Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

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 condensed financial statements and related footnotes thereto and other financial information included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026, 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.

Our customers consist of OEMs and distributors who resell our products to OEMs. We sell our products directly and through 20 independent sales representatives and distributors located in all regions of the United States, Canada, Europe, 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 Three Months Ended June 30,
		2026				2025
Domestic		$	9,497,403			$	5,696,607
International			524,043				611,548
Total		$	10,021,446			$	6,308,155

Financial Overview

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, accounting for income taxes and stock-based compensation expense.

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. It is important that the discussion of our operating results that follow be read in conjunction with these critical accounting policies which have been disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026 filed with the SEC on June 12, 2026.

Results of Operations

Comparison of the Three Months Ended June 30, 2026 and 2025

The following table summarizes our results of operations for the three months ended June 30, 2026 and 2025:

		For the Three Months Ended June 30,								Period-to- Period
		2026				2025				Change
Revenue		$	10,021,446			$	6,308,155			$	3,713,291
Operating expenses:
Cost of products sold			6,704,857				5,178,851				1,526,006
Selling, general and administrative			2,444,337				1,693,938				750,399
Depreciation and amortization			207,450				190,672				16,778
Total operating expenses			9,356,644				7,063,461				2,293,183
Operating income (loss)			664,802				(755,306	)			1,420,108
Other income, net:
Interest income, net			53,868				100,688				(46,820	)
Total other income, net			53,868				100,688				(46,820	)
Income (loss) before provision for income taxes			718,670				(654,618	)			1,373,288
Provision for income taxes			(64,204	)			-				(64,204	)
Net income (loss)		$	654,466			$	(654,618	)		$	1,309,084

Revenue for the three months ended June 30, 2026 was $10,021,446, reflecting an increase of $3,713,291, or 58.9%, as compared to $6,308,155 for the three months ended June 30, 2025. The increase in revenue for the period was principally on account of a 116% increase in defense revenues as we continue to witness unprecedented level of demand for parts in this industry. Our quarter over quarter commercial aerospace revenues decreased 11% driven principally by changes in customer delivery schedules, however we continue to see robust demand from the commercial aerospace sector as well.

Cost of products sold for the three months ended June 30, 2026 was $6,704,857, reflecting an increase of $1,526,006, or 29.5%, as compared to $5,178,851 for the three months ended June 30, 2025. The increase in our cost of products sold is attributable to the increase in revenue offset by more effective absorption of overhead in production on account of the increase in units sold and steady decrease in the cost of gold.

Selling, general and administrative expenses ("SG&A") for the three months ended June 30, 2026 was $2,444,337, reflecting an increase of $750,399, or 44.3%, as compared to $1,693,938 for the three months ended June 30, 2025. The increase was primarily attributable to an increase in stock compensation expense of $256,300 for stock options granted to employees and an increase in commission of $127,182 driven by increases in revenue. SG&A as a percentage of revenue has declined to 24% from 27% quarter over quarter.

Depreciation and amortization for the three months ended June 30, 2026 was $207,450, reflecting an increase of $16,778, or 8.8%, as compared to $190,672 for the three months ended June 30, 2025, reflecting additional investments in machinery.

Total other income, net for the three months ended June 30, 2026 was income of $53,868, reflecting a decrease of $46,820, as compared to income of $100,688 for the three months ended June 30, 2025. The decrease was principally attributable to a decrease in interest income earned on our cash and cash equivalents.

Provision for income taxes was $64,204 and $0 for the three months ended June 30, 2026 and 2025. The provision for income taxes for the three months ended June 30, 2026 was principally attributable to the utilization of net operating loss and general business credit carryforwards to offset taxable income and the impact of maintaining a full valuation allowance on the Company's deferred tax assets, net. The provision for income taxes for the three months ended June 30, 2025 was principally attributable to the loss before provision for income taxes incurred for the period and the impact of recording a full valuation allowance on the Company's deferred tax assets, net.

Liquidity and Capital Resources:

Our primary requirements for liquidity and capital are working capital, inventory, capital expenditures, and general corporate needs. We expect these needs to continue as we further develop and grow our business. For the three months ended June 30, 2026, our primary source of liquidity came from existing cash. Based on our current plans and business conditions, we believe that existing cash, 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 additional 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, may 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 June 30, 2026, and March 31, 2026, the Company's cash and cash equivalents was $9,360,045 and $9,647,698, respectively. The Company has recorded net income of $654,466 and net loss of $654,618 for the three months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, and March 31, 2026, the Company had working capital of $20,406,113 and $ 18,937,744 and stockholders' equity of $23,534,458and $22,358,492, respectively.

Our principal source of liquidity has been from cash flows generated by operating activities and our cash reserves.

Cash Flow Activities for the Three Months Ended June 30, 2026 Compared to the Three Months Ended June 30, 2025

The following table summarizes our sources and uses of cash for the three months ended June 30, 2026 and 2025:

		For the Three Months Ended June 30,								Period-to- Period
		2026				2025				Change
Net cash used in provided by:
Operating activities		$	(212,763	)		$	(424,024	)		$	211,261
Investing activities			(59,616	)			(17,299	)			(42,317	)
Financing activities		$	(15,274	)		$	156,500			$	(171,774	)
Net (decrease) increase in cash		$	(287,653	)		$	(284,823	)		$	(2,830	)

Net cash used in operating activities was $212,763 for the three months ended June 30, 2026, compared to $424,024 for the three months ended June 30, 2025. The period over period decrease in cash used in operating activities of $211,261 was primarily due to $1,309,084 increase in net income and $332,572 increase in customer advance payments offset by $153,921 increase in accounts receivable, $680,450 increase in inventory purchases, decrease in corporate tax receivable of $286,798 and decrease in accounts payable of $746,751.

Net cash used in investing activities was $59,616 and $17,299 for the three months ended June 30, 2026 and 2025, respectively. The increase in cash used in investing activities during the three months ended June 30, 2026 was principally due to increase in purchases of machinery to reduce reliance on foreign vendors for input materials.

Net cash used in financing activities was $15,274 for the three months ended June 30, 2026 and net cash provided by financing activities was $156,500 for the three months ended June 30, 2025, respectively. The use of cash during the three months ended June 30, 2026 was attributable to repayments under the equipment loan. The cash provided during the three months ended June 30, 2025 was attributable proceeds from the exercise of stock options received in June 2025 compared to cashless stock options exercised during the quarter ended June 30, 2026.

Revolving Line of Credit

On August 26, 2025, the Company entered into a revolving line of credit agreement ("Revolving Line of Credit") with JPMorgan Chase Bank, N.A. ("Chase Bank") for up to $1.0 million, bearing interest at the Secured Overnight Financing Rate ("SOFR") plus a margin of 2.15%. The Revolving Line of Credit contains certain financial covenants, including a fixed charge coverage ratio (the "FCCR") of at least 1.20, tested annually, and matures on July 31, 2026. As of March 31, 2026, the Company's FCCR was below the covenant requirement. Effective for the fiscal year ended March 31, 2026, Chase Bank waived the covenant exception. As of June 30, 2026, there was no outstanding borrowing under the Revolving Line of Credit. The Revolving Line of Credit is collateralized by a first-priority security interest in all property of the Company.

Equipment Financing Line of Credit

On September 8, 2025, the Company entered into a $450,000 equipment financing arrangement with Chase Bank, bearing interest at a fixed rate of 5.51%, to be repaid over a 60-month period ("Equipment Financing Line of Credit"). The Equipment Financing Line of Credit is expected to be utilized to purchase machine tools for production. Funding is on an equipment project basis, and once a project is fully funded, the obligation for that project is to be repaid by the execution of term note payable to Chase Bank. The Equipment Financing Line of Credit contains certain financial covenants, tested annually, consistent with the requirements under the Revolving Line of Credit. As of March 31, 2026, the Company's FCCR was below the covenant requirement for the Equipment Financing Line of Credit. Effective for the fiscal year ended March 31, 2026, Chase Bank waived the covenant exception. As of June 30, 2026 and March 31, 2026, the Company had an outstanding draw of $400,650 and $415,924, respectively, of which $76,370 and $256,257, respectively is reflected within equipment financing line of credit on the balance sheet and $324,280 and $159,667, respectively is reflected within equipment financing line of credit, net of current on the balance sheet. The borrowings under the Equipment Financing Line of Credit are collateralized by a first lien on the related equipment financed under the arrangement.

Backlog of Orders

The backlog of orders for the Company's products amounted to approximately $38,561,000 on June 30, 2026 as compared to approximately $13,023,000 on June 30, 2025. The orders in backlog on June 30, 2026 are expected to ship over the next 6 - 24 months depending on customer requirements and product availability.

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.