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CORRESP
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filename1.htm

VIA
EDGAR

March 27,
2009

United
States Securities and Exchange Commission

100
F Street, NE

Washington,
D.C. 20549-4561

  Attn:

  Ms. Kathleen
  Collins

  Ms. Melissa
  Feider

  Mr. Kevin
  Dougherty

  Mr. Mark
  P. Shuman

  RE:

  Innovative
  Solutions and Support, Inc.

  Form 10-K
  and Form 10-K/A for Fiscal Year Ended

  September 30,
  2008

  Filed
  December 11, 2008 and December 19, 2008

  Form 10-Q
  for the Fiscal Quarter Ended December 31, 2008

  Filed
  on February 6, 2009

  File
  No. 000-31157

Dear
Ms. Collins:

On
behalf of Innovative Solutions and Support, Inc. (the “Company”), we
respond to the written comments of the staff (the “Staff”) of the Securities
and Exchange Commission (the “Commission”) contained in your letter dated February 27,
2009 to John C. Long (the “Comment Letter”), with respect to Form 10-K and
Form 10-K/A for Fiscal Year Ended September 30, 2008, filed with the
Commission by the Company on December 11, 2008 and December 19, 2008,
respectively, and Form 10-Q for the Fiscal Quarter Ended December 31,
2008, filed with the Commission by the Company on February 6, 2009 (File No. 000-31157).

The
headings and numbered items of this letter correspond to the headings and
numbered items contained in the Comment Letter. For the convenience of the Staff,
each of the comments from the Comment Letter is restated in bold italics prior
to the Company’s response.

General

1.             We
note that that [sic] you amended the September 30, 2008 Form 10-K to
correct certain “typographical errors” in the consolidated statements of cash
flows.  Tell us what consideration you
gave to filing an Item 4.02 Form 8-K.
Also, tell us why you did not label the September 30, 2008 cash
flow information as restated.

Response:

Subsequent
to the filing on December 11, 2008 of the Company’s Form 10-K for the
fiscal year ended September 30, 2008, the Company identified a
typographical error contained on the face of

the
statement of cash flows for the fiscal year ended September 30, 2008 in
the document that was filed with the Commission.  The net loss line item shown under cash flows
from operating activities for the fiscal year ended September 30, 2008 was
incorrectly presented as $1,509,139 rather than ($7,897,248).  This incorrect amount on the statement of
cash flows was due to a typographical error made while making the final changes
to the Company’s Form 10-K for the fiscal year ended September 30,
2008 which caused data from the wrong cell on a spreadsheet to appear in the
net loss line item on the statement of cash flows.  As a result of the typographical error, the
totals on the statement of cash flows for net cash provided by operating
activities, net decrease in cash and cash equivalents and cash and cash
equivalents, end of year, were not correct.
However, in the same Form 10-K which was filed on December 11,
2008, those same items were properly stated in other sections of the Form 10-K,
resulting in clearly identifiable internal inconsistencies in the
document.  For example, the net loss is
properly stated as ($7,897,248) on the consolidated statements of operations on
page 34 and the summary financial information table on page 21, net
cash provided by operating activities is properly stated as $4.2 million on page 25
in the liquidity and capital resources section of the Management’s Discussion &
Analysis of Financial Condition and Results of Operations (“MD&A”) and cash
and cash equivalents, end of year, is properly stated as $35,031,932 on the
consolidated balance sheet on page 33 and the summary financial
information table on page 21.  Upon
becoming aware of this typographical error, the Company elected to correct the
statement of cash flows in a Form 10-K/A, which was filed on December 19,
2008.  All of the items on the statement
of cash flows described above were corrected in the amended filing.

Item
4.02 of Form 8-K requires disclosure on Form 8-K if a registrant
concludes that previously issued financial statements should no longer be
relied upon because of an error in the financial statements as addressed in
Accounting Principles Board Opinion No. 20, as it may be modified, supplemented or succeeded (“APB No. 20”).  APB No. 20 has been subsequently
superseded by Statement of Financial Accounting Standards No. 154 (“SFAS No. 154”).  An “error
in previously issued financial statements” is defined in SFAS No. 154 as “an
error in recognition, measurement, presentation, or disclosure in financial
statements resulting from mathematical mistakes, mistakes in the application of
GAAP, or oversight or misuse of facts that existed at the time the financial
statements were prepared.”

After consideration, the Company concluded that the
typographical errors that appeared on the face of the consolidated statement of
cash flows did not result from a mathematical mistake or a mistake in the
application of GAAP, and that no facts that existed at the time the Form 10-K
was filed were overlooked or misused.
Therefore, the Company concluded that the financial statements did not
contain an error within the meaning of SFAS No. 154, and 8-K disclosure
under Item 4.02 was therefore not required.
Similarly, the Company determined that because the information was
correctly reported in other parts of the financial statements included in Form 10-K,
the amounts in error were clearly identifiable to the user, and it was not
necessary to label the financial statements as having been restated.

Item 1.
Business

Customers

Retrofit
Market, Page 7

2.             You
disclose, in the aggregate, the percentage of revenue supplied by a specified,
limited number of your largest customers in fiscal 2008 and fiscal 2007;
however, there is no explicit identification in this section of the ten percent
or greater

customers.
In future filings, please disclose the name of each customer accounting
for ten percent or more of your consolidated revenues.  To adequately explain the extent of
dependence on these principal customers, it appears that the percentage
contributed by each of them should be provided.
You may elect to provide additional information regarding the extent of
concentration of your customer base.  See
Item 101(c)(i)(vii) of Regulation S-K.

Response:

The
Company notes the Staff’s comment and in future filings will disclose the name
of each customer accounting for ten percent or more of the Company’s consolidated
revenues and the percentage of revenues contributed by each of these
customers.  Had this enhanced disclosure
been provided in the Company’s Form 10-K for the fiscal year ended September 30,
2008, it would have read as follows:

Historically,
a majority of our sales have come from the retrofit market. Among other
reasons, we have pursued the retrofit market specifically because of its
continued rapid growth in response to the increasing need to support the world’s
aging fleet of aircraft. During fiscal year 2008 we derived 26% of our revenues
from three retrofit customers, Department of Defense (“DOD”), Federal Express
and American Airlines.  During fiscal
year 2008 DoD, our largest retrofit customer, accounted for 10% of our total
revenues.   During fiscal year 2007 three
retrofit customers, DoD, Eclipse and Western Aircraft accounted for 20%, 16%
and 11% of our total revenues, respectively.

Item
1A. Risk Factors

Risks
Related to Our Industry, page 16

3.             You
do not appear to address the cyclical nature of the aerospace industry in which
you sell your products.  Additional
global terrorists’ attacks, higher fuel prices, large fluctuations in commodity
prices, and/or further airline bankruptcies all have the ability to change the
course of the recovery of the aerospace industry and affect demand for your
products.  Please tell us what thought
you gave to expressing these or other industry risks that may be material in
separate headings under “risks related to our industry.”

Response:

The
Company notes the Staff’s comment and respectfully submits that the Company
believes that its exposure to what the Staff refers to in its comment as the “cyclical
nature of the aerospace industry” is mitigated by both the Company’s
diversified customer base and its focus on the retrofit market.   The Company’s customer base spans three
markets within the aerospace industry, namely military, commercial air
transport and general aviation.  While
terrorist attacks, higher fuel prices, fluctuations in commodity prices and
airline bankruptcies may impact certain markets within the industry (for
example, commercial air transport), other aspects of the market, in particular
military sales, can remain robust or even be enhanced due to those factors.  In addition, the Company believes that its
focus on retrofitting existing aircraft provides the Company with opportunities
in both times of expansion and times of contraction in the aerospace
industry.  As stated on page 22 of
the Company’s Form 10-K, the Company believes that in a declining economic
environment customers that may have otherwise elected to purchase newly
manufactured aircraft will instead be interested in retrofitting existing
aircraft as a cost effective

alternative.  Also, in an expanding market, the Company believes
that capacity constraints prevent the two largest suppliers of new aircraft
from meeting all of the demand in the market, which creates opportunity for
industry participants such as the Company who focus on retrofitting existing
aircraft.  Therefore, the Company
believes that these reasons mitigate the risk to the extent that it does not
believe that an additional risk factor on the cyclical nature of the aerospace
industry is required in addition to those already included in the Form 10-K
for the fiscal year ended September 30, 2008 to provide investors with an
overview of the significant risks facing the business.

Moreover,
the Company respectfully submits that it believes that its exposure to the
significant risks inherent in competing in the aerospace industry are
adequately addressed by the risk factors already included in the Form 10-K
for the fiscal year ended September 30, 2008.  In particular, the risk factors entitled “Our
sales principally relate to flat panel display systems and air data products,
and we cannot be certain that the market will continue to accept these or other
products,” “A global recession and continued credit tightening could adversely
affect us,” “The loss of a key customer or significant deterioration in the
financial condition of a key customer could have a material adverse
effect on our results of operations,” and “Growth in our customer base could be
limited by delays or difficulties in completing development and
introduction of our planned products or product enhancements.  If we fail to enhance existing products
or to develop and achieve market acceptance for flat panel displays and other
new products that meet customer requirements, our business will be adversely
affected,” each describe the significant risks that exist in competing in the
aerospace industry.  Based on its
experience and its knowledge of the aerospace industry, the Company believes
these risk factors properly convey to investors the key risks the Company faces
in the markets in which it sells its products.
The Company will continue to monitor these risks each quarter and
will add additional risk factors in the future regarding the cyclical nature of
the aerospace industry or other topics as it deems appropriate based on market
conditions at the time of each future filing on Form 10-K or Form 10-Q.

Item 5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and
Issuer Repurchase of Equity Securities

Comparison
of the Five Year Total Return, page 20

4.             We
note that your stock performance table uses a market capitalization index
instead of an industry specific or peer issuer index.  Issuers with similar market capitalization,
such as the Russell 2000 index, can be used in place of a recognized applicable
industry index, or a self-constructed peer index only in limited
circumstances.  See Item 201(e)(1)(ii)(C) of
Regulation S-K.  Please explain why your
presentation of the market capitalization based index is permissible.

Response:

The
Company notes the Staff’s comment and respectfully submits that the Company
believes that its presentation of a market capitalization based index is
permissible based on the Company’s individual circumstances and the
requirements of Item 201(e)(1)(ii)(C) of Regulation S-K.  Item 201(e)(1)(ii) of Regulation S-K
provides that the performance graph may include: (A) a published industry
or line-of-business index, (B) peer issuers selected in good faith, or (C) an
index based on similar market capitalization.
If the Company does not use a published industry or line-of-business
index and does not believe it can reasonably identify a peer group, a
presentation of issuers with a similar market capitalization is permissible
under the rules.

The
Company designs, manufactures and sells flat panel display systems and advanced
monitoring systems to the Department of Defense, government agencies, defense
contractors, commercial air transport carriers, original equipment
manufacturers and the corporate/general aviation markets.  The Company does not use a published industry
or line-of-business index because it is not aware of any such index made of
companies that are comparable to it and that would be accessible to the Company’s
security holders or is widely recognized and used.  Further, the Company is not reasonably able
to identify a peer group because its competitors are either private companies
or divisions of much larger public companies, and a comparison to the stock
price of these public company competitors may be misleading since there are
many factors that affect the share price of these larger, more diversified
companies that would not be relevant to the Company.  As a result, the Company chose to include a
comparison to the Russell 2000 index, an index of issuers with a similar market
capitalization, in accordance with Item 201(e)(1)(ii)(C) of Regulation
S-K.  The Company does note, however that
a statement regarding the reasons for choosing a market capitalization based
index under Item 201(e)(1)(ii)(C) of Regulation S-K to accompany the stock
performance graph in Form 10-K and in future filings will include a
statement describing the reasons mentioned above.

Item
7A. Quantitative and qualitative disclosures about market risk, page 30

5.             You
disclose that changes in interest rates could impact interest income and
expense along with cash flows.  Please
tell us your consideration and conclusion with respect to quantitative
disclosure regarding market risk of interest rate fluctuations.  We are unable to locate a sensitivity
analysis or other quantitative presentation of the potential impact of changes
in interest rates and their potential impact on interest income, expense and
cash flows.  See Item 305(a)(1) of
Regulation S-K.

Response:

The
Company notes the Staff’s comment and in future filings will provide the
following disclosure to attempt to quantify for investors the impact of changes
in interest rates and their potential impact on interest income, interest
expense, and cash flows, although to date the impact of changes in interest
rates would not have had a material effect on the Company’s consolidated
financial statements taken as a whole.
Had this enhanced disclosure been provided in the Company’s Form 10-K
for the fiscal year ended September 30, 2008, it would have read as
follows:

Item 7A.  Quantitative
and qualitative disclosures about market risk.

The
Company’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’s exposure to
market