Annual Report for Fiscal Year Ending March 31, 2026 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations:

Statements contained in this report, which are not historical facts, may be considered forward-looking information with respect to plans, projections, or future performance of the Company as defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those projected. The words "anticipate", "believe", "estimate", "expect", "objective", and "think" or similar expressions used herein are intended to identify forward-looking statements. The forward-looking statements are based on the Company's current views and assumptions and involve risks and uncertainties that include, among other things, the performance of the Company's business, actions of competitors, changes in laws and regulations, including accounting standards, employee relations, customer demand, prices of purchased raw materials and parts, domestic economic conditions, and foreign economic conditions, including currency rate fluctuations.

The following discussion and analysis should be read in conjunction with our audited financial statements and related footnotes included elsewhere in this report, which provide additional information concerning the Company's financial activities and condition.

Overview of Business:

The Company designs, develops and manufactures printed circuit board connectors and custom interconnects for high performance applications.

All of our connectors utilize the Hyperboloid contact design, a rugged, high-reliability contact system ideally suited for high-stress environments. We believe we are the only independent producer of Hyperboloid printed circuit board connectors in the United States.

Our customers consist of OEMs and distributors who resell our products to OEMs. We sell our products directly and through 17 independent sales representatives and distributors located in all regions of the United States, Canada, the European Union, Southeast Asia, Central Asia and the Middle East.

The customers we service are in the defense, aerospace, space, medical, oil and gas, industrial, test equipment and commercial electronics markets. We appear on the Military DLA Qualified Product Listing ("QPL") MIL-DTL-55302 and supply customer requested modifications to this specification.

The customers we service by industry as a percentage of total revenue is provided below:

		For the Fiscal Years Ended March 31,
		2026				2025
Industry		%				%
Defense			63.2				65.7
Commercial Aerospace			25.2				19.9
Space			7.8				10.6
Other			3.8				3.8

We are exposed to and impacted by macroeconomic factors and federal state and local government policies. Current general economic conditions, including the current levels of inflation, increased energy costs and evolving tariff policies, have created uncertainties, resulting in market volatility. We have adopted particular measures to protect our employees at our manufacturing operations in Brooklyn, New York, and Allentown, Pennsylvania, and we expect to execute on our contracts through carefully designed arrangements.

Worldwide Supply Chain Disruptions

Worldwide supply chain disruptions, which were initially brought about by the impact of the COVID-19 pandemic, have persisted despite the recovery in the global economy and financial markets. The Company has experienced longer lead times for raw materials and has experienced raw material cost increases compared to prior fiscal years. These and other issues resulting from worldwide supply chain disruptions, including tariffs and the impact of trade policies from the current United States government administration, as well as the conflicts in Eastern Europe and the Middle East, are expected to continue into fiscal 2027 and could continue to have a material adverse effect on the Company's business, operating results and financial condition. The precise financial impact and duration, however, cannot be reasonably estimated at this time.

Critical Accounting Policies and Estimates:

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements. The most significant accounting estimates inherent in the preparation of our financial statements include estimates associated with revenue recognition, valuation of inventories, stock-based compensation expense and provision for income taxes and also for deferred tax assets and liabilities and any valuation allowances recorded against deferred tax asset.

Our financial position, results of operations and cash flows are impacted by the accounting policies we have adopted. In order to get a full understanding of our financial statements, one must have a clear understanding of the accounting policies employed. A summary of our critical accounting policies is presented within the footnotes to the financial statements presented within this Annual Report.

Revenue Recognition

Pursuant to Accounting Standards Codification ("ASC") ASC Topic 606, "Revenue from Contracts with Customers," revenue represents the amount received or receivable for goods and services supplied by the Company to its customers. We recognize revenue and the related cost of products sold when the performance obligations are satisfied. The performance obligations are typically satisfied upon shipment of physical goods. In addition to the satisfaction of the performance obligations, the following conditions are required for revenue recognition: an arrangement exists, there is a fixed price, and collectability is reasonably assured.

We do not offer any discounts, credits or other sales incentives. Historically, the Company believes that it has had no collection issues with its customer base. The Company's policy with respect to customer returns and allowances as well as product warranty is as follows:

We may accept a return of defective product within one year from shipment for repair or replacement at the Company's option. If the product is repairable, the Company at its own cost, will repair and return it to the customer. If unrepairable, the Company, at its own expense, will replace the defective product with a new item. The cost of defective products is immaterial at this time. Billing terms vary by customer and product but generally do not exceed 30 days.

We provide engineering services as part of the relationship with our customers in developing the custom product. We are not obligated to provide such engineering service to our customers. We do not invoice our customers separately for these services.

We record a liability when receiving cash in advance of delivering goods or services to the customer. This liability is offset against the receivable recognized when those goods or services are delivered. Deposits from customers were $18,471 and $173,074, as of March 31, 2026 and 2025, respectively.

Valuation of Inventories

Raw materials are stated at the average cost on a first-in first-out basis which does not exceed net realizable value. Finished goods and work in process are valued at the lower of actual cost, determined on a specific identification basis, or the net realizable value of each product. The Company estimates which materials may be obsolete and which products in work in process or finished goods may be sold at less than cost, and adjusts their inventory value accordingly.

Accounting for Income Taxes

Our current provision for income taxes is based upon our estimated taxable income in each of the jurisdictions in which we operate, after considering the impact on taxable income of temporary and permanent differences resulting from different treatment of items for tax and financial reporting purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and any operating loss or tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible. Should management determine that it is more likely than not that some portion of the deferred tax assets will not be realized, a valuation allowance against the deferred tax assets would be established in the period such determination was made.

Stock-Based Compensation Expense

Stock-based compensation expense is recognized in the Statement of Operations over the vesting term of the equity-based award. We chose the straight-line method of allocating compensation cost over the requisite service period of the related award in accordance with the authoritative guidance. When the terms of an equity-based award provide for immediate vesting, the fair value of the equity-based award is expensed immediately. The expected term of options granted to employees is calculated using the simplified method, which represents the average of the contractual term of the option and the weighted-average vesting period of the option, which, for options granted in fiscal 2026 and 2025, resulted in an expected term of approximately five years. We used our historical volatility to estimate expected volatility in fiscal 2026 and 2025. The risk-free interest rate is based on the U.S. Treasury yields in effect at the time of grant for periods corresponding to the expected life of the options. The dividend yield is 0% based on the fact that we have no present intention to pay dividends. Determining some of these assumptions requires significant judgment and changes to these assumptions could result in a significant change to the calculation of stock-based compensation in future periods.

Results of Operations:

Annual Results of Operations

Comparison of the Years Ended March 31, 2026 and March 31, 2025:

The following table summarizes our results of operations for the fiscal years ended March 31, 2026 and March 31, 2025:

		For the Fiscal Years Ended March 31,								Period-to- Period
		2026				2025				Change
Revenue		$	29,417,600			$	28,783,861			$	633,739
Operating expenses:
Cost of products sold			23,866,707				21,309,983				2,556,724
Selling, general and administrative			6,410,508				6,154,214				256,294
Depreciation and amortization			772,264				744,802				27,462
Total operating expenses			31,049,479				28,208,999				2,840,480
Operating (loss) income			(1,631,879	)			574,862				(2,206,741	)
Other income (expense):
Interest income (expense), net			292,349				425,291				(132,942	)
Total other income (expense), net			292,349				425,291				(132,942	)
(Loss) income before benefit from (provision for) income taxes			(1,339,530	)			1,000,153				(2,339,683	)
Benefit from (provision for) income taxes			42,746				(1,115	)			43,861
Net (loss) income		$	(1,296,784	)		$	999,038			$	(2,295,822	)

Revenue for the fiscal year ended March 31, 2026 was $29,417,600, reflecting an increase of $633,739, or 2.2%, as compared to $28,783,861 for the fiscal year ended March 31, 2025. The increase in revenues was primarily due to an increase in orders from commercial aerospace customers as the industry continues to navigate away from various production, labor and regulatory related challenges related to a major airplane producer. Our defense revenue remained mostly flat year over year as we continued to see strong demand in the sector offsetting a decline in revenue from space related programs.

Cost of products sold for the fiscal year ended March 31, 2026 was $23,866,707 reflecting an increase of $2,556,724, or 12.0%, as compared to $21,309,983 for the fiscal year ended March 31, 2025. The increase was principally attributable to increases in input costs, including gold, tariffs on imports of parts from Asia and Europe, higher than expected health insurance premiums on direct labor and increases in direct labor costs.

Selling, general and administrative expenses for the fiscal year ended March 31, 2026 was $6,410,508, reflecting an increase of $256,294, or 4.2%, as compared to $6,154,214 for the fiscal year ended March 31, 2025. The increase was principally due to an increase in legal fees associated with the dismissal of the motion against IEH by the SEC and due to hiring of additional sales personnel dedicated to foreign markets.

Depreciation and amortization for the fiscal year ended March 31, 2026 was $772,264, reflecting an increase of $27,462, or 3.7%, as compared to $744,802 for the fiscal year ended March 31, 2025. The increase was principally attributable to machinery purchased for the Allentown location in order to reduce reliance on foreign vendors for assembly parts and components. The Company continues to monitor fixed assets investment closely against a backdrop of bringing cost effective capabilities in-house for assembly parts.

Total interest income (expense), net for the fiscal year ended March 31, 2026 was $292,349, reflecting a decrease of $132,942, as compared to $425,291 for the fiscal year ended March 31, 2025. The decrease was primarily attributable to decrease in interest income earned on taxes prepaid for federal, state and municipal jurisdictions. Interest income earned on cash and cash equivalents remained relatively flat year over year.

The provision for income taxes for the fiscal year ended March 31, 2026, was a tax benefit of $42,746, as compared to a provision of $1,115 for the fiscal year ended March 31, 2025. The benefit for the fiscal year ended March 31, 2026 was principally attributable to adjustments to prior years' federal, state and local income taxes. The provision for the fiscal year ended March 31, 2025 was due to a federal provision of $64,300, offset by an adjustment of $63,185 for state and local income taxes.

Liquidity and Capital Resources:

Our primary requirements for liquidity and capital are working capital, inventory, capital expenditures, public company costs and general corporate needs. We expect these needs to continue as we further develop and grow our business. For the fiscal year ended March 31, 2026, our primary sources of liquidity came from cash flows generated by operating activities and cash reserves. Based on our current plans and business conditions, we believe that existing cash and cash equivalents, together with cash generated from operations will be sufficient to satisfy our anticipated cash requirements in fiscal year 2027 and into fiscal year 2028, and we are not aware of any trends or demands, commitments, events or uncertainties that are reasonably likely to result in a decrease in liquidity of our assets. We may require additional capital to respond to technological advancements, competitive dynamics or technologies, business opportunities, challenges, acquisitions or unforeseen circumstances and in either the short-term or long-term may determine to engage in equity or debt financings or enter into credit facilities for other reasons. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited. In particular, inflationary pressures and the conflicts in Eastern Europe and the Middle East, any economic uncertainty as a result of the current administration in the U.S. may result in significant disruption and volatility in the global financial markets, reducing our ability to access capital have resulted in, and may continue to result in, significant disruption and volatility in the global financial markets, reducing our ability to access capital. If we are unable to raise additional funds when or on the terms desired, our business, financial condition and results of operations could be adversely affected.

As of March 31, 2026, our cash and cash equivalents balance was $9,647,698. For the fiscal year ended March 31, 2026, we recorded net loss of $1,296,784. As of March 31, 2026, we had working capital of $18,937,744.

Our principal source of liquidity is cash flows generated by operating activities and cash reserves.

Cash Flow Activities for the Year Ended March 31, 2026 Compared to the Year Ended March 31, 2025

The following table summarizes our cash flow activities for the fiscal years ended March 31, 2026 and March 31, 2025:

		For the Fiscal Years Ended March 31,								Period-to- Period
		2026				2025				Change
Cash flow (used in) provided by
Operating activities		$	(631,130	)		$	4,883,619			$	(5,514,749	)
Investing activities			(953,094	)			(532,364	)			(420,730	)
Financing activities			692,094				48,750				643,344
(Decrease) increase in cash and cash equivalents		$	(892,130	)		$	4,400,005			$	(5,292,135	)

Net cash used in operating activities was $631,130 for the fiscal year ended March 31, 2026, as compared to net cash provided by operating activities of $4,883,619 for the fiscal year ended March 31, 2025. The increase in cash used in operating activities of $5,514,749 was primarily due to the increase in net loss of $2,295,822, increase in accounts receivable of $2,205,540, increase in corporate tax receivable of $1,040, 342, increase in inventory purchases of $1,371,313 offset by decrease in customer advance payments of $554,848 and decrease in accounts payable of $453,689.

Net cash used in investing activities was $953,094 for the fiscal year ended March 31, 2026, an increase of $420,730, as compared to use of $532,364 for the fiscal year ended March 31, 2025. The increase in cash used in investing activities during the fiscal year ended March 31, 2026 was primarily attributable to an increase in investments in machinery for assembly parts.

Net cash provided by financing activities was $692,094 for the fiscal year ended March 31, 2026, an increase of $643,344, as compared to $48,750 for the fiscal year ended March 31, 2025. This increase was attributable to financing proceeds received under our equipment line of credit facility and proceeds from the exercise of stock options.

Backlog of Orders

Our customers typically enter into supply arrangements for the purchase of our products which we will produce and deliver over time. On an as-needed basis, our customers place specific production orders, and these orders are generally filled and shipped within twelve weeks. Our backlog consists of supply arrangements where the anticipated unfulfilled shipping dates are within approximately twelve months. Because of the possibility of customer changes in delivery schedules or the cancellation of orders, our backlog as of any particular date may not be indicative of revenue in any future period. The backlog amounted to approximately $27,782,000 at March 31, 2026 as compared to $12,445,000 at March 31, 2025. The increase in total backlog as of March 31, 2026 compared with the previous year is primarily due to increase in defense orders as the Company sees strong growth in this sector in light of continuing geopolitical uncertainty and the continuing recovery in the commercial aerospace industry.

A portion of these backlog orders are subject to cancellation or postponement of delivery dates and, therefore, no assurance can be given that actual sales will result from these orders. The Company does not foresee any problems which would prevent it from fulfilling these orders.

Inflation

In the opinion of management, inflation has continued to impact the costs of our operations and depending upon the current duration and degree of higher inflation levels, is expected to have an impact upon our operations in the future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.