**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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**FORM 10-K/AAmendment No. 1**

**x**                                ANNUAL REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe fiscal year ended September 30, 2006**

**OR**

**o**                                   TRANSITION REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe transition period from                    to                    .**

**CommissionFile No. 0-31157**

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**INNOVATIVE SOLUTIONS ANDSUPPORT, INC.**

(Exact name of registrantas specified in its charter)

| **Pennsylvania**                                |   | **23-2507402**                     |
|-------------------------------------------------|--------|------------------------------------|
| (State or other  jurisdiction of incorporation) |   | (IRS Employer  Identification No.) |
| **720 Pennsylvania Drive, Exton, Pennsylvania** |   | **19341**                          |
| (Address of  principal executive offices)       |   | (Zip Code)                         |

 

**(610) 646-9800**

(Registrant’s telephonenumber, including area code)

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**Securities registered pursuant to Section 12(b) ofthe Act:**

| Title of each class:                    | ** ** | **Name of each exchange on which registered** |
|-----------------------------------------|------------|-----------------------------------------------|
| Common Stock par  value $.001 per share |       | NASDAQ National  Market                       |

 

**Securities registered pursuant to Section 12(g) ofthe Act: None**

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act.  Yes o  No x

Indicate by check mark if theregistrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Act  Yes o  No x

Note: Checking the abovebox will not relieve any registrant required to file reports pursant to section13 or section 15(d) of the Exchange Act from their obligations under thosesections.

Indicate by check markwhether registrant (1) has filed all reports required to be filed bysection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  Yes x  No o

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of the Registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment tothis Form 10-K. o

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer o |   | Accelerated  filer x |   | Non-accelerated  filer o |
|--------------------------------|--------|---------------------------|--------|-------------------------------|

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Act).  Yes o  No x

Theaggregate market value of the Registrant’s common stock held by non-affiliatesof the Registrant as of March 31, 2006 (the last business day of theregistrant’s most recently completed second quarter) was approximately $99million. Shares of common stock held by each executive officer and director andby each person who owns 10% or more of our outstanding common stock have beenexcluded since such persons may be deemed affiliates. This determination ofaffiliate status is not necessarily a conclusive determination for otherpurposes.

As ofDecember 1, 2006, there were 16,818,886 outstanding shares of theRegistrant’s Common Stock

**Documents Incorporated byReference**

None.

**ExplanatoryNote**

This Amendment No. 1 onForm 10-K/A to our Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2006 filed with the Securities and Exchange Commission (the “SEC”)on December 12, 2006 (the “Form 10-K”) is being filed to amend and restateonly the following items of the Form 10-K: Items 10, 11, 12, 13 and 14 of PartIII. Other than these items, none of the information contained in the Form 10-Khas been revised or amended.

 

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**PART III**

**Item10.**                 Directors andexecutive officers of the registrant.

**Directors**

Thecurrent members of the Board of Directors, together with certain informationabout them, are set forth below:

|                                   | ** ** | ** ** | ** ** | **Director** | ** ** | **Term**  | ** ** | ** **                       |
|-----------------------------------|------------|------------|------------|--------------|------------|-----------|------------|----------------------------------|
| **Name**                          | ** ** | ** ** | ** ** | **Age**      | ** ** | **Since** | ** ** | **Expires**                      | ** ** | **Positions with the Company** |
| *Class I Directors*          |       |       |       |         |       |      |       |                             |
| Ivan M. Marks                     |       | 65         |       | 1996         |       | 2007      |       | Director                         |
| Robert H. Rau                     |       | 70         |       | 2001         |       | 2007      |       | Director                         |
| *Class II Directors*         |       |       |       |         |       |      |       |                             |
| Glen R. Bressner                  |       | 46         |       | 1999         |       | 2008      |       | Director                         |
| Robert E.  Mittelstaedt, Jr. |       | 63         |       | 1989         |       | 2008      |       | Director                         |
| Raymound J. Wilson                |       | 61         |       | 2007         |       | 2008      |       | Director                         |
| *Class III Directors*        |       |       |       |         |       |      |       |                             |
| Geoffrey S. M. Hedrick            |       | 65         |       | 1988         |       | 2009      |       | Director, Chairman of  the Board |
|                                   |       |       |       |         |       |      |       | and Chief Executive  Officer     |
| Winston J. Churchill              |       | 66         |       | 1990         |       | 2009      |       | Director                         |
|                                   |            |            |            |              |            |           |            |                                  |  |  |

* *

*Ivan M. Marks.*   Mr. Marksretired January 31, 2005 as Vice President-Controller of Parker AerospaceGroup, which is the aerospace segment of Parker Hannifin Corporation, aposition he held since 1979. Mr. Marks holds a Bachelor of Science degreein Business Administration from Drake University and is a Certified PublicAccountant.

*Robert H. Rau.*   Mr. Rauretired December 31, 1998 as President of the Aerostructures Group of TheGoodrich Company. Prior to its merger with Goodrich, Mr. Rau was Presidentand Chief Executive Officer of Rohr, Inc. from 1993 to 1997. Beforejoining Rohr, he was an Executive Vice President of Parker Hannifin Corporationand President of its Aerospace Sector. In addition, Mr. Rau is a pastmember of the Board of Governors of the Aerospace Industries Association, apast Chairman of the General Aviation Manufacturers Association, and Chairmanof the International Advisory Panel of Singapore Aerospace. Mr. Raureceived a Bachelor of Arts degree in Business Administration from WhittierCollege in 1962.

*Glen R. Bressner.*   Mr. Bressnerhas been a partner of Mid-Atlantic Venture Funds, a venture capital firm, since1997. Mr. Bressner is also a partner of NEPA Venture Fund, L.P., a venturecapital firm, a position he has held since 1985. From 1996 to 1997,Mr. Bressner served as the Chairman of the Board of Directors of theGreater Philadelphia Venture Group. Mr. Bressner holds a Bachelor ofScience degree in Business Administration from Boston University and a Mastersof Business Administration degree from Babson College.

*Robert E.Mittelstaedt, Jr.*   Mr. Mittelstaedtserved as our Non-Executive Chairman of the Board of Directors from 1989 to1997. Since July 1, 2004 Mr. Mittelstaedt has been Dean of the W.P.Carey School of Business at Arizona State University. Prior to that, Mr. Mittelstaedtwas Vice Dean of The Wharton School of the University of Pennsylvania since1989. Mr. Mittelstaedt also serves on the Board of Directors of LaboratoryCorporation of America Holdings, Inc. Mr. Mittelstaedt holds aBachelor of Science degree in Mechanical Engineering from Tulane University anda Masters of Business Administration degree from The Wharton School of theUniversity of Pennsylvania.

*Geoffrey S. M. Hedrick.*   Mr. Hedrickhas been our Chief Executive Officer since he founded the Company inFebruary 1988 and our Chairman of the Board since 1997. Prior to foundingthe Company, Mr. Hedrick served as President and Chief Executive Officerof Smiths Industries, North American Aerospace Companies. He also foundedHarowe Systems, Inc. in 1971, which was subsequently acquired 

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by SmithsIndustries. Mr. Hedrick has over 35 years of experience in the avionicsindustry, and he holds a number of patents in the electronics, optoelectric,electromagnetic, aerospace and contamination-control fields.

*Winston J. Churchill.*   Mr. Churchillhas been managing general partner of SCP Private Equity Partners since hefounded it in 1996, and has over twenty-five years experience in private equityinvesting. Previously, he had formed Churchill Investment Partners, Inc.in 1989 and CIP Capital, L.P., another venture capital fund, in 1990. Prior tothat, he was a managing partner of a private investment firm that specializedin leveraged buyouts on behalf of Bessemer Securities Corporation. From 1967 to1983, he practiced law at the Philadelphia firm of Saul, Ewing, Remick and Sauland served as Chairman of its Banking and Financial Institutions Department,Chairman of the Finance Committee and a member of its Executive Committee. Heis a Director of Amkor Technology, Inc. and Griffin Land andNurseries, Inc., as well as a number of private companies. From 1989 to1993, he served as Chairman of the Finance Committee of the Pennsylvania PublicSchool Employees’ Retirement System. He is currently a trustee of FordhamUniversity, Georgetown University, Immaculata University, American Friends ofNew College Oxford, England, The Gesu School and Young Scholars Charter School.He was awarded a BS in Physics, summa cum laude, from Fordham Universityfollowed by a M.A. in Economics from Oxford University where he studied as aRhodes Scholar, and a J.D. degree from Yale Law School.

*Raymond J. Wilson C.B.E.**  *Since June, 2004, Mr. Wilson is employed as  an independent Aerospace ManufacturingConsultant, Wilson in the period from January 2001 to January 2004,  served on the five-person Executive Committeefor Airbus S.a.s., where he was an integral member of the management groupresponsible for the overall performance of the $30 billion internationalaircraft manufacturing firm. At that time, he also served as Executive VicePresident for Procurement with the Toulouse, France-based Company. Prior tothat, from September 1997 to January 2001, Mr. Wilson was ManagingDirector for Airbus U.K. as well as a member of the Airbus Executive Board inthe three years prior to the formation of Airbus as a company. Mr. Wilsonis currently a non executive member of the Board of Directors of the GardnerGroup LTD. in Nuneaton U.K.

As part of New Year’sHonours 2004, Wilson was honored by Her Majesty Queen Elizabeth II as aCommander of the British Empire (C.B.E.) for his services to the AircraftIndustry. Wilson is a graduate of Napier University in Edinburgh, Scotland andresides in Clevedon U.K.

**Executive Officers**

Thecurrent executive officers of the Company, their ages, positions, terms ofoffice with the Company, and brief summaries of their business experience areset forth in Part I of the Form 10-K beginning on page 12.

**Audit*****Committee and Audit Committee Expert*

The Audit Committee makesrecommendations to the Board with respect to various auditing and accountingmatters, including the selection and compensation of our independent registeredpublic accounting firm, the scope of our annual audits, fees to be paid to theindependent registered public accounting firm, the performance and independenceof our independent registered public accounting firm and our accountingpractices. The Audit Committee approves all services provided to the Company bythe independent registered public accounting firm. The Audit Committee hasestablished procedures for the receipt, retention and treatment, on aconfidential basis, of complaints received by the Company, regardingaccounting, internal accounting controls or auditing matters, and theconfidential, anonymous submissions by employees of concerns regardingquestionable accounting or auditing matters. In addition, the Audit Committeehas responsibility for, among other things, the planning and review of ourannual and periodic reports and accounts and the involvement of our independentregistered public accounting firm in that process. Messrs. Rau (Chairman),Bressner and Marks are currently members of the Audit Committee. 

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TheAudit Committee is comprised solely of independent members, as independence foraudit committee members is defined in the listing standards of the NasdaqNational Market. In addition, the Board has determined in its business judgmentthat each member of the Audit Committee is financially literate and that atleast one of the Audit Committee members, Mr. Marks, is an audit committeefinancial expert, as defined by SEC rules and regulations.

**Section 16(A) Beneficial Ownership ReportingCompliance**

Section 16(a) ofthe Securities Exchange Act of 1934, as amended, requires our officers (asdefined under Section 16(a) of the Securities Exchange Act),directors and persons who own greater than 10% of a registered class of ourequity securities to file reports of ownership and changes in ownership withthe Securities and Exchange Commission. Based solely on a review of the formswe have received and on written representations from certain reporting personsthat no such forms were required for them, we believe that during fiscal year2006, all of the Section 16(a) filing requirements applicable to ourofficers, directors and 10% beneficial owners were complied with by suchpersons, except that State Teachers Retirement System of Ohio filed aForm 3 on June 12, 2006 for a transaction that occurred onMay 30, 2006 and a Form 4 on June 12, 2006 for transactions thatoccurred on June 5, 2006 and June 6, 2006.

**Code of Ethics**

We adopted a Code ofEthics (the “Code of Ethics”) applicable to our Directors, our principalexecutive officer and principal financial and accounting officer and personsperforming similar functions. In addition, the Code of Ethics applies to ouremployees, officers, agents and representatives. The Code of Ethics is postedon the Company’s website, *www.innovative-ss.com*,under the heading Investor Relations.

**Item11.**                 Executivecompensation.

**EXECUTIVECOMPENSATION**

**Summary Compensation Table**

Thefollowing table sets forth the cash compensation as well as certain othercompensation paid or accrued during fiscal years 2006, 2005 and 2004 to ourchief executive officer and each other executive officer who earned more than$100,000 during fiscal year 2006 (collectively, the “Named Executive Officers”)for services rendered in such years:

|                                                | ** ** | ** **                   | ** ** | ** **     | ** ** | ** **         | ** ** | Long-Term        | ** ** | ** **  | ** ** |
|------------------------------------------------|------------|------------------------------|------------|----------------|------------|--------------------|------------|------------------|------------|-------------|------------|
| ** **                                     | ** ** | ** **                   | ** ** | ** **     | ** ** | ** **         | ** ** | **Compensation** | ** ** | ** **  | ** ** |
| ** **                                     | ** ** | ** **                   | ** ** | ** **     | ** ** | ** **         | ** ** | **Awards**       | ** ** | ** **  | ** ** |
| ** **                                     | ** ** | ** **                   | ** ** | ** **     | ** ** | ** **         | ** ** | **Securities**   | ** ** | ** **  | ** ** |
| ** **                                     | ** ** | **Annual Compensation** | ** ** | **Underlying** | ** ** | **All Other** | ** ** |
| **Name and Principal Position** | ** ** | ** **                   | ** ** | **Year**       | ** ** | **Salary**         | ** ** | **Bonus**        | ** ** | **Options** | ** ** | **Compensation** | ** ** |
| Geoffrey S. M. Hedrick                         |       | 2006                         |       | $              | 400,000    |               | $          | 1,945            |       |        | —     |   |   |   | $ | 3,270 | (2) |   |
| Chief Executive Officer                        |       | 2005                         |       | $              | 432,692    | (1)                | $          | 4,225            |       |        | —     |   |   |   | $ | 4,900 | (3) |   |
|                                                |       | 2004                         |       | $              | 350,000    |               | —     |             |       | —      |       |   |   | $ | 5,936 | (3) |   |
| Roman G. Ptakowski                             |       | 2006                         |       | $              | 250,000    |               | $          | 1,703            |       |        | —     |   |   |   | — |   |   |
| President                                      |       | 2005                         |       | $              | 250,000    |               | $          | 30,000           |       |        | —     |   |   |   |   |   |   |
|                                           |       | 2004                         |       | $              | 250,000    |               |       |             |       |        |       |   |   | $ | 57,903 | (4) |   |
| James J. Reilly                                |       | 2006                         |       | $              | 200,000    |               | $          | 1,768            |       |        | —     |   |   |   |   |   |   |
| Chief Financial Officer                        |       | 2005                         |       | $              | 192,308    |               | $          | 4,225            |       |        | 15,000     |   |   |   |   |   |   |
|                                                |       | 2004                         |       | $              | 180,000    |               | —     |             |       | —      |       |   |   | — |   |   |
|                                                |            |                              |            |                |            |                    |            |                  |            |             |            |  |  |  |  |  |  |  |  |  |

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(1)          Includes $32,692 ofretroactive pay from fiscal 2004.

(2)          Automobile Allowance.

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(3)          Automobile &Airplane allowance.

(4)          Thisamount represents a relocation bonus.

**Stock Option Grants**

There were no stock optiongrants in fiscal year 2006 to any of the Named Executive Officers.

**Stock OptionExercises and Holdings**

The following table setsforth the value of options held by each of the Named Executive Officers atSeptember 30, 2006.

**AggregatedOption Exercises in 2006 and Option Values at September 30, 2006**

| ** **             | ** ** | ** **   | ** ** | ** **            | ** ** | **Number of Securities** | ** ** | ** **                            | ** ** | ** **        | ** ** |
|------------------------|------------|--------------|------------|-----------------------|------------|------------------------------------|------------|---------------------------------------|------------|-------------------|------------|
| ** **             | ** ** | **Shares**   | ** ** | ** **            | ** ** | **Underlying Unexercised**    | ** ** | **Value of Unexercised**    | ** ** |
| ** **             | ** ** | **Acquired** | ** ** | ** **            | ** ** | **Options at**                | ** ** | **In-The-Money Options at** | ** ** |
| ** **             | ** ** | **On**       | ** ** | **Value**             | ** ** | **September 30, 2006**   | ** ** | **September 30, 2006(1)**   | ** ** |
| **Name**               | ** ** | ** **   | ** ** | **Exercise (#)** | ** ** | **Realized ($)**              | ** ** | **Exercisable**                       | ** ** | **Unexercisable** | ** ** | **Exercisable** | ** ** | **Unexercisable** | ** ** |
| Geoffrey S. M. Hedrick |       |         | —     |                  |       |                               | —     |                                  |       |              | 1,500      |   |   |   |   |   |   | $ | 10,796 |   |   | $ | 0 |   |   |
| Roman G. Ptakowski     |       |         |       |                  |       |                               |       |                                  |       |              | 180,000    |   |   |   |   |   |   | $ | 1,858,140 |   |   | $ | 0 |   |   |
| James J. Reilly        |       |         |       |                  |       |                               |       |                                  |       |              | 46,049     |   |   |   | 12,000 |   |   | $ | 286,016 |   |   | $ | 0 |   |   |
|                        |            |              |            |                       |            |                                    |            |                                       |            |                   |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)          The value of unexercisedin-the-money options is based on the difference between the last sale price ofa share of our common stock as reported on the Nasdaq National Market onSeptember 29, 2006 ($14.53) and the exercise price of the options,multiplied by the number of options.

**EmploymentContracts, Termination of Employment and Change in Control Arrangements**

In March 2003, we entered into an agreement withRoman G. Ptakowski to serve as President at an annual salary of $250,000 and anannual performance incentive bonus of up to 30% of base salary based onperformance of the business. The initial term of the agreement was for twoyears with yearly one-year renewal periods unless either party provides theother party with written notice of termination of the agreement not later thanninety-days (90) prior to the end of the then current term of the agreement. Inthe event that Mr. Ptakowski is involuntarily terminated without cause.Mr. Ptakowski would be entitled to continue to receive compensation andbenefits at the rate in effect at the time of termination until the end of thethen current term of the agreement, provided however, that such amount shallnot be less than six months of current salary and benefits. Amounts payablefollowing such a termination shall be reduced by any compensation received forservices rendered by Mr. Ptakowski to a subsequent employer. In addition,Mr. Ptakowski was granted options to purchase 270,000 shares of commonstock at $4.21 per share. One-third of these options vest each year on theanniversary of the initial grant date.

In the event that Mr. Ptakowski is involuntarilyterminated without cause or resigns as a result of a material change in dutiesor a reduction in compensation or benefits following certain changes of controlof Innovative Solutions and Support, Mr. Ptakowski would be entitled toreceive a one time payment equal to Mr. Ptakowski’s annual salary as thenin effect within thirty (30) days of the date of such termination inaddition to continued compensation and benefits at the rate in effect at thetime of termination until the end of the then current term of the agreement.

On December 27, 2004both parties concurred that the current agreement will be allowed to expire andwill be replaced with one that continues with the same terms and conditions,provided that employment may be terminated by either party at any time onninety-days prior notice.

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**Compensation ofDirectors**

The 2003 Restricted StockPlan for non-employee directors was approved by shareholders at the Company’sFebruary 26, 2004 Annual Meeting of Shareholders. The Plan called for anannual award of restricted stock, having a fair market value of $25,000 as ofthe close of business on October 1of the current fiscal year, for alleligible non-employee directors. The stock vests quarterly during the fiscalyear provided the director was still serving on the Board on the vesting date.In fiscal year 2005 the annual award was increased to $40,000 effective in thefourth quarter of the fiscal year. Additionally, each non-employeedirector receives $1,000 for each board meeting attended. All directors arereimbursed for reasonable travel and lodging expenses associated withattendance at meetings.

**CompensationCommittee Interlocks and Insider Participation**

No member of theCompensation Committee is a former or current executive officer or employee of theCompany. There are no compensation committee interlocks between us and anyother entity involving us or such entity’s executive officers or board members.

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**STOCK PERFORMANCEGRAPH**

The following graph shows the total return on ourcommon stock during the period from September 30, 2001 untilSeptember 30, 2006, against the cumulative total return on the NASDAQComposite Index and the Russell 2000 index during such period. The comparisonassumes that $100 was invested at the beginning of such period in our commonstock and in each of the foregoing indices and assumes the reinvestment of anydividends.

**COMPARISON OF 5-YEARCUMULATIVE TOTAL RETURN***AMONGINNOVATIVE SOLUTIONS AND SUPPORT, INC.,THE NASDAQ COMPOSITE INDEXAND THE RDG TECHNOLOGY COMPOSITE INDEX

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*                    $100 investedon 9/30/01 in stock or index-including reinvestment of dividends.Fiscal year ending September 30.

| ** **                                   | ** ** | **Cumulative Total Return** | ** ** |
|----------------------------------------------|------------|---------------------------------------|------------|
| ** **                                   | ** ** | **9/01**                              | ** ** | **9/02** | ** ** | **9/03** | ** ** | **9/04** | ** ** | **9/05** | ** ** | **9/06** | ** ** |
| Innovative Solutions and  Support, Inc. |       | 100.00                                |       | 105.78 |   | 112.24 |   | 337.41 |   | 320.43 |   | 299.79 |   |
| NASDAQ Composite                             |       | 100.00                                |       | 80.97 |   | 120.85 |   | 131.16 |   | 150.08 |   | 159.80 |   |
| Russell 2000                                 |       | 100.00                                |       | 90.70 |   | 123.80 |   | 147.04 |   | 173.44 |   | 190.65 |   |

 

*Thefollowing report of the Compensation Committee and the performance graph on theprevious page will not be deemed incorporated by reference by any generalstatement incorporating by reference this Annual Report into any filing underthe Securities Act of 1933, as amended, or under the Securities Exchange Act of1934, as amended, except to the extent that we specifically incorporate thisinformation by reference. The following report shall not otherwise be deemedfiled under such Acts.*

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**REPORT OF THECOMPENSATION COMMITTEE**

The Compensation Committee of the Board of Directorsis composed of two directors, each of whom, in the judgment of the Board ofDirectors, was found to be “independent” as defined by the applicable NASDAQlisting standards. The Compensation Committee is responsible for setting andadministering the policies that govern annual executive salaries, bonuses andstock ownership programs. The Compensation Committee annually evaluates theperformance, and determines or recommends to the full Board the compensation,of the Chief Executive Officer and other executive officers.

The CompensationCommittee’s objectives include (i) attracting and retaining exceptionalindividuals as executive officers, and (ii) providing key executives withmotivation to perform to the full extent of their abilities to maximize theperformance of the Company and deliver enhanced value to the Company’sshareholders. The Compensation Committee attempts to achieve these objectivesby annually reviewing and approving corporate goals and objectives relevant tothe compensation of the Chief Executive Officer and other key executiveofficers of the Company, evaluating the performance of the Chief ExecutiveOfficer and other key executive officers in light of those goals and objectives,and determining and approving the compensation level of the Chief ExecutiveOfficer and other key executive officers based on this evaluation.

**Components ofExecutive Compensation**

An executive officer’sannual salary is established initially on the basis of subjective factors,including experience, individual achievements, level of responsibility assumedat the Company and market compensation practices. The Compensation Committeeannually reviews each executive officer’s annual salary based on such executiveofficer’s past performance, expected future contributions, the scope and natureof the responsibilities of the executive officer, including any changes in suchresponsibilities, and compensation practices among competitive peers.

**Chief ExecutiveOfficer Compensation**

Geoffrey S.M. Hedrick hasserved as the Company’s Chief Executive Officer since 1988. For fiscal 2006,Mr. Hedrick was paid an annual salary of $400,000. Mr. Hedrick’ssalary was adjusted in fiscal year 2004 from $350,000 to $400,000 and has remainedunchanged during fiscal year 2005 and 2006.

**Deductibility ofCompensation**

Section 162(m) of the Internal Revenue Codeof 1986, as amended, generally denies a federal income tax deduction forcertain compensation exceeding $1,000,000 paid to the Chief Executive Officeror any of the other named executive officers, excluding, among other things,certain performance-based compensation. Through September 30, 2006, thisprovision has not affected our tax deductions, and the Compensation Committee believesthat, at the present time, it is unlikely that the compensation paid to any ofour employees in a taxable year will exceed $1,000,000. The CompensationCommittee intends to continue to evaluate the effects of the statute and anyapplicable regulations and to comply with Internal Revenue CodeSection 162(m) in the future to the extent consistent with our bestinterests.

*Submitted by theCompensation Committee:*

*WinstonJ. Churchill (Chairman)*

*Robert E. Mittelstaedt, Jr.*

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**Item12.**                 Securityownership of certain beneficial owners and management.

**Equity Compensation Plan Information**

The following tablegives information about our common stock that may be issued upon the exerciseof options and rights under all of our existing equity compensation plans andarrangements as of September 30, 2006, including the 1998 Stock OptionPlan and the 2003 Restricted Stock Plan.

| **Plan Category**                                      | ** ** | ** ** | ** ** | **Number of Securities  to be issued upon  exercise of outstanding  options, warrants and rights** | ** ** | **Weighted-average  exercise price of  outstanding   options,  warrants and rights** | ** ** | **Number of Securities  remaining available for  future issuance under  equity compensation  plans (excluding securities  reflected in second column)** | ** ** |
|-------------------------------------------------------------|------------|------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| Equity compensation  plans approved by security holders     |       |       | 705,129    |                                                                                                                                                 |       |                                                                                                          | $          | 9.95                                                                                                                                                                                                                |       |   |   | 1,698,065 | (1) |   |
| Equity compensation  plans not approved by security holders |       |       | 0          |                                                                                                                                                 |       |                                                                                                          | $          | 0.00                                                                                                                                                                                                                |       |   |   | 0 |   |   |
| Total                                                       |       |       | 705,129    |                                                                                                                                                 |       |                                                                                                          | $          | 9.95                                                                                                                                                                                                                |       |   |   | 1,698,065 | (1) |   |

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(1)          Includes1,613,419 stock options from the 1998 Stock Option Plan and 84.646 shares fromthe 2003 Restricted Stock Plan.

In fiscal years endedSeptember 30, 2006, 2005 and 2004 awards to our non-employee directorsunder the 2003 Restricted stock Plan were 15,396, 15,828 and 30,855 sharesrespectively.

**Security Ownership of Principal Shareholders**

The following tablesets forth certain information with respect to the beneficial ownership, as ofJanuary 25, 2007, of each person who we knew to be the beneficial owner ofmore than 5% of our common stock. To the knowledge of the Company, each of theshareholders named below has sole voting and investment power with respect tosuch shares, unless otherwise indicated. The information provided in the tableis based on our records, information filed with the Securities and ExchangeCommission and information provided to the Company. 

| ** **                                   | ** ** | **Common Stock** | ** ** |
|----------------------------------------------|------------|-----------------------|------------|
| ** **                                   | ** ** | **Number of**    | ** ** | **Percent of** | ** ** |
| **Name of Beneficial Owner**  | ** ** | ** **            | ** ** | **Shares** | ** ** | **Class(1)** | ** ** |
| Geoffrey S. M.  Hedrick(2)                   |       | 4,001,676             |       | 23.7 | % |
| Federated  Investors, Inc.(3)           |       | 2,600,400             |       | 15.4 | % |
| State Teachers  Retirement System of Ohio(4) |       | 2,276,550             |       | 13.5 | % |
| Putnam Investment Management(5)              |       | 974,074               |       | 5.8 | % |
|                                              |            |                       |            |  |  |  |  |

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(1)          Asused in this table, beneficial ownership means the sole or shared power to voteor direct the voting of a security, or the sole or shared investment power withrespect to a security (i.e., the power to dispose, or direct the disposition,of a security). A person is deemed as of any date to have beneficial ownershipof any security that such person has the right to acquire within 60 days aftersuch date. Percentage ownership is based upon 16,856,193 shares of commonstock outstanding as of January 25, 2007.

(2)          Mr. Hedrick’saddress is c/o Innovative Solutions and Support, Inc., 720 PennsylvaniaDrive, Exton, PA 19341. The amount includes options to purchase 1,500 shares,which were exercisable as of January 25, 2007, or within 60 days from suchdate.

(3)          Asfiled on Amendment No.1 to Schedule 13G with the SEC on March 10, 2006.Federated Investors, Inc.’s address is Federated Investors Tower,Pittsburgh PA. 15222

(4)          Asfiled on Form 4 with the SEC on January 12, 2007. State TeachersRetirement System of Ohio’s address is 275 East Broad Street, Columbus OH.43215

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(5)          Asfiled on Amendment to Schedule 13G with the SEC on February 11, 2005.Putnam Investment Management’s address is One Post Office Square, Boston, MA.02109

**Security Ownershipof Management**

The following tablesets forth certain information with respect to the beneficial ownership as ofJanuary 25, 2007 of (i) each director, (ii) the Named ExecutiveOfficers and (iii) all the directors and executive officers as a group.Each of the shareholders named below has sole voting and investment power withrespect to such shares, unless otherwise indicated. The information provided inthe table is based on our records, information filed with the Securities andExchange Commission and information provided to the Company.

| **Name of Beneficial Owner**                       | ** ** | ** ** | ** ** | **Number of Shares** | ** ** | **Percent of Class(1)** | ** ** |
|-------------------------------------------------------------------|------------|------------|------------|--------------------------------|------------|-----------------------------------|------------|
| Geoffrey S. M.  Hedrick                                           |       |       | 4,001,676  | (2)                            |       |                              | 23.7       | % |   |
| Robert E.  Mittelstaedt, Jr.                                 |       |       | 124,424    | *                              |       |                              |       |   |   |
| Roman G.  Ptakowski                                               |       |       | 180,000    | (3)                            |       |                              | 1.1        | % |   |
| Winston J.  Churchill                                             |       |       | 60,922     | *                              |       |                              |       |   |   |
| James J. Reilly                                                   |       |       | 53,549     | (4)                            | *          |                              |       |   |   |
| Robert H. Rau                                                     |       |       | 28,040     | *                              |       |                              |       |   |   |
| Glen R. Bressner                                                  |       |       | 25,383     | *                              |       |                              |       |   |   |
| Ivan M. Marks                                                     |       |       | 13,009     | *                              |       |                              |       |   |   |
| Raymond J. Wilson                                                 |       |       | —     |                           |       |                              |       |   |   |
| All executive officers  and directors as a group (9 persons) |       |       | 4,487,003  | (5)                            |       |                              | 26.6       | % |   |

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*                    Lessthan 1%.

(1)          Asused in this table, beneficial ownership means the sole or shared power to voteor direct the voting of a security, or the sole or shared investment power withrespect to a security (i.e., the power to dispose, or direct the disposition,of a security). A person is deemed as of any date to have beneficial ownershipof any security that such person has the right to acquire within 60 days aftersuch date. Percentage ownership is based upon 16,856,193 shares of common stockoutstanding as of January 25, 2007.

(2)          Includesoptions to purchase 1,500 shares, which were exercisable as of January 25,2007, or within 60 days from such date.

(3)          Representsthe total number of outstanding options to purchase shares, which wereexercisable as of January 25, 2007, or within 60 days from such date.

(4)          Includesoptions to purchase 49,049 shares, which were exercisable as ofJanuary 25, 2007, or within 60 days from such date.

(5)          Includesoptions to purchase 230,549 shares, which were exercisable as ofJanuary 25, 2007, or within 60 days from such date

**Item 13.**                 Certainrelationships and related transactions.

**Related PartyTransactions**

The Company incurred legal fees of $357,000, $137,000and $116,000 with a law firm which is a shareholder of the Company for theyears ended September 30, 2006, 2005 and 2004, respectively. The fees paidand services rendered were comparable with the fees paid and services renderedprior to the law firm’s investment in the Company.

For the years endedSeptember 30, 2006, 2005 and 2004, respectively, the Company incurredservice fees of $25,000, $33,000 and $125,000 with a commercial graphics firmcontrolled by an individual who is married to a shareholder and the daughter ofthe Company’s Chairman and Chief Executive Officer.

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**Item 14.      Principalaccounting fees and services**

**PrincipalAccountant Fees and Services**

Theaudit committee retained Deloitte & Touche, LLP to provide auditservices for the fiscal years ended September 30, 2006 and 2007. Servicesprovided by Deloitte & Touche, LLP included an audit of the annualconsolidated financial statements of the company, an audit of the effectivenessof internal controls over financial reporting as required by the Sarbanes-OxleyAct of 2002 and other services related to filings made with the SEC. The aggregatefees billed by Deloitte & Touche, LLP in connection with servicesrendered during fiscal year ended September 30, 2006 and 2005 were:

| ** **          | ** ** | **FY 2006** | ** ** | **FY 2005** | ** ** |
|---------------------|------------|------------------|------------|------------------|------------|
| Audit Fees          |       | $                | 407,180    |             | $          | 462,975 |   |
| Audit Related  Fees |       | $                | 17,150     |             | $          | 16,000 |   |
| Tax Fees            |       | $                | 3,900      |             | $          |   |   |
| Total               |       | $                | 428,230    |             | $          | 478,975 |   |

 

**Audit Fees**

Audit fees for fiscal 2006and 2005 were for professional services rendered for the audit of our annualconsolidated financial statements, auditing the effectiveness of our internalcontrols over financial reporting, review of the interim consolidated financialstatements included in quarterly reports and services that are normallyprovided by Deloitte & Touche, LLP in connection with statutory andregulatory filings or engagements.

**Audit Related Fees**

Audit related fees forfiscal 2006 and 2005 were for audits of our 401(k) Plan.

**Tax Fees**

Tax-related fees forfiscal year 2006 were related to assistance with an IRS examination for thefiscal year 2002.

**Pre-Approved Policies and Procedures**

The Audit Committee’spolicy is to pre-approve the engagement of accountants to render all audit andtax-related services for the Company, as well as any changes to the terms ofthe engagement. The Audit Committee will also pre-approve all proposednon-audit related services to be provided by the Company’s independentregistered public accounting firm. The Audit Committee reviews the terms of theengagement, a description of the engagement, and a budget for the engagement.The request for services must be specific as to the particular services to beprovided. Requests are aggregated and submitted to the Audit Committee in oneof the following ways: requesting approval of services at a meeting of theAudit Committee, through a written consent or by a designated member of theAudit Committee. The Audit Committee approved all 2006 and 2005 fees paid tothe independent registered public accounting firm.

Pursuant to the adoptionof the revised Audit Committee Charter, the Board of Directors has adopted apolicy which prohibits the Company from entering into non-audit relatedconsulting agreements for financial information systems design andimplementation, for certain other services considered to have an impact onindependence, and for all other services prohibited by the Sarbanes-Oxley Actof 2002 and new Securities and Exchange Commission regulations. The policy alsocontains procedures requiring Audit Committee pre-approval of all audit andpermitted non-audit services provided by the Company’s independent registeredpublic accounting firm.

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**PART IV**

**Item 15.**                 Exhibits,financial statement schedules.

(a)(3)               SeeExhibit Index on page 13 of this Amendment No. 1 for a list ofexhibits furnished as part of this Amendment No. 1.

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the Registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.
|        | INNOVATIVE  SOLUTIONS  AND SUPPORT, INC. |
|--------|-----------------------------------------------|
|   | By:                                           | /s/ GEOFFREY S. M. HEDRICK |
|   | ** **                                    | **Geoffrey  S. M. Hedrick** |
|   | *** ***                                  | ***Chairman  of the Board and*** |
|   | *** ***                                  | ***Chief  Executive Officer*** |
|   | Dated: April 24,  2007              |

 

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**ExhibitIndex**

| Exhbit No. | ** ** | ** **                                                             | ** ** | **Exhibit** |
|------------|------------|------------------------------------------------------------------------|------------|-------------|
| 31.1       |       | Rule 13a-14(a)/15d-14(a)  Certification of Principal Executive Officer |
| 31.2       |       | Rule 13a-14(a)/15d-14(a)  Certification of Principal Financial Officer |
|       |       |                                                                   |

 

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