Commitments and Contingencies:

12 Months Ended

Sep. 30, 2011

Commitments and Contingencies:

Commitments and Contingencies:

14. Commitments and Contingencies:

• Capital Lease

        The Company leases certain equipment under capital leases with terms of five years and an implicit interest rate of 7.2%. The capitalized cost of $57,450 and related annual amortization of $5,127, $7,178 and $10,050 have been included in property and equipment at September 30, 2011, 2010 and 2009 respectively. The balance due on these leases was $13,189, $25,500 and $36.899 as of September 30, 2011, 2010 and 2009 respectively. Future payments, including interest relating to these leases are $13,189 annually for the next year.

• Operating Leases

        Rent expense under operating leases totaled $31,000, $26,000 and $39,000 for the years ended September 30, 2011, 2010 and 2009, respectively. As of September 30, 2011 the Company has no future minimum payments related to any non-cancelable operating leases in fiscal 2011.

• Product Liability

        The Company has product liability insurance of $50,000,000, which management believes is adequate to cover potential liabilities that may arise because the Company has not experienced any material product liability claims in the past.

• Legal Proceedings

        In the ordinary course of business, the Company is at times subject to various legal proceedings and claims. IS&S does not believe any such matters that are currently pending will have a material effect on its results of operations or financial position.

        On September 26, 2011, Farhad Daghigh, a former employee of the Company, filed a lawsuit against IS&S in the Court of Common Pleas of Chester County alleging breach of contract and violation of the Pennsylvania Wage Payment and Collection Law claiming unpaid sales commissions, prejudgment interest and liquidated damages totaling approximately $583,000 for the fiscal years ended 2007, 2008, 2009 and 2010. IS&S has filed a preliminary objection to the complaint requesting the Court to dismiss all claims. The Company vehemently denies any allegations of liability and will vigorously defend the lawsuit. This matter has not been resolved as of the date hereof. The Company believes that the probability of an unfavorable outcome on this claim is remote, and, therefore, no contingent liability has been recorded as at September 30, 2011.

        On November 18, 2010, Jeoffrey L. Burtch, the Chapter 7 Trustee for AE Liquidation, Inc. (formerly Eclipse Aviation Corporation), filed avoidance actions against IS&S on behalf of AE Liquidation, Inc. for the avoidance of seven payments totaling approximately $321,000 as allegedly preferential transfers paid to IS&S during the 90 days preceding the filing of the bankruptcy petition of Eclipse Aviation Corporation on November 25, 2008. The Company asserted meritorious defenses to these avoidance actions. The parties reached a settlement agreement, approved by the Bankruptcy Court on October 17, 2011, under which the Company paid $17,000 and waived its claim in the bankruptcy proceeding in settlement of the case in its entirety.

        On January 17, 2007 the Company filed suit in the Court of Common Pleas for Delaware County, Pennsylvania against Strathman Associates, a former software consultant for IS&S, alleging that Strathman had improperly used IS&S trade secret and proprietary information in assisting J2 and Kollsman in developing the J2/Kollsman Air Data Computer. The case has not been resolved as of the date hereof.