Innovative Solutions & Support, Inc. (“IS&S” or the “Company”) (NASDAQ: ISSC) today announced its financial results for the third quarter of fiscal 2017 ended June 30, 2017.

For the third quarter of fiscal 2017, the Company reported net sales of $4.5 million, compared to third quarter fiscal 2016 net sales of $6.5 million. Gross margins in the third quarter were 52% compared to 60% in the third quarter of fiscal 2016. The Company reported net income of $19,000, or approximately $0.00 per fully diluted share, for the third quarter of 2017 compared to net income of $227,000, or $0.01 per fully diluted share, for the third quarter of 2016.

Geoffrey Hedrick, Chairman and Chief Executive Officer of IS&S, said, “Sales in the third quarter were consistent with the previous quarter, with a concentration of revenues generated from more profitable product sales resulting in an increase to gross margin compared to the second fiscal quarter. More importantly, we continued to implement our strategy to expand our product portfolio and grow our distribution network. We are partnering with Blackhawk Modifications, Inc. (Blackhawk) as a distributor and installation center for our NextGen Flight Deck and Integrated Turboprop Autothrottle for the King Air 200 and 350 platforms. We’ll be working with Blackhawk for flight testing and product certification and expect to receive a Supplemental Type Certification (STC) for the Autothrottle on these platforms in the next few months. In June, the FAA issued to IS&S the first STC for a Turboprop Autothrottle, (Patent Pending Design) for the PC-12. We believe based on conversations with aviation experts and partners that this first-of-its-kind technology should open a market that features at least twenty-five different aircraft types and over 10,000 individual aircraft opportunities. We plan to leverage the innovative functionality of the Autothrottle to add additional value to our NextGen Flight Deck."

At June 30, 2017, the Company had $25.0 million of cash on hand, an increase of $6.2 million compared to September 30, 2016, our last fiscal year end.

New orders in the third quarter of fiscal 2017 were $3.0 million and backlog, as of June 30, 2017, was $4.3 million. Backlog excludes potential future sole-source production orders from products developed under the Company’s Pilatus PC-24 and Boeing KC-46A engineering development contracts, both of which the Company expects to remain in production for more than a decade. The Company expects that these contracts will add to their production sales already in backlog.

Shahram Askarpour, President of IS&S, added, "This has been a year of significant commitment to new product development and distribution network expansion. Research and development expenses were 27% of revenues through the first three quarters of this year as we continue to invest in internal development of new products that can address broader markets, not just individual manufacturers. Already this year, we have been awarded two STCs that we believe will position us for meaningful growth opportunities. In addition, we’ve increased our efforts to build out our global MRO distribution network. By continually expanding our product portfolio and enhancing our global distribution network, we are striving to increase our addressable market and strengthen the value of our franchise for shareholders.”

Nine Months Results

Total net sales for the nine months ended June 30, 2017 were $12.6 million compared to $21.7 million for the first nine months of fiscal 2016. Gross margin for the first nine months of fiscal 2017 was 50% compared to 60%(1) in the year ago period. Net income for the nine months ended June 30, 2017 was $4.8 million, or $0.28 per fully diluted share, compared to $1.6 million(1), or $0.09 per fully diluted share(1), over the first three quarters of fiscal 2016. In the second quarter of 2017, as a result the settlement of the Delta Airlines, Inc. (“Delta”) lawsuit, the Company recognized $4.1 million of other income.

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(1) In January 2016, the Company renegotiated an agreement with a customer whereby $1.3 million of unbilled receivables and our obligations associated with certain product levels were canceled. The bad debt expense related to the impairment of the unbilled receivable was previously recognized in the Company's September 30, 2015 audited financial statements. In addition, as a result of the changes to the agreement, we recognized an approximately $1.2 million positive impact to the statement of operations in the second quarter of fiscal 2016 resulting from a reversal of $1.2 million in associated liabilities consisting of deferred revenue and a contract loss accrual.

Conference Call

The Company will be hosting a conference call on Thursday, August 10, 2017 at 10:00 a.m. ET to discuss these results and its business outlook. Please use the following dial in number to register your name and company affiliation for the conference call: 877-883-0383 and enter the PIN Number 0725903. The call will also be carried live on the Investor Relations page of the Company web site at www.innovative-ss.com.

About Innovative Solutions & Support, Inc.

Headquartered in Exton, Pa., Innovative Solutions & Support, Inc. (www.innovative-ss.com) is a systems integrator that designs and manufactures flight guidance and cockpit display systems for Original Equipment Manufacturers (OEMs) and retrofit applications. The company supplies integrated Flight Management Systems (FMS) and advanced GPS receivers for precision low carbon footprint navigation.

Certain matters contained herein that are not descriptions of historical facts are “forward-looking” (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in filings made by the Company with the Securities and Exchange Commission. Many of the factors that will determine the Company’s future results are beyond the ability of management to control or predict. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

        Innovative Solutions and Support, Inc. Consolidated Balance Sheets     June 30, September 30, 2017 2016 (unaudited)

ASSETS

Current assets Cash and cash equivalents $ 24,981,341 $ 18,767,661 Accounts receivable 2,073,268 4,511,091 Unbilled receivables, net 1,600,034 1,597,672 Inventories 4,533,039 3,645,828 Prepaid expenses and other current assets 1,002,622 847,207             Total current assets 34,190,304 29,369,459   Property and equipment, net 6,762,897 6,962,562 Other assets 200,274 156,948             Total assets $ 41,153,475   $ 36,488,969    

LIABILITIES AND SHAREHOLDERS' EQUITY

  Current liabilities Accounts payable $ 1,021,572 $ 1,503,771 Accrued expenses 1,955,031 1,889,908 Deferred revenue 314,702 179,585             Total current liabilities 3,291,305 3,573,264   Non-current deferred income taxes 67,745 67,701             Total liabilities   3,359,050     3,640,965    

Commitments and contingencies

  Shareholders' equity  

Preferred stock, 10,000,000 shares authorized, $.001 par value, of which 200,000 shares are authorized as Class A Convertible stock. No shares issued and outstanding at June 30, 2017 and September 30, 2016

$ - $ -  

Common stock, $.001 par value: 75,000,000 shares authorized, 18,879,580 and 18,812,465 issued at June 30, 2017 and September 30, 2016

18,880 18,813   Additional paid-in capital 51,583,840 51,392,159 Retained earnings 7,560,242 2,805,569

Treasury stock, at cost, 2,096,451 shares at June 30, 2017 and September 30, 2016

(21,368,537 ) (21,368,537 )             Total shareholders' equity 37,794,425 32,848,004             Total liabilities and shareholders' equity $ 41,153,475   $ 36,488,969       Innovative Solutions and Support, Inc. Consolidated Statements of Operations (unaudited)                   Three months ended Nine months ended June 30, June 30, 2017 2016 2017 2016   Gross sales $ 4,541,421 $ 6,504,592 $ 13,117,200 $ 21,749,152 Returns and allowances   -     -   (556,009 )   - Net Sales 4,541,421 6,504,592 12,561,191 21,749,152   Cost of sales   2,164,140     2,621,016   6,294,623     8,646,419   Gross profit 2,377,281 3,883,576 6,266,568 13,102,733   Operating expenses: Research and development 1,236,184 1,405,158 3,391,181 3,674,374 Selling, general and administrative   1,682,286     2,246,074   2,025,952     7,531,633 Total operating expenses 2,918,470 3,651,232 5,417,133 11,206,007   Operating (loss) income (541,189 ) 232,344 849,435 1,896,726   Interest income 7,682 9,092 27,505 24,458 Other income   15,628     12,457   4,174,953     71,490 (Loss) income before income taxes (517,879 ) 253,893 5,051,893 1,992,674   Income tax (benefit) expense   (537,099 )   27,096   297,220     403,002   Net income $ 19,220   $ 226,797 $ 4,754,673   $ 1,589,672   Net income per common share: Basic $ 0.00   $ 0.01 $ 0.28   $ 0.09 Diluted $ 0.00   $ 0.01 $ 0.28   $ 0.09   Weighted average shares outstanding: Basic   16,755,082     16,941,707   16,735,533     16,925,688 Diluted   16,870,404     17,059,546   16,847,305     17,027,216  

Innovative Solutions & Support, Inc.Relland WinandChief Financial Officer610-646-0350rwinand@innovative-ss.com

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