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<SEC-DOCUMENT>0000950116-04-002496.txt : 20040816
<SEC-HEADER>0000950116-04-002496.hdr.sgml : 20040816
<ACCEPTANCE-DATETIME>20040816110134
ACCESSION NUMBER:		0000950116-04-002496
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20040630
FILED AS OF DATE:		20040816

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			INNOVATIVE SOLUTIONS & SUPPORT INC
		CENTRAL INDEX KEY:			0000836690
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-COMPUTER PROGRAMMING SERVICES [7371]
		IRS NUMBER:				232507402
		STATE OF INCORPORATION:			PA
		FISCAL YEAR END:			0930

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-31157
		FILM NUMBER:		04976759

	BUSINESS ADDRESS:	
		STREET 1:		420 LAPP RD
		CITY:			MALVERN
		STATE:			PA
		ZIP:			19355
		BUSINESS PHONE:		6108899898

	MAIL ADDRESS:	
		STREET 1:		420 LAPP ROAD
		CITY:			MALVERN
		STATE:			PA
		ZIP:			19355
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>tenq.htm
<DESCRIPTION>10-Q
<TEXT>
<html>
<head><title>
Prepared and filed by St Ives Burrups
</title>
</head>
<div sytle="page-break-before:always"></div>
<page>
<body bgcolor="#FFFFFF">  <p align="center"><font face="serif" size="4"><b>UNITED STATES<br>SECURITIES AND EXCHANGE COMMISSION</b></font></p>
<p align="center"><font face="serif" size="2"><b>Washington, D.C. 20549</b></font></p> <p align="center"><font face="serif" size="2"><b><font face="serif" size="4">FORM 10-Q</font></b></font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td width="3%"><font size="2" face="serif"><img src="tickedbox.gif"></font></td>
<td width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td><font size="2" face="serif"><b>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></font><b>
</b></td>
</tr>
</table>
<p align="center"><font size="2" face="serif">For the quarterly period ended June 30, 2004</font></p>
<p align="center"><font size="2" face="serif">OR</font></p>
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<tr valign="top">
<td width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td width="3%"><font size="2" face="serif"><img src="emptybox.gif"></font></td>
<td width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td><font size="2" face="serif"><b>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></font><b>
</b></td>
</tr>
</table>
<p align="center"><font size="2" face="serif">[For the transition period from_____________________ to ___________________________</font></p>
<p align="center"><font size="2" face="serif">Commission File No. 0-31157</font></p>
<p align="center"><b><font face="serif" size="2"><font face="serif" size="5">INNOVATIVE SOLUTIONS AND SUPPORT, INC.<br>
        <font size="2">(Exact name of registrant as specified in its charter)</font> </font></font></b></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="top" bgcolor="#ffffff">
<td align="center"><font size="2" face="serif"><b>PENNSYLVANIA</b></font></td>
<td align="left" width="2%">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="49%" align="center"><font size="2" face="serif"><b>23-2507402</b></font></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="center"><font size="2" face="serif"><b>(State or other jurisdiction</b></font><br><font size="2" face="serif"><b>of incorporation)</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="2" face="serif"><b>(IRS Employer</b></font><br><font size="2" face="serif"><b>Identification No.)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
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<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="center"><font size="2" face="serif"><b>720 Pennsylvania Drive, Exton, Pennsylvania</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="2" face="serif"><b>19341</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="center"><font size="2" face="serif"><b>(Address of principal executive offices)</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="2" face="serif"><b>(Zip Code)</b></font></td>
<td align="left">&nbsp;</td>
</tr>
</table>
<p align="center"><font size="2" face="serif"><b>(610) 646-9800<br><font face="serif" size="1">(Registrant&#8217;s telephone number, including area code)</font></b></font></p>
<div style="text-indent: 3%"><p align="left"><font size="2" face="serif">Indicate by check mark whether 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.  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes  <img src="tickedbox.gif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No   <img src="emptybox.gif"></font></p>
<p align="left"><font size="2" face="serif">Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br>
  Yes  <img src="tickedbox.gif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No   <img src="emptybox.gif"></font></p>
<p align="left"><font size="2" face="serif">As of August 11, 2004, there were 11,809,204 shares of the Registrant&#8217;s Common Stock, with par value of $.001, outstanding. </font></p></div>
<p align="center"><font face="serif" size="2"></font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="contents" id="contents"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>INNOVATIVE SOLUTIONS AND SUPPORT, INC.<br>FORM 10-Q June 30, 2004<br> INDEX</b></font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="top">
<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
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<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="serif"><b>Page No.</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="serif"><b>_______</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><a href="#p3"><font size="2" face="serif">PART I.</font></a></td>
<td align="left" width="2%"><a href="#p3"></a></td>
<td width="1%" align="right"><a href="#p3"></a></td>
<td width="80%" align="left"><a href="#p3"><font size="2" face="serif">FINANCIAL INFORMATION</font></a></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="4%" align="center"><font size="2" face="serif">&nbsp;</font></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><a href="#p3"><font size="2" face="serif">Item 1.</font></a></td>
<td align="left"><a href="#p3"></a></td>
<td align="right"><a href="#p3"></a></td>
<td align="left"><a href="#p3"><font size="2" face="serif">FINANCIAL STATEMENTS (unaudited)</font></a></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><a href="#p3a"><font size="2" face="serif">Condensed Consolidated
    Balance Sheets&#150;September 30, 2003 and June 30, 2004</font></a></td>
<td align="left"><a href="#p3a"></a></td>
<td align="right"><a href="#p3a"></a></td>
<td align="center"><a href="#p3a"><font size="2" face="serif">3</font></a></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;</font><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><a href="#p4"><font size="2" face="serif">Condensed Consolidated
      Statements of Operations&#150;<br>
Three Months and Nine Months Ended June 30, 2003 and 2004</font></a></td>
<td align="left"><a href="#p4"></a></td>
<td align="right"><a href="#p4"></a></td>
<td align="center" valign="bottom"><a href="#p4"><font size="2" face="serif">&nbsp;4</font></a></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="left"></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><a href="#p5"><font size="2" face="serif">Condensed Consolidated
    Statements of Cash Flows&#150;Nine Months Ended June 30, 2003 and 2004</font></a></td>
<td align="left"><a href="#p5"></a></td>
<td align="right"><a href="#p5"></a></td>
<td align="center"><a href="#p5"><font size="2" face="serif">5</font></a></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><a href="#p6"><font size="2" face="serif">Notes to Condensed Consolidated Financial Statements</font></a></td>
<td align="left"><a href="#p6"></a></td>
<td align="right"><a href="#p6"></a></td>
<td align="center"><a href="#p6"><font size="2" face="serif">6-8</font></a></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><a href="#p9"><font size="2" face="serif">Item 2.</font></a></td>
<td align="left"><a href="#p9"></a></td>
<td align="right"><a href="#p9"></a></td>
<td align="left"><a href="#p9"><font size="2" face="serif">MANAGEMENT&#8217;S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</font></a></td>
<td align="left"><a href="#p9"></a></td>
<td align="right"><a href="#p9"></a></td>
<td align="center" valign="bottom"><a href="#p9"><font size="2" face="serif">9-15</font></a></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td colspan="4" align="left"></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><a href="#p15"><font size="2" face="serif">Item 3.</font></a></td>
<td align="left"><a href="#p15"></a></td>
<td align="right"><a href="#p15"></a></td>
<td align="left"><a href="#p15"><font size="2" face="serif">QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</font></a></td>
<td align="left"><a href="#p15"></a></td>
<td align="right"><a href="#p15"></a></td>
<td align="center"><a href="#p15"><font size="2" face="serif">15</font></a></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><a href="#p16"><font size="2" face="serif">Item 4.</font></a></td>
<td align="left"><a href="#p16"></a></td>
<td align="right"><a href="#p16"></a></td>
<td align="left"><a href="#p16"><font size="2" face="serif">CONTROLS AND PROCEDURES</font></a></td>
<td align="left"><a href="#p16"></a></td>
<td align="right"><a href="#p16"></a></td>
<td align="center"><a href="#p16"><font size="2" face="serif">16</font></a></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td colspan="4" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><a href="#p17"><font size="2" face="serif">PART II</font></a></td>
<td align="left"><a href="#p17"></a></td>
<td align="right"><a href="#p17"></a></td>
<td align="left"><a href="#p17"><font size="2" face="serif">OTHER INFORMATION</font></a></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><a href="#p17a"><font size="2" face="serif">Item 6.</font></a></td>
<td align="left"><a href="#p17a"></a></td>
<td align="right"><a href="#p17a"></a></td>
<td align="left"><a href="#p17a"><font size="2" face="serif">EXHIBITS AND REPORTS ON FORM 8-K</font></a></td>
<td align="left"><a href="#p17a"></a></td>
<td align="right"><a href="#p17a"></a></td>
<td align="center"><a href="#p17a"><font size="2" face="serif">17</font></a></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td colspan="4" align="left"></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td colspan="4" align="left"><a href="#p18"><font size="2" face="serif">Signatures</font></a></td>
<td align="left"><a href="#p18"></a></td>
<td align="right"><a href="#p18"></a></td>
<td align="center"><a href="#p18"><font size="2" face="serif">18</font></a></td>
<td align="left">&nbsp;</td>
</tr>
</table>
<p align="center"><font face="serif" size="2">2</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b><a name="p3"></a>PART I&#150;FINANCIAL INFORMATION<br>Item 1&#150;Financial Statements<br>INNOVATIVE SOLUTIONS AND SUPPORT, INC.<br><a name="p3a"></a>CONDENSED CONSOLIDATED BALANCE SHEETS<br>(unaudited)</b></font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="top">
<td colspan="8" align="left"><font size="1" face="serif">&nbsp;</font><font size="1" face="serif">&nbsp;</font><font size="1" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td width="9%" align="center" valign="bottom"><font size="1" face="serif"><b>As of<br>
September 30,<br>
2003</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center" valign="bottom"><font size="1" face="serif"><b>As of<br>
June 30,<br>
2004</b></font></td>
<td width="2%" align="center" valign="bottom">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>

<tr valign="top" bgcolor="#FFFFFF">
<td colspan="4" align="center"><font size="2" face="serif"><b>ASSETS</b></font></td>
<td colspan="4" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">Current Assets:</font></font></td>
<td colspan="7" align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font><font size="2" face="serif">&nbsp;</font></td>
<td width="1%" align="right" valign="baseline">&nbsp;</td>
<td width="8%" align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td width="2%" align="left" valign="baseline">&nbsp;</td>
<td width="1%" align="right" valign="baseline">&nbsp;</td>
<td width="1%" align="right" valign="baseline">&nbsp;</td>
<td width="-1%" align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td width="2%" align="left" valign="baseline">&nbsp;</td>
<td width="1%" align="right" valign="baseline">&nbsp;</td>
<td width="7%" align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td width="2%" align="left" valign="baseline">&nbsp;</td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents</font></font></td>
<td colspan="7" align="right" valign="baseline"><font size="2" face="serif">&nbsp;</font><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;48,789,744</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td colspan="2" align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;58,627,694</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td colspan="4" align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, less allowance for doubtful accounts of $100,000 at September 30, 2003 and June 30, 2004</font></font></td>
<td colspan="4" align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6,955,207</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,991,335</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</font></font></td>
<td colspan="7" align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,840,648</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,697,647</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes</font></font></td>
<td colspan="7" align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;673,134</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;673,134</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses</font></font></td>
<td colspan="7" align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;660,430</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;615,241</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets</font></font></td>
<td colspan="4" align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td width="1%" align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td width="2%" align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;59,919,163</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;69,605,051</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">Property and Equipment:</font></font></td>
<td width="2%" align="left" valign="baseline">&nbsp;</td>
<td width="1%" align="right" valign="baseline">&nbsp;</td>
<td width="26%" align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td width="2%" align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Computers and test equipment</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,309,852</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,728,577</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate airplane</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,998,161</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,998,161</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furniture and office equipment</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;520,973</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;599,013</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Manufacturing facility</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,368,690</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,414,986</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Land</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,021,245</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,021,245</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></font><font face="serif" size="1">Total property and equipment</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13,218,921</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13,761,982</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less-accumulated depreciation and amortization</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3,670,430</font></font></td>
<td align="left" valign="baseline"><font face="serif" size="1">)</font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font face="serif" size="1">(4,166,087</font></td>
<td align="left" valign="baseline"><font face="serif" size="1">)</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net property and equipment</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,548,491</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,595,895</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">Deposits and Other Assets</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;408,971</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;140,113</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Assets</font></font></td>
<td colspan="7" align="right" valign="baseline"><font size="2" face="serif">&nbsp;</font><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;69,876,625</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td colspan="3" align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$</font></font></td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;79,341,059</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td colspan="4" align="center" valign="baseline"><font size="2" face="serif"><b>LIABILITIES AND SHAREHOLDERS&#8217; EQUITY</b></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">Current Liabilities</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current portion of note payable</font></font></td>
<td colspan="7" align="right" valign="baseline"><font size="2" face="serif">&nbsp;</font><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;100,000</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td colspan="3" align="right" valign="baseline"><font face="serif" size="1">$</font></td>
<td align="right" valign="baseline"><font face="serif" size="1">100,000</font></td>
<td align="right" valign="baseline"></td>
<td align="right">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current portion of capitalized lease obligations</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7,257</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;578,306</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;779,794</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,146,409</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,270,660</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;98,036</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;153,180</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,922,751</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,310,891</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">Note Payable</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,235,000</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,235,000</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">Capitalized Lease Obligations</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22,524</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">Deferred Revenue</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;332,407</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;279,552</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">Deferred Income Taxes</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;328,177</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;320,089</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">Commitments and Contingencies</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">Shareholders&#8217; Equity:</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td colspan="4" rowspan="2" align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred stock, 10,000,000 shares authorized&#150;Class A Convertible stock, $.001</font></font><br>
  <font size="2" face="serif"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></font><font face="serif" size="1">par value; 200,000 shares authorized, no shares<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;issued and outstanding at September 30, 2003 and June 30, 2004</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td colspan="4" align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock, $.001 par value; 75,000,000 shares authorized, 13,080,717 and</font></font><br>
  <font size="2" face="serif"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></font><font face="serif" size="1">13,462,385 shares issued at September 30, 2003 and</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;June 30, 2004, respectively</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13,081</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13,462</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;46,248,224</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;47,895,517</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retained earnings</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25,410,742</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32,877,781</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Treasury stock, at cost, 1,690,026 shares</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(10,613,757</font></font></td>
<td align="left" valign="baseline"><font face="serif" size="1">)</font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(10,613,757</font></font></td>
<td align="left" valign="baseline"><font face="serif" size="1">)</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left" valign="baseline"><font size="2" face="serif"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></font><font face="serif" size="1">Total shareholders&#8217; equity</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;61,058,290</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left" valign="baseline"><font size="2" face="serif">&nbsp;</font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;70,173,003</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Liabilities and Shareholders&#8217; Equity</font></font></td>
<td colspan="7" align="right" valign="baseline"><font size="2" face="serif">&nbsp;</font><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;69,876,625</font></font></td>
<td align="left" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="right" valign="baseline">&nbsp;</td>
<td colspan="3" align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$</font></font></td>
<td align="right" valign="baseline"><font size="2" face="serif"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;79,341,059</font></font></td>
<td align="right" valign="baseline">&nbsp;</td>
<td align="left">&nbsp;</td>
</tr>
</table>
<p align="center"><font size="2" face="serif">The accompanying notes are an integral part of these statements.</font></p>
<p align="center"><font face="serif" size="2">3</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>INNOVATIVE SOLUTIONS AND SUPPORT, INC.<br> <a name="p4"></a>CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS<br>(unaudited)</b></font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="top">
<td align="left"><font size="1" face="serif">&nbsp;</font><font size="1" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="serif"><b>Three Months<br>
Ended<br>
June 30,<br>
2003</b></font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td align="center"><font size="1" face="serif"><b>Three Months<br>
Ended<br>
June 30,<br>
2004</b></font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td align="center"><font size="1" face="serif"><b>Nine Months<br>
Ended<br>
June 30,<br>
2003</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td align="center"><font size="1" face="serif"><b>Nine Months<br>
Ended<br>
June 30,<br>
2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Net Sales</font><font size="2" face="serif">&nbsp;</font></td>
<td width="1%" align="right"><font size="2" face="serif">$</font></td>
<td width="10%" align="right"><font size="2" face="serif">6,519,628</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="2%" align="right"><font size="2" face="serif">$</font></td>
<td width="10%" align="right"><font size="2" face="serif">12,269,653</font></td>
<td width="1%" align="right">&nbsp;</td>
<td width="2%" align="right"><font size="2" face="serif">$</font></td>
<td width="10%" align="right"><font size="2" face="serif">18,064,848</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="2%" align="right"><font size="2" face="serif">$</font></td>
<td width="10%" align="right"><font size="2" face="serif">31,688,276</font></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Cost of Sales</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">2,744,729</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">4,056,372</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">7,752,467</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">11,200,624</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Gross Profit</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">3,774,899</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">8,213,281</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">10,312,381</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">20,487,652</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Operating expense:</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">658,259</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">1,363,143</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">2,424,147</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">3,861,311</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">1,598,011</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">2,090,357</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">4,330,342</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">5,600,461</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Operating Income</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">1,518,629</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">4,759,781</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">3,557,892</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">11,025,880</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Interest Income</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">134,142</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">116,110</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">463,383</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">345,985</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Interest Expense</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">33,090</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">31,197</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">101,680</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">94,201</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Income Before Income Taxes</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">1,619,681</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">4,844,694</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">3,919,595</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">11,277,664</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Income Tax Expense</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">388,723</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">1,559,086</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">1,193,694</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">3,810,625</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Net Income</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">1,230,958</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">3,285,608</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">2,725,901</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">7,467,039</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Net Income per Common Share</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">0.10</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">0.28</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">0.22</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">0.65</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">0.10</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">0.27</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">0.22</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">0.63</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Weighted Average Shares Outstanding</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">11,982,569</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">11,666,639</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">12,437,036</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">11,530,994</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">12,204,971</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">11,960,746</font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">12,660,902</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">11,867,818</font></td>
<td align="left">&nbsp;</td>
</tr>
</table>
<p align="center"><font size="2" face="serif">The accompanying notes are an integral part of these statements.</font></p>
<p align="center"><font face="serif" size="2">4</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>INNOVATIVE SOLUTIONS AND SUPPORT, INC.<br><a name="p5"></a>CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS<br>(unaudited)</b></font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="top">
<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td colspan="2" align="center"><font size="1" face="serif"><b>For the Nine<br>
Months Ended<br>
June 30,<br>
2003</b></font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="center" valign="bottom"><font size="1" face="serif"><b>For the Nine<br>
Months Ended<br>
June 30,<br>
2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Cash Flows From Operating Activities:</font></td>
<td colspan="2" align="left"><font size="2" face="serif">&nbsp;</font><font size="2" face="serif">&nbsp;</font></td>
<td width="2%" align="left">&nbsp;</td>
<td colspan="2" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td width="1%" align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td width="7%" align="right"><font size="2" face="serif">2,725,901</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="serif">$</font></td>
<td width="8%" align="right"><font size="2" face="serif">7,467,039</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by (used in) operating activities:</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">499,693</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">520,665</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Write-off of software deposit</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">101,738</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">&#151;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on disposal of fixed assets</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">__</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">1,037</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Excess and obsolete inventory expense</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">&#151;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">62,998</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compensation expense for stock issued to directors</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">99,302</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">182,766</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax benefit from exercise of stock options</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">&#151;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">175,982</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Increase)/decrease in&#150;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">984,132</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">1,963,871</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">(383,196</font></td>
<td align="left"><font size="2" face="serif">)</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">(1,919,997</font></td>
<td align="left"><font size="2" face="serif">)</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">(356,441</font></td>
<td align="left"><font size="2" face="serif">)</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">305,045</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase/(decrease) in&#150;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">195,581</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">201,486</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">(232,161</font></td>
<td align="left"><font size="2" face="serif">)</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">116,164</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue</font></td>
<td rowspan="2" align="left"><font size="2" face="serif">&nbsp;</font><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">(8,024</font></td>
<td align="left"><font size="2" face="serif">)</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">2,290</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities</font></td>
<td align="right"><font size="2" face="serif">3,626,525</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">9,079,346</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Cash Flows From Investing Activities:</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchases of property and equipment</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">(35,990</font></td>
<td align="left"><font size="2" face="serif">)</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">(560,105</font></td>
<td align="left"><font size="2" face="serif">)</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">(35,990</font></td>
<td align="left"><font size="2" face="serif">)</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">(560,105</font></td>
<td align="left"><font size="2" face="serif">)</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Cash Flows From Financing Activities:</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from exercise of stock options</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">&#151;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">674,330</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from exercise of warrants</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">&#151;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">614,598</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase of treasury stock</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">(5,244,862</font></td>
<td align="left"><font size="2" face="serif">)</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">&#151;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital lease obligations</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">&#151;</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">39,119</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Repayments of capitalized lease obligations</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">(14,570</font></td>
<td align="left"><font size="2" face="serif">)</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">(9,338</font></td>
<td align="left"><font size="2" face="serif">)</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) financing activities</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">(5,259,432</font></td>
<td align="left"><font size="2" face="serif">)</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">1,318,709</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Net Increase (Decrease) in Cash and Cash Equivalents</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">(1,668,897</font></td>
<td align="left"><font size="2" face="serif">)</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">9,837,950</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Cash and Cash Equivalents, Beginning of Year</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">52,245,754</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">48,789,744</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Cash and Cash Equivalents, End of Period</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">50,576,857</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">58,627,694</font></td>
<td align="left">&nbsp;</td>
</tr>
</table>
<p align="center"><font size="2" face="serif">The accompanying notes are an integral part of these statements.</font></p>
<p align="center"><font face="serif" size="2">5</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>Innovative Solutions &amp; Support Inc.<br>
<a name="p6"></a>Notes to Condensed Consolidated Financial Statements</b></font></p>
<p><font face="serif" size="2"><b>1. Basis of Presentation: </b></font></p>
<p align="left"><font size="2" face="serif">Innovative Solutions and Support, Inc. (the &#8220;Company&#8221;) was incorporated in Pennsylvania on February 12, 1988. The Company&#8217;s primary business is the design, manufacture and sale of flight information computers, flat panel displays and advanced monitoring systems for the military, government, commercial air transport and corporate aviation markets. </font></p>
<p align="left"><font size="2" face="serif">The balance sheet as of June 30, 2004, the statement of operations for the three months and nine months ended June 30, 2003 and 2004 and the statements of cash flows for the nine months ended June 30, 2003 and 2004 have been prepared by the Company without audit. In the opinion of management, all adjustments, consisting of normal and recurring adjustments, necessary to present fairly the financial position, results of operations and cash flows at June 30, 2004 and for all periods presented have been made. </font></p>
<p align="left"><font size="2" face="serif">Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company&#8217;s Form 10K for the year ended September 30, 2003 as filed with the Securities and Exchange Commission. The results of operations for the three months and nine months ended June 30, 2004 are not necessarily indicative of the operating results for the full year. </font></p>
<p><font face="serif" size="2"><b>2. Net income per Share </b></font></p>
<p align="left"><font size="2" face="serif">Net income per share (&#8220;EPS&#8221;) is calculated using the principles of SFAS No. 128. </font></p>
<p align="left"><font size="2" face="serif">A reconciliation of weighted average shares outstanding appears below: </font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="top">
<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="serif"><b>Three Months<br>
Ended<br>
June 30, 2003</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="serif"><b>Three Months<br>
Ended<br>
June 30, 2004</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="serif"><b>Nine Months
<br>
Ended<br>
June 30, 2003</b></font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="center"><font size="1" face="serif"><b>Nine Months<br>
Ended<br>
June 30, 2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Weighted average shares outstanding:</font></td>
<td align="left" width="2%">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="12%" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="12%" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="12%" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="12%" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><div style="margin-left: 3%"><font size="2" face="serif">Basic</font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">11,982,569</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">11,666,639</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">12,437,036</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">11,530,994</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Effect of dilutive securities:</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><div style="margin-left: 3%"><font size="2" face="serif">Employee
    stock options</font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">43,351</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">294,107</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">38,922</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">239,015</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><div style="margin-left: 3%"><font size="2" face="serif">Warrants</font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">179,051</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">0</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">184,944</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">97,809</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Weighted average shares outstanding:</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><div style="margin-left: 3%"><font size="2" face="serif">Diluted</font></div></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">12,204,971</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">11,960,746</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">12,660,902</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right"><font size="2" face="serif">11,867,818</font></td>
<td align="left">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="serif">For the nine-month period ended June 30, 2004, there were 7,153 options outstanding that were excluded from the computation of diluted earnings per share as the effect would be antidilutive. </font></p>
<p><font face="serif" size="2"><b>3. Concentrations </b></font></p>
<p align="left"><font size="2" face="serif">For the three months ended June 30, 2004, three customers accounted for 17%, 11%, and 10% of net sales or 38% on a combined basis. For the three months ended June 30, 2003, two customers accounted for 17% each of revenues or 34% on a combined basis. For the nine months ended June 30, 2004, four customers accounted for 13%, 13%, 10% and 10% of net sales or 46% on a combined basis. For the nine months ended June 30, 2003, three customers accounted for 18%, 11% and 11% of net sales or 40% on a combined basis. </font></p>
<p align="center"><font face="serif" size="2">6</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p><font face="serif" size="2"><b>4. Inventories </b></font></p>
<p align="left"><font size="2" face="serif">Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following: </font></p>
<table width="90%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="top">
<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td align="center"><font size="1" face="serif"><b>September 30,</b></font><br><font size="1" face="serif"><b>2003</b></font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td align="center"><font size="1" face="serif"><b>June 30,</b></font><br><font size="1" face="serif"><b>2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Raw materials</font></td>
<td width="2%" align="right"><font size="2" face="serif">$</font></td>
<td width="10%" align="right"><font size="2" face="serif">1,412,242</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="2%" align="right"><font size="2" face="serif">$</font></td>
<td width="10%" align="right"><font size="2" face="serif">1,982,555</font></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Work-in-process</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">785,771</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">1,999,337</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Finished goods</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">642,635</font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">715,755</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">2,840,648</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">4,697,647</font></td>
<td align="left">&nbsp;</td>
</tr>
</table>
<p><font face="serif" size="2"><b>5. Warranty</b></font></p>
<p align="left"><font size="2" face="serif">The Company provides for the estimated cost of product warranties at the time revenue is recognized. Warranty cost is recorded as cost of sales in the financial statements. While the Company engages in extensive product quality programs and processes, the Company&#8217;s warranty obligation is affected by product failure rates and the related material, labor and delivery costs incurred in correcting a product failure. During the period ended March 31, 2004, the Company changed its warranty accrual based upon favorable historical experience. Should actual product failure rates, material or labor costs differ from the Company&#8217;s estimates, further revisions to the estimated warranty liability would be required. </font></p>
<p align="left"><font size="2" face="serif">Warranty cost and accrual information for the three months ended June 30, 2004 is highlighted below:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warranty accrual at March 31, 2004</font></td>
<td width="1%" align="right"><font size="2" face="serif">$<sup></sup></font></td>
<td align="right"><font size="2" face="serif">742,665</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expense for the quarter ended June 30, 2004</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">45,993</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warranty costs for the quarter ended June 30, 2004</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">(38,702</font></td>
<td align="left"><font size="2" face="serif">)</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warranty accrual at June 30, 2004</font></td>
<td align="right"><font size="2" face="serif">$<sup></sup></font></td>
<td align="right"><font size="2" face="serif">749,956</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</td>
  <td align="left"><font size="2">&nbsp;</font></td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Warranty cost and accrual information for the nine months ended June 30, 2004 is highlighted below:</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#ffffff">
  <td align="left">&nbsp;</td>
  <td align="right"><font size="2">&nbsp;</font></td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warranty accrual at September 30, 2003</font></td>
<td align="right"><font size="2" face="serif">$<sup></sup></font></td>
<td align="right"><font size="2" face="serif">842,541</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expense for the nine months ended June 30, 2004</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">175,410</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warranty costs for the nine months ended June 30, 2004</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">(101,595</font></td>
<td align="left"><font size="2" face="serif">)</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in estimate of warranty liability</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">(166,400</font></td>
<td align="left"><font size="2" face="serif">)</font></td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warranty accrual at June 30, 2004</font></td>
<td align="right"><font size="2" face="serif">$<sup></sup></font></td>
<td align="right"><font size="2" face="serif">749,956</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
</table>
<p><font face="serif" size="2"><b>6. Stock Options</b></font></p>
<p align="left"><font size="2" face="serif">The Company&#8217;s 1988 Stock Incentive Plan terminated in 1998 consistent with its ten year life. The Company&#8217;s 1998 Stock Option Plan provides for the granting of incentive and nonqualified stock options to employees, officers, directors and independent contractors and consultants. </font></p>
<p align="left"><font size="2" face="serif">Incentive stock options granted under the terminated 1988 Stock Incentive Plan and the 1998 Stock Option Plan (the &#8220;Plans&#8221;) must be at least equal to the fair value of the common stock on the date of grant. Nonqualified stock options granted under the 1998 Plan may be less than, equal to or greater than the fair value of the common stock on the date of grant. Required disclosure information regarding the Plans has been combined due to the similarities in the Plans. The Company has reserved 1,259,350 shares of Common stock for awards under the 1998 plan. </font></p>
<p align="left"><font size="2" face="serif">Stock-based employee compensation is recognized using the intrinsic value method in accordance with Accounting Principles Board Opinion (&#8220;APB&#8221;) No. 25, &#8220;Accounting for Stock Issued to Employees.&#8221; For disclosure purposes, pro forma net income and net income per share data are provided in accordance with SFAS No. 123, &#8220;Accounting for Stock-Based Compensation,&#8221; as if the fair value method had been applied. Under SFAS No. 123, compensation cost related to stock options granted to employees is computed based on the fair value of the stock option at the date of grant using the Black-Scholes option pricing model. Had the Company recognized compensation cost for its stock option plans consistent with the provisions of
SFAS 123, the Company&#8217;s pro forma net income for the three-month and nine-month periods ended June 30, 2003 and 2004 would have been as follows: </font></p>
<p align="center"><font face="serif" size="2">7</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="top">
<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td align="center"><font size="1" face="serif"><b>Three Months</b></font><font size="1"><br>
    <font face="serif"><b>Ended</b></font><br>
    <font face="serif"><b>June 30,</b></font><br>
    <font face="serif"><b>2003</b></font></font></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td align="center"><font size="1" face="serif"><b>Three Months<br>
Ended<br>
June 30,<br>
2004</b></font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td align="center"><font size="1" face="serif"><b>Nine Months<br>
Ended<br>
June 30,<br>
2003</b></font></td>
<td align="left">&nbsp;</td>
<td align="left"><font size="1" face="serif">&nbsp;</font></td>
<td align="center"><font size="1" face="serif"><b>Nine Months<br>
Ended<br>
June 30,<br>
2004</b></font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Net income:</font></td>
<td width="2%" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td width="9%" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td width="1%" align="right">&nbsp;</td>
<td width="2%" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td width="8%" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="2%" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td width="8%" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="2%" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td width="8%" align="left"><font size="2" face="serif">&nbsp;</font></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As reported</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">1,230,958</font></td>
<td align="right"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">3,285,608</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">2,725,901</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">7,467,039</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deduct: Total stock based employee compensation expense</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;determined under the fair value based method for all awards,</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net of related tax effects</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">177,580</font></td>
<td align="right"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">194,088</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">490,680</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">568,524</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pro forma</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">1,053,378</font></td>
<td align="right"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,091,520</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">2,235,221</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">6,898,515</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Basic EPS:</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As reported</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">.10</font></td>
<td align="right"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;.28</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">.22</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">.65</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pro forma</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">.09</font></td>
<td align="right"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;.26</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">.18</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">.60</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Diluted EPS:</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As reported</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">.10</font></td>
<td align="right"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.27</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">.22</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">.63</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pro forma</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">.09</font></td>
<td align="right"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">.26</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">.18</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">.58</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
</table>
<p><font face="serif" size="2"><b>New Accounting Pronouncements</b></font></p>
<p align="left"><font size="2" face="serif">In January 2003, the FASB issued FIN 46, &#8220;Consolidation of Variable Interest Entities an Interpretation of ARB No. 51.&#8221; FIN 46 addresses consolidation by business enterprises of variable interest entities. The FASB then issued FIN 46(R), &#8220;Consolidation of Variable Interest Entities an Interpretation of ARB No. 51,&#8221; which replaced FIN 46. Application of FIN 46(R) is required in financial statements of public entities that have interests in variable interest entities or potential variable interest entities commonly referred to as special-purpose entities for periods ending after December 15, 2003. Application by public entities for all other types of entities is required in financial statements for periods ending after March
15, 2004. The Company has adopted both FIN 46 and FIN 46(R), and their adoption had no impact on the Company&#8217;s financial position or results of operations. </font></p>
<p align="left"><font size="2" face="serif">In May 2003, the FASB issued SFAS 150, &#8220;Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.&#8221; This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company adopted the provisions of SFAS 150, including the deferral of certain effective dates as a
result of the provisions of FASB Staff Position 150-3, &#8220;Effective Date, Disclosures, and Transition for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests Under FASB Statement No. 150, &#8216;Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.&#8217;&#8221; The Company does not have any significant financial instruments with characteristics of both liabilities and equity as of June 30, 2004. </font></p>
<p align="center"><font face="serif" size="2">8</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p><font face="serif" size="2"><b><a name="p9"></a>Item 2. Management&#8217;s Discussion and Analysis of Financial Condition and Results of Operations  </b></font></p>
<p><font face="serif" size="2"><b>Overview </b></font></p>
<p align="left"><font size="2" face="serif">We design, manufacture and sell flight information computers, flat panel displays and advanced monitoring systems to the Department of Defense (DOD), government agencies, commercial air transport carriers and corporate/general aviation markets. </font></p>
<p align="left"><font size="2" face="serif">Our revenues are derived from the sale of our products to the retrofit market and, to a lesser extent, original equipment manufacturers (OEMs). Our customers include government and military entities and their commercial contractors, aircraft operators, aircraft modification centers and various OEMs. Although we occasionally sell our products directly to government entities, we primarily sell our products to commercial customers for end use in government and military programs. </font></p>
<p align="left"><font size="2" face="serif">Since fiscal 1997, the majority of our revenues have come from the sale of Reduced Vertical Separation Minimum (RVSM) compliant air data systems. </font></p>
<p align="left"><font size="2" face="serif">We continue to invest in and seek additional opportunities for our Flat Panel Display product line. To date, we have been selected by the U.S. Navy for Flat Panel applications on their Landing Craft Air Cushion (LCAC) platforms. Further, we were selected by Boeing to provide Flat Panels for the Boeing 767 tanker program. Both of these programs have multi-year requirements that we believe will provide a solid base for future awards. In addition, the Company&#8217;s flat panel display received certification from the Federal Aviation Administration (FAA) in the form of a Technical Standard Order (TSO) on July 2, 2004. </font></p>
<p align="left"><font size="2" face="serif">Our cost of sales is comprised of material components purchased through our supplier base and direct in-house assembly labor and overhead costs. Many of the components we use in assembling our products are standard, although certain parts are manufactured to meet our specifications. The overhead portion of cost of sales is primarily comprised of salaries and benefits, building occupancy, supplies, and outside service costs related to our production, purchasing, customer service, material control and quality departments as well as warranty costs. </font></p>
<p align="left"><font size="2" face="serif">We continue to invest in the development of new products and the enhancement of our existing product line. We expense research and development costs related to future product development as they are incurred. </font></p>
<p align="left"><font size="2" face="serif">Our selling, general, and administrative expenses consist of marketing and business development expenses, professional expenses, salaries and benefits for executive and administrative personnel, facility costs, recruiting, legal, accounting, and other general corporate expenses. </font></p>
<p><font face="serif" size="2"><b>Three Months Ended June 30, 2004 Compared to the Three Months Ended June 30, 2003 </b></font></p>
<p align="left"><font size="2" face="serif"><i>Net sales. </i>Net sales increased $5.8 million, or 88%, to $12.3 million for the three months ended June 30, 2004 from $6.5 million in the three months ended June 30, 2003. This increase in net sales was mainly due to increased RVSM system deliveries to both the commercial air transportation and general aviation market segments. The increase in net sales reflects an industry wide response to a Federal Aviation Administration (FAA) mandate. Essentially, the mandate requires RVSM equipment installations on aircraft flying between 29,000 and 41,000 feet by January 20, 2005. The Company&#8217;s equipment provides RVSM compliance. Equipment deliveries related to the FAA&#8217;s mandate are increasing as both air transport and general aviation
industry segments begin to meet the new FAA mandate.  </font></p>
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<p align="left"><font size="2" face="serif"><i>Cost of sales.</i> Cost of sales increased $1.3 million or 48%, to $4.1 million, or 33% of net sales, in the three months ended June 30, 2004 from $2.7 million, or 42% of net sales, in the three months ended June 30, 2003. The absolute dollar increase in cost of sales was related to our increase in net sales. As a percentage, the decrease was the result of higher net sales in the period. </font></p>
<p align="left"><font size="2" face="serif"><i>Research and development</i>. Research and development expenses increased $0.7 million or 107% to $1.4 million or 11% of net sales in the three months ended June 30, 2004 from $0.7 million or 10% of net sales in the three months ended June 30, 2003. Both the absolute dollar and percent to sales increase was principally due to increased spending on the flat panel program as the Company prepared to submit its Technical Standard Order (TSO) application to the FAA.  The FAA awarded the Company&#8217;s flat panel display a TSO on July 2, 2004. </font></p>
<p align="left"><font size="2" face="serif"><i>Selling, general, and administrative</i>. Selling, general, and administrative expenses increased $0.5 million, or 31%, to $2.1 million, or 17% of net sales, in the three months ended June 30, 2004 from $1.6 million or 25% of net sales, in the three months ended June 30, 2003. The increase in the dollar amount was the result of higher corporate governance expenses coupled with increased salaries.  The decrease as a percent of net sales was the result of higher net sales in the period. </font></p>
<p align="left"><font size="2" face="serif"><i>Interest income.</i> Interest income was $116,000 in the three months ended June 30, 2004 as compared to interest income of $134,000 in the three months ended June 30, 2003. The decreased interest income in the three months ended June 30, 2004 was primarily the result of lower interest rates in the period. </font></p>
<p align="left"><font size="2" face="serif"><i>Interest expense.</i> Interest expense was $31,000 in the three months ended March 31, 2004 as compared to interest expense of $33,000 in the three months ended June 30, 2003. The decreased interest expense in the three months ended June 30, 2004 was primarily the result of lower interest rates in the period. </font></p>
<p align="left"><font size="2" face="serif"><i>Income tax expense.</i> Income tax expense for the three months ended June 30, 2004 was $1.6 million. The income tax expense for the three months ending June 30, 2003 was $0.4 million. The increase in tax expense was primarily due to higher income in the period. The effective tax rate in the June 30, 2004 quarter was 32%. In the June 30, 2003 quarter the effective tax rate was 24%. In each quarter, the effective tax rate differs from the statutory rate due to the utilization of research and development tax credits.  Although the credits utilized in each period were similar, the effective tax rate was lower in 2003 due to lower pre-tax income in the period ended June 30, 2003.</font></p>
<p align="left"><font size="2" face="serif"><i>Net income</i>. As a result of the factors described above, our net income in the three months ended June 30, 2004 increased $2.1 million or 167%, to $3.3 million, or 27% of net sales, from $1.2 million or 19% of net sales in the three months ended June 30, 2003. </font></p>
<p><font face="serif" size="2"><b>Nine Months Ended June 30, 2004 Compared to the Nine Months Ended June 30, 2003 </b></font></p>
<p align="left"><font size="2" face="serif"><i>Net sales. </i>Net sales increased $13.6 million, or 75%, to $31.7 million for the nine months ended June 30, 2004 from $18.1 million in the nine months ended June 30, 2003. This increase in net sales was mainly due to increased RVSM system deliveries to both the commercial air transportation and general aviation market segments. The increase reflects an industry wide response to an FAA mandate requiring RVSM equipment installations on aircraft flying between 29,000 and 41,000 feet by January 20, 2005. The Company&#8217;s equipment provides RVSM compliance. Equipment deliveries related to the FAA&#8217;s mandate are increasing as both air transport and general aviation industry segments begin to meet the new FAA mandate. </font></p>
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<p align="left"><font size="2" face="serif"><i>Cost of sales.</i> Cost of sales increased $3.4 million or 44%, to $11.2 million, or 35% of net sales, in the nine months ended June 30, 2004 from $7.8 million, or 43% of net sales, in the nine months ended June 30, 2003. The absolute dollar increase in cost of sales was related to our increase in net sales. As a percentage, the decrease was the result of both higher net sales in the period coupled with a favorable change in the Company&#8217;s estimate of accrued warranty liability in the period. </font></p>
<p align="left"><font size="2" face="serif"><i>Research and development</i>. Research and development expenses increased $1.4 million or 59% to $3.9 million or 12% of net sales in the nine months ended June 30, 2004 from $2.4 million or 13% of net sales in the nine months ended June 30, 2003. The absolute dollar increase was principally due to increased spending on the flat panel program as the Company prepared to submit its TSO application to the FAA. The Company was awarded a TSO certification for their Flat Panel Display on July 2, 2004 by the FAA. On a percent to sales basis, the 2004 period was less than 2003 by one percentage point because of higher sales in the period.   </font></p>
<p align="left"><font size="2" face="serif"><i>Selling, general, and administrative</i>. Selling, general, and administrative expenses increased $1.3 million or 29%, to $5.6 million, or 18% of net sales, in the nine months ended June 30, 2004 from $4.3 million or 24% of net sales, in the nine months ended June 30, 2003. The increase in the dollar amount was the result of higher wages, commissions due to increased net sales and corporate governance. The decrease as a percent of net sales was the result of higher net sales in the period. </font></p>
<p align="left"><font size="2" face="serif"><i>Interest income.</i> Interest income was $346,000 in the nine months ended June 30, 2004 as compared to interest income of $463,000 in the nine months ended June 30, 2003. The decreased interest income in the nine months ended June 30, 2004 was primarily the result of lower interest rates in the period. </font></p>
<p align="left"><font size="2" face="serif"><i>Interest expense.</i> Interest expense was $94,000 in the nine months ended June 30, 2004 as compared to $102,000 in the nine months ended June 30, 2003. The decrease was due to lower interest rates in the period. </font></p>
<p align="left"><font size="2" face="serif"><i>Income tax expense.</i> Income tax expense for the nine months ended June 30, 2004 was $3.8 million. The income tax expense for the nine months ending June 30, 2003 was $1.2 million. The increase in income tax expense was mostly due to higher income in the period. The effective tax rate in the June 30, 2004 year to date period was 34%. In the June 30, 2003 year to date period the effective tax rate was 31%. In each year to date period, the effective tax rate differs from the statutory rate due to the utilization of research and development tax credits.  Although the credits utilized in each period were similar, the effective tax rate was lower in 2003 due to lower pre-tax income in the period ended June 30, 2003.</font></p>
<p align="left"><font size="2" face="serif"><i>Net income</i>. As a result of the factors described above, our net income in the nine months ended June 30, 2004 increased $4.7 million or 174%, to $7.5 million, or 24% of net sales, from $2.7 million or 15% of net sales in the nine months ended June 30, 2003.</font></p>
<p><font face="serif" size="2"><b>Liquidity and Capital Resources </b></font></p>
<p align="left"><font size="2" face="serif">Our main sources of liquidity have been cash flows from operations and the proceeds of our initial public offering (IPO) in August 2000. We require cash principally to finance inventory, accounts receivable and payroll. </font></p>
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<p align="left"><font size="2" face="serif">Our cash flow provided from operating activities was $9.1 million for the nine months ended June 30, 2004 as compared to $3.6 million for the nine months ended June 30, 2003. The increase was due to higher net income in the period while a $2.0 million improvement in accounts receivable was mostly offset with a $1.9 million inventory increase. The increase in inventory was primarily due to additional purchases of raw material and increased production in response to a higher order backlog and in anticipation of an increased demand for RVSM equipment in light of the industry wide response to the FAA&#8217;s mandate discussed above. </font></p>
<p align="left"><font size="2" face="serif">Our cash used in investing activities was $560,000 for the nine months ended June 30, 2004 as compared to $36,000 for the nine months ended June 30, 2003. The increase was primarily due to the purchase of additional manufacturing and engineering equipment. </font></p>
<p align="left"><font size="2" face="serif">Net cash flow from financing activities was $1.3 million for the nine months ended June 30, 2004 as compared to $5.3 million in usage in the nine months ended June 30, 2003. In the nine month period ended June 30, 2004, the in-flow of cash was the result of proceeds from the exercise of stock options and warrants. The primary use of cash in the nine month period ended June 30, 2003 was to acquire treasury stock. </font></p>
<p align="left"><font size="2" face="serif">Our future capital requirements depend on numerous factors, including market acceptance of our products, the timing and rate of expansion of our business, acquisitions, joint ventures and other factors. We have experienced increases in our expenditures since our inception consistent with growth in our operations, personnel and product line, and we anticipate that our expenditures will continue to increase in the foreseeable future. We believe that our cash and cash equivalents, together with the net proceeds from our IPO will provide sufficient capital to fund our operations for at least the next twelve months. However, we may need to raise additional funds through public or private financings or other arrangements in order to support more rapid
expansion of our business than we now anticipate either through acquisitions or organic growth. Further, we may need to develop and introduce new or enhanced products, respond to competitive pressures, invest in or acquire businesses or technologies or respond to unanticipated requirements or developments. If additional funds are raised through the issuance of equity securities, dilution to existing shareholders may result. If insufficient funds are available, we may not be able to introduce new products or compete effectively in any of our markets, which could hurt our business. </font></p>
<p><font face="serif" size="2"><b>Backlog </b></font></p>
<p align="left"><font size="2" face="serif">At June 30, 2004 our total backlog
    was $44.9 million, a 19%
    increase from the June 30, 2003 backlog of $37.8 million.<sup>(1)</sup>
    </font></p>
<p><font face="serif" size="2"><b>Critical Accounting Policies </b></font></p>
<p align="left"><font size="2" face="serif">The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The Company&#8217;s most critical accounting policies are revenue recognition, income taxes, allowance for doubtful accounts, inventory valuation and warranty reserves. </font></p>
<p align="left"><font size="2" face="serif">The Company recognizes sales for products when the following revenue recognition criteria are met: persuasive evidence of an arrangement exists, product delivery and acceptance has occurred, pricing is fixed or determinable, and collection is reasonably assured. The Company recognizes sales upon shipment of products to customers. </font></p>
<p align="left"><font size="2" face="serif">Sales related to certain long-term contracts requiring development and delivery of products over several years are accounted for under the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 81-1, <i>Accounting for Performance of Construction-Type and Certain Production-Type Contracts. </i>We consider the nature of these contracts as well as the types of products and services provided when determining the appropriate accounting treatment for a particular contract. Certain long-term contracts are recorded on a percentage of completion basis using cost-to-cost methodology to measure progress towards completion. </font></p>
<p><font face="serif" size="2"><sup>(1)</sup> Note that some elements of our backlog includes options for additional equipment. In the event an option is not exercised by a customer the backlog would be reduced accordingly.</font></p>
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<p align="left"><font size="2" face="serif">The Company offers its customers extended warranties for additional fees. These warranty sales are recorded as deferred revenue and recognized as sales on a straight-line basis over the warranty period. </font></p>
<p align="left"><font size="2" face="serif">The Company enters into certain sales arrangements that include multiple deliverables as defined in Emerging Issues Task Force (EITF) Issue No. 00-21, <i>Accounting for Revenue Arrangements with Multiple Deliverables</i>. Effective July 1, 2003, the Company identifies all goods and/or services that are to be delivered separately under a sales arrangement and allocates revenue to each deliverable based on fair value that is established with the customer during contract negotiations. In general, revenues are separated between product sales and non-recurring engineering services. The allocated revenue for each deliverable is then recognized using appropriate revenue recognition methods. Effective for transactions entered into after October 1, 2003,
the Company accounts for transactions with software and non-software components under EITF Issue 03-5, &#8220;Applicability of AICPA Statement of Position 97-2, Software Revenue Recognition, to Non-Software Deliverables in an Arrangement Containing More-Than-Incidental Software.&#8221; </font></p>
<p align="left"><font size="2" face="serif">Income taxes are recorded in accordance with SFAS No. 109, <i>Accounting for Income Taxes. </i>Provisions for federal and state income taxes are calculated on reported financial statement pre-tax income based on current tax law. The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company&#8217;s assets and liabilities and expected benefits of utilizing net operating loss carryforwards. The impact on deferred taxes of changes in tax rates and laws, if any, applied to the years during which temporary differences are expected to be settled, are reflected in the consolidated financial statements in the period of enactment.</font></p>
<p align="left"><font size="2" face="serif">We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. These allowances are determined by analyzing historical data and trends. If actual losses are greater than estimated amounts or if the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, future results from operations could be adversely affected. </font></p>
<p align="left"><font size="2" face="serif">Inventories are written down for estimated obsolescence equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future market conditions. If actual future demand or market conditions are less favorable than those projected by management, additional inventory write-downs may be required. </font></p>
<p align="left"><font size="2" face="serif">We offer warranties on some products of various lengths. At the time of shipment, we establish a reserve for the estimated cost of warranties based on our best estimate of the amounts necessary to settle future and existing claims using historical data on products sold as of the balance sheet date. The length of the warranty period, the product&#8217;s failure rates and the customer&#8217;s usage affects warranty cost. If the actual cost of warranties differs from our estimated amounts, future results of operations could be adversely affected. </font></p>
<p><font face="serif" size="2"><b>Business Segments </b></font></p>
<p align="left"><font size="2" face="serif">We operate in one principal business segment which designs, manufactures and sells flight information computers, flat panel displays and advanced monitoring systems to the Department of Defense, government agencies, commercial air transport carriers and corporate/general aviation markets. We currently derive virtually all our net sales from the sale of this equipment. Almost all of the net sales, operating results and identifiable assets are in the United States. </font></p>
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<p><font face="serif" size="2"><b>New Accounting Pronouncements </b></font></p>
<p align="left"><font size="2" face="serif">In January 2003, the FASB issued FIN 46, <i>Consolidation of Variable Interest Entities an Interpretation of ARB No. 51</i>. FIN 46 addresses consolidation by business enterprises of variable interest entities. The FASB then issued FIN 46(R), <i>Consolidation of Variable Interest Entities an Interpretation of ARB No. 51</i>, which replaced FIN 46. Application of FIN 46(R) is required in financial statements of public entities that have interests in variable interest entities or potential variable interest entities commonly referred to as special-purpose entities for periods ending after December 15, 2003. Application by public entities for all other types of entities is required in financial statements for periods ending after March 15, 2004. The
Company has adopted both FIN 46 and FIN 46(R), and their adoption had no impact on the Company&#8217;s financial position or results of operations. </font></p>
<p align="left"><font size="2" face="serif">In May 2003, the FASB issued SFAS 150, &#8220;Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.&#8221; This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company adopted the provisions of SFAS 150, including the deferral of certain effective dates as a
result of the provisions of FASB Staff Position 150-3, &#8220;Effective Date, Disclosures, and Transition for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests Under FASB Statement No. 150, &#8216;Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.&#8217;&#8221; The Company does not have any significant financial instruments with characteristics of both liabilities and equity as of June 30, 2004.</font></p>
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<p align="center"><font size="2" face="serif"><b>FORWARD-LOOKING STATEMENTS</b></font></p>
<p align="left"><font size="2" face="serif">This Form 10-Q contains statements, which, to the extent that they are not recitations of historical fact, constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words &#8220;believe,&#8221; &#8220;estimate,&#8221; &#8220;anticipate,&#8221; &#8220;project,&#8221; &#8220;intend,&#8221; &#8220;expect,&#8221; &#8220;plan,&#8221; &#8220;outlook,&#8221; &#8220;forecast&#8221; and similar expressions are intended to identify forward-looking statements. Numerous factors, including potentially the following factors, could affect the Company&#8217;s forward-looking statements and actual performance:</font></p>
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<td><font size="2" face="serif">difficulties in developing and producing our flat panel display systems (CIP) or other planned products or product enhancements;</font>
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<td><font size="2" face="serif">our ability to gain regulatory approval of our products in a timely manner;</font>
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<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td width="3%"><font size="2" face="serif">&#149;</font></td>
<td><font size="2" face="serif">protection of intellectual property rights;</font>
</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td width="3%"><font size="2" face="serif">&#149;</font></td>
<td><font size="2" face="serif">our ability to service the international market;</font>
</td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td width="3%"><font size="2" face="serif">&#149;</font></td>
<td><font size="2" face="serif">other factors disclosed from time to time in our filings with the Securities and Exchange Commission.</font>
</td>
</tr>
</table>
<p align="left"><font size="2" face="serif">Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Form 10-Q. 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-Q, 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 and 21E of the Exchange Act. </font></p>
<p align="left"><font size="2" face="serif">For a discussion identifying some important factors that could cause actual results to vary materially from those anticipated in the forward-looking statements, see the Company&#8217;s Securities and Exchange Commission filings including, but not limited to, the discussions of &#8220;Risk Factors&#8221; contained in the Company&#8217;s Annual Report on Form 10-K for the fiscal year ended September 30, 2003. </font></p>
<p><font face="serif" size="2"><b><a name="p15"></a>Item 3. Quantitative and Qualitative Disclosures About Market Risk  </b></font></p>
<p align="left"><font size="2" face="serif">The Company&#8217;s operations are exposed to market risks primarily as a result of changes in interest rates. The Company does not use derivative financial instruments for speculative or trading purposes. The Company&#8217;s exposure to market risk for changes in interest rates relates to its cash equivalents and an industrial revenue bond. The Company&#8217;s cash equivalents consist of funds invested in money market accounts, which bear interest at a variable rate, while the industrial revenue bond carries an interest rate that is consistent with 30-day, tax-exempt commercial paper. As the interest rates are variable, and we do not engage in hedging activities, a change in interest rates earned on the cash equivalents or paid on the industrial
revenue bond would impact interest income and expense along with cash flows, but would not impact the fair market value of the related underlying instruments. </font></p>
<p align="center"><font face="serif" size="2">15</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p><font face="serif" size="2"><b><a name="p16"></a>Item 4. Controls and Procedures  </b></font></p>
<p align="left"><font size="2" face="serif">An evaluation was performed under the supervision and with the participation of the Company&#8217;s management, including its Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, of the effectiveness of the Company&#8217;s disclosure controls and procedures, as such term is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934, as amended (the &#8220;Exchange Act&#8221;) as of June 30, 2004. Based on that evaluation, the Company&#8217;s management, including the CEO and CFO, concluded that the Company&#8217;s disclosure controls and procedures provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, is recorded,
processed, summarized and reported as specified in Securities and Exchange Commission rules and forms. There were no significant changes in the Company&#8217;s internal control over financial reporting that occurred during the Company&#8217;s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company&#8217;s internal control over financial reporting. </font></p>
<p align="center"><font face="serif" size="2">16</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b><a name="p17"></a>PART II&#150;OTHER INFORMATION</b></font></p>
<p><font face="serif" size="2"><b><a name="p17a"></a>Item 6. Exhibits and Reports on Form 8-K.</b></font></p>
<table width="100%" border="0">
<tr valign="top">
<td width="3%">
<font face="serif" size="2">(a)</font>
</td>
<td>
<font face="serif" size="2">Exhibits</font>
</td>
</tr>
</table>
<p>&nbsp;</p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="top" bgcolor="#ffffff">
<td align="center"><font size="2" face="serif">31.1</font></td>
<td align="left" width="2%"><font size="2">&nbsp;</font></td>
<td width="1%" align="right"><font size="2">&nbsp;</font></td>
<td width="85%" align="left"><font size="2" face="serif">Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)</font></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="center"><font size="2" face="serif">31.2</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)</font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="center"><font size="2" face="serif">32.1</font></td>
<td align="left"><font size="2">&nbsp;</font></td>
<td align="right"><font size="2">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">Certification Pursuant to U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</font></td>
<td align="left">&nbsp;</td>
</tr>
</table>
<p align="left"><font size="2" face="serif">(b) Reports on Form 8-K.</font></p>
<p align="left"><font size="2" face="serif">None </font></p>
<p align="center"><font face="serif" size="2">17</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p?"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b><a name="p18"></a>SIGNATURES</b></font></p>
<p align="left"><font size="2" face="serif">Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. </font></p>  <table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left" width="54%"></td>
<td align="left"><font size="2" face="serif"><b>INNOVATIVE SOLUTIONS &amp; SUPPORT,
      INC.</b></font></td>
<td align="left" width="18%"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top">
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">Date: August 11, 2004&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
<td align="center"><font size="2" face="serif">By:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/
    JAMES J. REILLY</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top">
<td>&nbsp;</td>
<td><hr noshade size=1>
  </td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="center"><font size="2" face="serif"><b><font face="serif" size="1">James
        J. Reilly Chief Financial Officer</font></b></font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
</table>
<p align="center"><font face="serif" size="2">18</font></p>
<hr noshade align="center" width="100%" size="2">
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<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>4
<FILENAME>ex31-1.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<html>
<head><title>
Prepared and filed by St Ives Burrups
</title>
</head>
<page>
<div align="right"><a name="p?"></a>
</div>
<p align="right"><font size="2" face="serif"><b>Exhibit 31.1 </b></font></p>
<p align="left"><font size="2" face="serif"><b>CERTIFICATION OF CHIEF EXECUTIVE OFFICER</b></font></p>
<p align="left"><font size="2" face="serif">I, Geoffrey S. M. Hedrick, certify that:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="top" bgcolor="#ffffff">
<td width="3%" align="left"><font size="2" face="serif">1.</font></td>
<td align="right">&nbsp;</td>
<td colspan="4" align="left"><font size="2" face="serif">I have reviewed this quarterly report on Form 10-Q of Innovative Solutions and Support, Inc. </font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">2.</font></td>
<td align="right">&nbsp;</td>
<td colspan="4" align="left"><font size="2" face="serif">Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; </font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">3.</font></td>
<td align="right">&nbsp;</td>
<td colspan="4" align="left"><font size="2" face="serif">Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; </font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">4.</font></td>
<td align="right">&nbsp;</td>
<td colspan="4" align="left"><font size="2" face="serif">The registrant&#8217;s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: </font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left"></td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"></td>
<td width="1%" align="right">&nbsp;</td>
<td width="1%" align="left"><font size="2" face="serif">a)</font></td>
<td width="2%" align="left">&nbsp;</td>
<td width="1%" align="right">&nbsp;</td>
<td width="89%" align="left"><font size="2" face="serif">Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; </font></td>
<td width="2%" align="left">&nbsp;</td> </tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left"></td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">b)</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">Evaluated the effectiveness of the registrant&#8217;s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and </font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left"></td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">c)</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">Disclosed in this report any change in the registrant&#8217;s internal control over financial reporting that occurred during the registrant&#8217;s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant&#8217;s internal control over financial reporting; and </font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td colspan="4" align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">5.</font></td>
<td align="right">&nbsp;</td>
<td colspan="4" align="left"><font size="2" face="serif">The registrant&#8217;s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant&#8217;s auditors and the audit committee of the registrant&#8217;s board of directors (or persons performing the equivalent functions): </font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left"></td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">a)</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant&#8217;s ability to record, process, summarize and report financial information; and </font></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
  <td align="left"></td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"></td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">b)</font></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><font size="2" face="serif">Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant&#8217;s internal control over financial reporting. </font></td>
<td align="left">&nbsp;</td>
</tr>
</table>
<br><br>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left" width="50%"><font size="2" face="serif">Date: August 11, 2004</font></td>
<td align="center" width="30%"><font size="2" face="serif">By:</font> <font size="2" face="serif">&nbsp;&nbsp;/s/
   &nbsp;&nbsp;GEOFFREY S. M. HEDRICK&nbsp;&nbsp;</font></td>
<td width="30%"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
</tr>
<tr valign="top">
<td>&nbsp;</td>
<td><hr size=1 noshade>
  </td>
<td>&nbsp;</td> </tr>
<tr valign="top">
<td align="left"></td>
<td align="center"><font size="2" face="serif"><b><font face="serif" size="1">Geoffrey
        S. M. Hedrick<br>
Chairman of the Board and<br>
Chief Executive Officer</font></b></font></td>
<td align="center"><font size="2" face="serif"><b></b></font></td>
</tr>
</table>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>5
<FILENAME>ex31-2.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<html>
<head><title>
Prepared and filed by St Ives Burrups
</title>
</head>
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<a name="p?"></a>
<p align="right"><font size="2" face="serif"><b>Exhibit 31.2 </b></font></p>
<p align="left"><font size="2" face="serif"><b>CERTIFICATION OF CHIEF FINANCIAL OFFICER</b></font></p>
<p align="left"><font size="2" face="serif">I, James J. Reilly, certify that:</font></p>
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<td width="3%" align="left"><font size="2" face="serif">1.</font></td>
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<td colspan="4" align="left"><font size="2" face="serif">I have reviewed this quarterly report on Form 10-Q of Innovative Solutions and Support, Inc. </font></td>
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<td align="left"><font size="2" face="serif">2.</font></td>
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<td colspan="4" align="left"><font size="2" face="serif">Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; </font></td>
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<td align="left"><font size="2" face="serif">3.</font></td>
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<td colspan="4" align="left"><font size="2" face="serif">Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; </font></td>
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<td align="left"><font size="2" face="serif">4.</font></td>
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<td colspan="4" align="left"><font size="2" face="serif">The registrant&#8217;s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: </font></td>
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<td width="1%" align="left"><font size="2" face="serif">a)</font></td>
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<td width="1%" align="right">&nbsp;</td>
<td width="89%" align="left"><font size="2" face="serif">Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; </font></td>
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<td align="left"><font size="2" face="serif">b)</font></td>
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<td align="left"><font size="2" face="serif">Evaluated the effectiveness of the registrant&#8217;s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and </font></td>
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<td align="left"><font size="2" face="serif">c)</font></td>
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<td align="left"><font size="2" face="serif">Disclosed in this report any change in the registrant&#8217;s internal control over financial reporting that occurred during the registrant&#8217;s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant&#8217;s internal control over financial reporting; and </font></td>
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<td align="left"><font size="2" face="serif">5.</font></td>
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<td colspan="4" align="left"><font size="2" face="serif">The registrant&#8217;s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant&#8217;s auditors and the audit committee of the registrant&#8217;s board of directors (or persons performing the equivalent functions): </font></td>
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<td align="left"><font size="2" face="serif">a)</font></td>
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<td align="left"><font size="2" face="serif">All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant&#8217;s ability to record, process, summarize and report financial information; and </font></td>
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<td align="left"><font size="2" face="serif">b)</font></td>
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<td align="left"><font size="2" face="serif">Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant&#8217;s internal control over financial reporting. </font></td>
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<br><br>
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  <td align="left" width="53%"><font size="2" face="serif">Date: August 11, 2004</font></td>
<td align="center" width="30%"><font size="2" face="serif">By:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;JAMES J. REILLY&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
<td><font size="2" face="serif">&nbsp;&nbsp;&nbsp;</font></td>
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  <td>&nbsp;</td>
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  </td>
<td>&nbsp;</td> </tr>
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  <td align="left">&nbsp;</td>
<td align="center"><font size="2" face="serif">&nbsp;<b><font face="serif" size="1">James
        J. Reilly</font></b></font><br>
  <font size="2" face="serif"><b><font face="serif" size="1">Chief Financial
  Officer</font></b></font></td>
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<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>6
<FILENAME>ex32-1.htm
<DESCRIPTION>EXHIBIT 32.1
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Prepared and filed by St Ives Burrups
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<p align="right"><font size="2" face="serif"><b>Exhibit 32.1 </b></font></p>
<p align="center"><font face="serif" size="2"><b>CERTIFICATION PURSUANT TO<br>18 U.S.C. SECTION 1350,<br>AS ADOPTED PURSUANT TO<br>SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 </b></font></p>
<p align="left"><font size="2" face="serif">In connection with the Quarterly Report of Innovative Solutions and Support, Inc. (the &#8220;Company&#8221;) on Form 10-Q for the period ending June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the &#8220;Report&#8221;), each of the undersigned officers of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:</font></p>
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<td width="3%"><font size="2" face="serif">&nbsp;(1)</font></td>
<td><font size="2" face="serif">The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and</font>
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<td width="3%"><font size="2" face="serif">&nbsp;</font></td>
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<td width="3%"><font size="2" face="serif">&nbsp;(2)</font></td>
<td><font size="2" face="serif">The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.</font>
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  <td width=30% align="center"><font size="2" face="serif">/s/&nbsp;&nbsp;&nbsp;&nbsp;G<font size="1">EOFFREY</font>    S. M. H<font size="1">EDRICK</font>&nbsp;</font></td>
<td align="center"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
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  <td><hr noshade size=1>
    </td>
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  <td align="center"><font size="2" face="serif"><b><font face="serif" size="1">Geoffrey
          S. M. Hedrick</font></b></font><br>
    <font size="2" face="serif"><b><font face="serif" size="1">Chairman of the
    Board and Chief Executive Officer</font></b></font></td>
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<br><br>
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  <td width="30%" align="left"><font size="2" face="serif">August 11, 2004</font></td>
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  <td>&nbsp;</td>
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  <td align="center"><font size="2" face="serif">/s/&nbsp;&nbsp;&nbsp;&nbsp;J<font size="1">AMES</font>    J. R<font size="1">EILLY&nbsp;&nbsp;&nbsp;&nbsp;</font></font></td>
<td align="center"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
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  <td><hr noshade size=1>
    </td>
<td>&nbsp;</td> </tr>
<tr valign="top">
  <td align="center"><font size="2" face="serif"><b><font face="serif" size="1">James
          J. Reilly</font></b></font><br>
    <font size="2" face="serif"><b><font face="serif" size="1">Chief Financial
    Officer</font></b></font></td>
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<p align="left"><font size="2" face="serif">August 11, 2004</font></p> <p align="center"><font face="serif" size="2"></font></p>
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