, 2025 ($) | 3 Months Ended June 30, 2024 ($) | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :----------- | :----------- | | Net Sales | $24,144,832 | $11,765,635 | $12,379,197 | 105.2% | | Product Sales | $16,601,648 | $5,127,056 | $11,474,592 | 223.8% | | Services Sales | $7,543,184 | $6,638,579 | $904,605 | 13.6% | | Cost of Sales | $15,562,597 | $5,485,814 | $10,076,783 | 183.7% | | Gross Profit | $8,582,235 | $6,279,821 | $2,302,414 | 36.7% | | R&D Expense | $916,829 | $1,099,367 | $(182,538) | -16.6% | | SG&A Expense | $4,151,074 | $3,143,334 | $1,007,740 | 32.1% | | Net Income | $2,443,814 | $1,552,520 | $891,294 | 57.4% | | Diluted EPS | $0.14 | $0.09 | $0.05 | 55.6% | - The increase in product sales was primarily driven by $11.5 million from Honeywell military products, benefiting from accelerated production in anticipation of facility transition170 - The decrease in gross margin percentage (from 53.4% to 35.6%) was mainly due to unfavorable changes in product mix and increased proportion of military sales171 Nine Months Ended June 30, 2025 Compared to the Nine Months Ended June 30, 2024 For the nine months ended June 30, 2025, net sales increased by 95.0% to $62.0 million, with product sales up 175.3% largely from the September 2024 Honeywell Agreement, while gross margin decreased to 42.7% from 54.6% due to product mix, depreciation, and integration costs, R&D expenses slightly decreased by 4.6%, SG&A expenses increased by 29.4% due to acquisition-related fees, amortization, and headcount, and net income more than doubled to $8.5 million from $3.8 million Nine Months Operating Results | Metric | 9 Months Ended June 30, 2025 ($) | 9 Months Ended June 30, 2024 ($) | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :----------- | :----------- | | Net Sales | $62,049,775 | $31,813,214 | $30,236,561 | 95.0% | | Product Sales | $39,765,914 | $14,446,753 | $25,319,161 | 175.3% | | Services Sales | $22,283,861 | $17,366,461 | $4,917,400 | 28.3% | | Cost of Sales | $35,589,860 | $14,427,868 | $21,161,992 | 146.7% | | Gross Profit | $26,459,915 | $17,385,346 | $9,074,569 | 52.2% | | R&D Expense | $2,891,793 | $3,031,630 | $(139,837) | -4.6% | | SG&A Expense | $11,725,652 | $9,058,347 | $2,667,305 | 29.4% | | Net Income | $8,516,348 | $3,818,186 | $4,698,162 | 123.0% | | Diluted EPS | $0.48 | $0.22 | $0.26 | 118.2% | - Net sales for the nine months ended June 30, 2025, included $29.3 million from the September 2024 Honeywell Agreement178 - The decline in gross margin percentage (from 54.6% to 42.7%) was attributed to unfavorable product mix, increased depreciation from acquisitions, and cost inefficiencies from hiring and training new personnel179 Liquidity and Capital Resources The Company's liquidity is primarily supported by cash flows from operations and its revolving credit facility, expecting existing cash and anticipated cash flows, along with the credit facility, to be sufficient for at least the next 12 months, covering working capital, facility expansion, and ERP system implementation, with a new $100 million credit agreement entered into post-period end to enhance liquidity and flexibility Liquidity Metrics | Metric | June 30, 2025 ($) | September 30, 2024 ($) | | :-------------------------- | :------------ | :----------------- | | Cash and cash equivalents | $601,759 | $538,977 | | Current assets | $39,811,433 | $34,685,698 | | Current liabilities | $11,278,120 | $7,265,254 | | Quick ratio | 1.08 | 1.81 | | Current ratio | 3.53 | 4.77 | - Net cash provided by operating activities increased to $10.3 million for the nine months ended June 30, 2025, from $5.4 million in the prior year186199 - Net cash used in investing activities was $5.5 million, primarily for facility additions, equipment purchases, and ERP system investment186200 - Net cash used in financing activities was $4.8 million, mainly for repayments against the line of credit186201 - A new five-year, $100 million committed credit agreement was entered into on July 18, 2025, replacing the existing $35 million line of credit, providing expanded liquidity and flexibility195136138 Backlog The Company's backlog decreased to $72.4 million at June 30, 2025, from $89.2 million at September 30, 2024, with approximately 60% expected to be recognized as revenue over the next 12 months, and 90% over the next 24 months, driven by recent contract wins in commercial, military, and business aviation markets Backlog Summary | Backlog Metric | 3 Months Ended June 30, 2025 ($) | 9 Months Ended June 30, 2025 ($) | | :-------------------------- | :--------------------------- | :--------------------------- | | Backlog, beginning of period | $79,598,515 | $89,232,576 | | Plus: bookings during period, net | $16,940,971 | $45,211,853 | | Less: sales recognized during period | $(24,144,832) | $(62,049,775) | | Backlog, end of period | $72,394,654 | $72,394,654 | - Backlog decreased to $72.4 million at June 30, 2025, from $89.2 million at September 30, 2024206 - Approximately 60% of the backlog is expected to be recognized as revenue over the next 12 months, and 90% over the next 24 months206 - Recent contract wins include the ThrustSense® Autothrottle system for US Army C-12 aircraft and a multi-million dollar production contract for a 19" Multifunction Display (MFD) with Integrated Mission Computer207 Off-Balance Sheet Arrangements The Company has no relationships with unconsolidated entities or financial partnerships established for off-balance sheet arrangements - The Company does not have any off-balance sheet arrangements with unconsolidated entities or financial partnerships208 Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company's primary market risk exposure is to changes in interest rates, particularly affecting its cash equivalents invested in variable-rate money market accounts, with a hypothetical 1% increase in interest rates having a minimal impact on interest income and cash flows - The Company's primary market risk is exposure to changes in interest rates, affecting cash equivalents in variable-rate money market accounts209 - A hypothetical 1% increase in variable interest rates would impact interest income and cash flows by approximately $3,717 for the nine months ended June 30, 2025209 - The Company does not use derivative financial instruments for speculative or trading purposes and does not participate in interest rate hedging209 Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the fiscal quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025210 - No material changes in internal control over financial reporting were identified during the fiscal quarter ended June 30, 2025211 PART II. OTHER INFORMATION This section addresses legal proceedings, risk factors, equity security sales, defaults, and other miscellaneous information and exhibits Item 1. Legal Proceedings The Company is involved in various legal proceedings and claims in the ordinary course of business but does not anticipate any material adverse effect on its operations or financial position from these matters - The Company does not believe any currently pending legal proceedings will have a material effect on its results of operations or financial position212 Item 1A. Risk Factors This section refers to the risk factors disclosed in the Company's Annual Report on Form 10-K, with an additional disclosure regarding the potential material adverse effect of tariffs and trade restrictions on the Company's business, supply chain, and demand for products and services - Tariffs imposed by the United States government and reciprocal trade restrictions from other nations could have a material adverse effect on the Company's results of operations, supply chain, and demand214 - Uncertainty surrounding trade policies and potential escalation of trade tensions could negatively impact world trade and the global economy214 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities, use of proceeds, or repurchases of common stock during the quarter ended June 30, 2025 - No unregistered sales of equity securities occurred during the quarter ended June 30, 2025216 - The Company did not repurchase shares of its common stock during the quarter ended June 30, 2025218 Item 3. Defaults upon Senior Securities There were no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported219 Item 4. Mine Safety Disclosures This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company220 Item 5. Other Information No executive officer or director adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - No executive officer or director adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025221 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Credit Agreement, certifications from the CEO and CFO, and XBRL-related documents - Exhibits include the Credit Agreement dated July 18, 2025, certifications of the CEO and CFO, and Inline XBRL documents224 SIGNATURES The report is duly signed on behalf of Innovative Solutions and Support, Inc. by Jeffrey DiGiovanni, Chief Financial Officer, on August 14, 2025 - The report was signed by Jeffrey DiGiovanni, Chief Financial Officer, on August 14, 2025228