{"url_path":"/sec/iehc/10-k/2026/item-1a","section_key":"item-1a","section_title":"Item 1A ****Risk Factors:**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-12","source_url":"https://www.sec.gov/Archives/edgar/data/50292/0001213900-26-068122-index.html","accession_number":"0001213900-26-068122","cik":"0000050292","ticker":"IEHC","issuer_name":"IEH Corp","edgar_url":"https://www.sec.gov/Archives/edgar/data/50292/0001213900-26-068122-index.html","primary_entity_key":"0000050292","primary_entity_name":"IEH Corp"},"word_count":6113,"has_tables":true,"body_markdown":"**Item 1A.****Risk Factors:**\n\n** **\n\n*In evaluating our Company and our business, you should\ncarefully consider the risks and uncertainties described below, together with the other information in this Annual Report on Form 10-K.\nThe occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events\nor circumstances, may have a material adverse effect on our business, reputation, revenue, financial condition, results of operations\nor future prospects, in which case the market price of our common stock could decline, and you could lose part or all of your investment.\nThe material and other risks and uncertainties summarized in this Annual Report on Form 10-K and described below are not intended to be\nexhaustive and are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial\nmay also impair our business. This Annual Report on Form 10-K also contains forward-looking statements that involve risks and uncertainties.\nOur actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors,\nincluding the risks described below. See the section titled “Cautionary Note Regarding Forward-Looking Statements”.*\n\n \n\n**Risks Related to Our Business:**\n\n** **\n\n**We operate in a niche industry and our business results\nmay vary from year to year depending upon, among other things, the nature of the ordering cycle of our products which makes it hard to\npredict demand for our business and may adversely impact our business and results of operations.**\n\n** **\n\nWe manufacture PCB connector offerings for specialized applications\nand our customers include defense contractors, commercial aerospace equipment manufacturers, medical device manufacturers, oil and gas\nexploration firms, industrial equipment manufacturers and commercial space launch companies. Our products are typically a small part in\na larger end product used by our customers. Supply shortages or other factors impacting third party suppliers that supply different parts\nto our customers for use in the same end product in which our product is used can impact demand for our products. In addition, due to\nthe specialized nature of our products, we often manufacture limited quantities of our products. Since we are mostly producing customized\nproducts in smaller quantities, we are not able to achieve economies of scale, unable to obtain bulk discounts on our orders for raw materials\nand sometimes the fulfillment is delayed because our suppliers may prioritize larger orders. All of these factors may have an adverse\nimpact on our business and results of operations.\n\n \n\nIn addition, the ultimate end product in which our products\nare used have long and irregular ordering cycles which may cause our business results to vary year to year. For example, some of our products\nare used in airplanes which often are operable for about thirty years and thus are replaced over longer time horizons than many other\nproducts and are susceptible to changes in the demand for travel. The ordering cycle for our customers is often irregular and hard to\npredict. This makes it difficult for us to anticipate when demand increases will occur and adjust our business and ordering to accommodate\nfluctuations in demand. If we are not able to ramp production up or down quickly enough in response to rapid changes in demand, we may\nnot be able to effectively manage our costs, which could negatively impact operating results, and we may lose sales and market share.\n\n** **\n\n 5 \n\n \n\n \n\n**The loss of certain substantial customers could materially\nand adversely affect us.**\n\n \n\nDuring the year ended March 31, 2026, two customers accounted\nfor 34.0% of the Company’s net revenues, each represented 23.5% and 10.5%, respectively. During the year ended March 31, 2025, two\ncustomers accounted for 31.9% of the Company’s net revenues, each represented 17.8% and 14.1%, respectively. We believe that the\nloss of one or more of our larger customers could have a material adverse effect on our financial position and results of operations. \nWe have experienced significant concentrations of customers in prior years. Furthermore, factors that negatively impact the businesses\nof our major customers could materially and adversely affect us even if the customer represents a relatively small part of our net sales.\n\n** **\n\n**We may need additional financing in the future and\nif we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our production or business efforts.**\n\n \n\nAlthough we have sufficient working capital in the short\nterm, we may need to raise additional capital in connection with our continuing operations through the debt or equity markets in the future.\nIf we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our business efforts.\nAny additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our business.\nIn addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all.\nAdditionally, market volatility resulting from macroeconomic conditions or other factors could also adversely impact our ability to access\ncapital as and when needed. Moreover, the terms of any financing may adversely affect the holdings or the rights of our shareholders and\nthe issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price\nof our shares to decline. The sale of additional equity or convertible securities would dilute all of our shareholders and may decrease\nour stock price. The incurrence of indebtedness could result in increased fixed payment obligations and we may be required to agree to\ncertain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell,\nor license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.\nWe could also be required to seek funds through arrangements with partners or others and we may be required to relinquish rights to some\nof our intellectual property or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business,\noperating results and prospects. If we are unable to obtain funding on a timely basis, our business, financial condition and results of\noperations may be materially affected.\n\n \n\n**The Company may have limited intellectual property\nprotection.**\n\n** **\n\nThe Company possesses certain proprietary intellectual property,\nincluding but not limited to, trade secrets, know-how and proprietary processes. The Company relies on this intellectual property, know-how and\nother proprietary information, and requires employees, consultants and suppliers to sign confidentiality agreements. However, these confidentiality\nagreements may be breached, and the Company may not have adequate remedies for such breaches. Third parties may independently develop\nsubstantially equivalent proprietary information without infringing upon any proprietary technology. Third parties may otherwise gain\naccess to proprietary information and adopt it in a competitive manner. Any loss of intellectual property protection may have a material\nadverse effect on the business, results of operations or prospects.\n\n** **\n\n**We are a niche manufacturer of highly engineered products\nthat are high value/short run, using a unique mix of labor and capital equipment.**\n\n \n\nOur engineers provide Hyperboloid interconnect solutions\nfor defense, commercial, aerospace and medical use. Our products are specialized and require special equipment and skilled workers to\noperate our machinery. Our reliance on our skilled labor and capital equipment subjects us to a number of risks that could negatively\naffect our ability to manufacture our products and harm our business, including interruption of supply. We expect our overall reliance\non our mix of labor and capital equipment to continue. Any significant delay or interruption in our mix of labor and capital equipment\ncould impair our ability to meet the demand of our customers and could harm our business. With changes in demand, labor costs, and capital\nequipment costs, there can be no assurance that we will be able to maintain the labor and capital equipment mix and therefore maintain\nour margins.\n\n \n\n 6 \n\n \n\n \n\n**A significant design, manufacturing or supplier quality\nissue could adversely affect profitability. **\n\n** **\n\nAs a manufacturer of highly engineered products,\nthe performance, reliability and productivity of the Company’s products are some of its competitive advantages. While the Company\nprides itself on implementing procedures to ensure the quality and performance of its products and suppliers, a significant quality or\nproduct issue, whether due to design, performance, manufacturing or supplier quality issue, could lead to scrapping of raw materials,\nfinished goods or returned products, the deterioration in a customer relationship, or other action that could adversely affect costs,\nfuture sales and profitability.\n\n* *\n\n**A shortage of availability or an increase in the cost\nof raw materials and other resources may adversely impact our ability to manufacture our products at cost effective prices and thus may\nnegatively impact profit margins.**\n\n** **\n\nOur results of operations may be materially adversely impacted\nby difficulties in obtaining raw materials, supplies, power, labor and any other items needed for the production of our products, as well\nas by the effects of quality deviations in raw materials and the effects of significant fluctuations in the prices paid. Many of\nthese materials and components are produced by a limited number of suppliers and their availability to us may be constrained by supplier\ncapacity.  In recent periods, we have seen the impact of inflation drive up costs of materials and labor significantly. Any material\ndisruption to or continuing increases in prices of our raw materials and other resources could materially adversely affect our financial\nresults.  Profit margins will be materially and adversely impacted if we are not able to reduce our costs of production, introduce\ntechnological innovations, or pass through cost increases to customers.\n\n \n\n**We may be subject to work stoppages at our facilities\nor those of our principal customers and suppliers, which could seriously impact the profitability of our business.**\n\n \n\nOur unionized workforce and those of our customers and suppliers\nmay experience work stoppages during collective bargaining agreement negotiations. The Company and the Union have a collective bargaining\nagreement, which expires on March 31, 2027.\n\n \n\nIn the future, if we are unable to negotiate an acceptable new\nagreement with the Union, upon expiration of the existing contract, we could experience a strike or work stoppage, which could seriously\nimpact the profitability of our business. Contingency plans have been developed that would allow production to continue in the event of\na strike but we cannot guarantee the effectiveness of such plans.\n\n \n\n**Our success is dependent on the performance of our\nmanagement and the cooperation, performance and retention of our executive officers and key employees.**\n\n* *\n\nOur business and operations are substantially dependent on\nthe performance of our senior management team and executive officers. If our management team is unable to perform it may adversely impact\nour results of operations and financial condition. We do not maintain “key person” life insurance on any of our executive\nofficers. The loss of one or several key employees could seriously harm our business. Any reorganization or reduction in the size of our\nemployee base could harm our ability to attract and retain other valuable employees critical to the success of our business.\n\n* *\n\n**If we lose key personnel or fail to integrate replacement\npersonnel successfully, our ability to manage our business could be impaired.**\n\n \n\nOur future success depends upon the continued service of\nour key management, technical, sales, finance, and other critical personnel. We cannot assure you that we will be able to retain them.\nThe loss of one or several key employees could result in significant disruptions to our operations, including adversely affecting the\ntimeliness of product releases, the successful implementation and completion of Company initiatives, the effectiveness of our disclosure\ncontrols and procedures and our internal control over financial reporting, and the results of our operations. In addition, hiring, training,\nand successfully integrating replacement sales and other personnel could be time consuming, may cause additional disruptions to our operations,\nand may be unsuccessful, which could negatively impact future revenues.\n\n \n\n 7 \n\n \n\n  \n\n**We are a small business that competes globally in a\ncompetitive industry that is highly fragmented.**\n\n \n\nThe market for connectors and interconnect devices, domestic\nand worldwide, is highly fragmented as a result of the manufacture by many companies of a multitude of different types and varieties of\nconnectors and interconnects. The Company has been servicing a niche in the market by manufacturing connectors containing Hyperboloid\ncontact designs in the printed wiring board style of connectors. The connector and interconnect device industry is competitive and fragmented and\nincludes numerous small organizations capable of competing in the markets we target. Although large companies tend to not compete directly\nwith us due to the customized and small batch nature of our business, large companies compete in adjacent industries and possess substantially\ngreater financial and other resources than we do. Larger competitors’ greater resources could allow those competitors to compete\nmore effectively than we can. Our competitors have successfully built their names in the industry in which we compete. These various competitors\nmay be able to offer products more competitively priced and more widely available than our offerings, and also have greater resources\nto acquire members and suppliers than us. Failure to compete in the industry in which we operate would adversely affect our results of\noperations.\n\n \n\n**A reduction in U.S. Government funding or a change\nin U.S. Government spending priorities could have an adverse impact on our business, financial condition, results of operations, cash\nflows and equity.**\n\n \n\nWe expect changes in policy positions and spending priorities\nfrom the current Administration could impact our business. Our U.S. Government programs must compete with programs managed by other government\ncontractors and with other policy imperatives for consideration for limited resources and for uncertain levels of funding during the budget\nand appropriations process. Although multi-year contracts may be authorized and appropriated in connection with major procurements, Congress\ngenerally appropriates funds on a U.S. Government fiscal year (“GFY”) basis. Procurement funds are typically disbursed over\nthe course of one to three years. Consequently, programs often initially receive only partial funding, and additional funds are obligated\nonly as Congress authorizes further appropriations. We cannot predict the extent to which total funding and/or funding for individual\nprograms will be changed as part of the annual appropriations process ultimately approved by Congress and the President or in separate\nsupplemental appropriations or continuing resolutions, as applicable. Budget and appropriations decisions made by the U.S. Government\nare outside of our control and may have long-term consequences for our business. U.S. Government spending priorities and levels remain\nuncertain and difficult to predict, and are affected by numerous factors, including the U.S. Government’s budget deficit and the\nnational debt. A change in U.S. Government spending priorities or an increase in non-procurement spending at the expense of our programs,\nor a reduction in total U.S. Government spending on an absolute or inflation-adjusted basis, could have material adverse consequences\non our current or future business. If Congress does not enact a full-year GFY 2026 appropriations bill, the U.S. Government may not be\nable to fulfill its funding obligations, and there could be significant disruption to all discretionary programs and corresponding impacts\non the entire defense industry, which could adversely affect our business, results of operations, financial condition and cash flow. Any\ninability of the U.S. Government to complete its budget process for any GFY and resulting operation on funding levels equivalent to its\nprior fiscal year pursuant to a Continuing Resolution or shut down, also could have material adverse consequences on our current or future\nbusiness.\n\n \n\n**Accounting Related Risks and Other Factors:**\n\n** **\n\n**Failure to achieve and maintain effective internal\ncontrol over financial reporting could result in our failure to accurately or timely report our financial condition or results of operations,\nwhich could have a material adverse effect on our business and stock price.**\n\n \n\nOur management is responsible for establishing and maintaining\nadequate internal control over financial reporting and for evaluating and reporting on the effectiveness of our system of internal control.\nOur internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial\nreporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally\naccepted in the United States of America (“U.S. GAAP”). As a public company, we are required to comply with the Sarbanes-Oxley\nAct and other rules that govern public companies. In particular, we are required to review on an annual basis our internal control over\nfinancial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal control over financial reporting.\nWe are also required to certify our compliance with Section 404 of the Sarbanes-Oxley Act, which requires us to furnish annually a report\nby management on the effectiveness of our internal control over financial reporting. In the event that we are unable to maintain or achieve\ncompliance with the applicable provisions of the Sarbanes-Oxley Act and related rules, we may incur significant and additional expenses\nfor remedial efforts that may negatively impact our financial performance, and such process may result in a diversion of management’s\ntime and attention. As a result, we and the market price of our common stock may be adversely affected.\n\n \n\n 8 \n\n \n\n  \n\nManagement performed an assessment of the effectiveness of\nour internal control over financial reporting as of March 31, 2026 and concluded that our internal controls over financial reporting and\ndisclosure controls and procedures were not effective, as we have not fully established an effective control environment due to the ineffective\ndesign and implementation of Information Technology General Controls (“ITGC”). Our ITGC deficiencies included improperly designed\ncontrols pertaining to change management and user access rights over systems that are critical to our system of financial reporting. We\nhave taken and continue to take remedial steps to improve our internal control over financial reporting. For further discussion of the\nmaterial weaknesses identified and our remedial efforts, see Item 9A, Controls and Procedures.\n\n \n\nWe have identified steps to remediate the identified material\nweakness in our ITGC. However, we may not be able to fully remediate this material weakness until these additional steps have been operating\neffectively for a sufficient period of time. We cannot assure you that the measures we have taken to date and plan to take will be sufficient\nto remediate the material weaknesses we identified or avoid the identification of additional material weaknesses in the future. Moreover,\nbecause of the inherent limitations of any control system, material misstatements due to error or fraud may not be prevented or detected\nand corrected on a timely basis, or at all.\n\n \n\n**The requirements of being a public company may strain\nour resources, divert management’s attention and affect its ability to attract and retain qualified board members.**\n\n \n\nAs a public company listed in the U.S., we are subject to\nthe reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and any rules promulgated thereunder. Our management team may not\nsuccessfully or efficiently manage being a public company that is subject to significant regulatory oversight and reporting obligations\nunder the federal securities laws and the continuous scrutiny of securities analysts and investors. Operating a public company requires\nsignificant attention from our senior management and could divert their attention away from the day-to-day management of our business,\nwhich could harm our business, results of operations and financial condition. For example, the requirements of these rules and regulations\nmay increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly, and increase demand\non our systems and resources. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and\nprocedures and internal controls for financial reporting. In order to maintain and improve our disclosure controls and procedures and\ninternal control over financial reporting to meet this standard, significant resources and management oversight is required and, as a\nresult, management’s attention may be diverted from other business concerns. The costs of compliance with public company reporting\nrequirements and our potential failure to satisfy these requirements could have a material adverse effect on our operations, business,\nfinancial condition or results of operations.\n\n \n\n**In order to satisfy our obligations as a public company,\nwe must hire, retain and train qualified accounting and financial personnel with appropriate public company experience. Failure to do\nso may result in increased costs and additional risks in connection with the quality of our financial reporting.**\n\n \n\nAs a public company, we need to establish and maintain effective\ndisclosure and financial controls and adhere to certain corporate governance practices. We need to hire, retain and train accounting and\nfinancial personnel with appropriate public company experience and technical accounting knowledge, and it may be difficult\nto recruit and retain such personnel. Even if we are able to hire appropriate personnel, our existing operating expenses and operations\nwill be impacted by the direct costs of their employment and the indirect consequences related to the diversion of management resources\nfrom other business concerns.\n\n \n\n 9 \n\n \n\n \n\n**RISKS RELATED TO OUR COMMON STOCK**\n\n \n\n**Our stock price is volatile and could decline; there\nis currently a limited trading market for our common stock and we cannot predict how liquid the market might become.**\n\n \n\nOn February 20, 2026, the Company’s\nshares of common stock (the “common stock”) were elevated to, and commenced trading exclusively on, the OTCQX Marketplace\n(the “OTCQX”). The OTCQX is the highest tier of the OTC Marketplace. Immediately prior to February 20, 2026, the Company’s\ncommon stock had been trading on the newly structured OTCID Marketplace since July 1, 2025. For several decades the Company’s common\nstock had been traded on the OTC Pink Sheet Current Information tier of the OTC Marketplace where transactions were limited to the “Expert\nMarket.\n\n \n\nOn March 17, 2017, the Company’s\ncommon stock was approved for trading on the OTCQB Marketplace, the middle tier of the OTC Marketplace. Thereafter, on March 22, 2019,\nthe Company’s common stock was approved for trading on the OTCQX and commenced trading thereon.\n\n \n\nThe price of our common stock has been, and is likely to\ncontinue to be, volatile. For example, our stock price during the fiscal year ended March 31, 2026 traded as low as $6.50 and as high\nas $19.75 per share and during the fiscal year ended March 31, 2025, our stock price traded as low as $5.20 per share and as high as $16.00\nper share. Fluctuations may be exaggerated since the trading volume is and would likely be volatile, limited, and sporadic. These\nfluctuations may or may not be based upon any business or operating results. We cannot assure you that your investment in our common stock\nwill not decline.\n\n \n\n**Except for a single dividend declared and paid in 2017,\nwe have not paid dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited to the\nvalue of our common stock.**\n\n** **\n\nExcept for a single dividend declared and paid in 2017, we\nhave never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends\non our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as\nour Board of Directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your\ninvestment will only occur if our stock price appreciates.\n\n** **\n\n**The Offerman family has substantial influence over\nour management and policies, and their interests may conflict with ours or yours in the future.**\n\n \n\nGail Offerman and Dave Offerman, our Chief Executive Officer,\n(the “Offerman Investors”) beneficially own approximately 44% of our common stock as of June 12, 2026, and will generally\nvote together as a single class on matters submitted to a vote of our shareholders. As a result, the Offerman Investors may exert substantial influence on\nother actions requiring a shareholder vote, potentially in a manner that you do not support, including the election and removal of directors\nand the approval of any merger, consolidation or sale of all or substantially all of our assets. In addition, the ownership of such shareholders\ncould preclude any unsolicited acquisition of us, and consequently, adversely affect the price of our common stock. In addition, the Offerman\nInvestors exercise significant influence over the operations of our Company because the Company has been a business led by the Offerman\nfamily for generations. These shareholders may make decisions that are adverse to your interests.\n\n \n\n**We have reduced disclosure and governance requirements\napplicable to smaller reporting companies, which could result in our common stock being less attractive to investors.**\n\n \n\nWe have a public float of less than $250 million and therefore\nqualify as a smaller reporting company under the rules of the SEC. As a smaller reporting company, we are able to take advantage of reduced\ndisclosure requirements, such as simplified executive compensation disclosures, exemption from the provisions of Section 404(b) of the\nSarbanes-Oxley Act requiring that our independent registered public accounting firm provide an attestation report on the effectiveness\nof internal control over financial reporting and reduced financial statement disclosure requirements in our SEC filings. Decreased disclosures\nin our SEC filings due to our status as a smaller reporting company may make it harder for our investors to analyze our results of operations\nand financial prospects. We cannot predict if investors will find our common stock less attractive due to our reliance on these exemptions.\nIf some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and\nour stock price may be volatile.\n\n \n\n 10 \n\n \n\n  \n\n**There are risks related to the implementation of our\nperpetual accounting system.**\n\n \n\nSince 2020, we have been operating on a new perpetual accounting\nsystem, SAP’s Business One system along with an add-on inventory and production module, Beas Manufacturing (“SAP System”)\nin order to improve our financial reporting. Since implementation, we have been engaged in a multi-year process to refine the functionality\nof the SAP System, most significantly around the accounting for inventory and costs of products sold. We have identified the causes of\nthe errors that led to the restatement of previously reported financials and have made enhancements to the SAP System to remediate those\ncauses. There remains further work to improve and optimize the SAP System, and that work is ongoing. Any deficiency in further re-design\nof the SAP System could negatively impact the quality of our financial data and may result in inaccurate financials or delays in our periodic\nreports with the SEC, which may have a material adverse effect on our business, financial condition or results of operations.\n\n \n\n**Risks Related to General Economic Conditions and Other\nFactors:**\n\n \n\n**Changes in general economic conditions, geopolitical\nconditions, U.S. trade policies and other factors beyond the Company’s control may adversely impact our business and operating results.**\n\n \n\nThe Company’s operations and performance depend significantly\non global, regional and U.S. economic and geopolitical conditions. The United States has from time to time experienced challenging economic\nconditions, including in connection with the COVID-19 pandemic, and the global financial markets have recently undergone and may continue\nto experience significant volatility and disruption. Our business, financial condition and results of operations may be materially adversely\naffected by changes in consumer confidence, levels of unemployment, inflation, interest rates, tax rates and general uncertainty\nregarding the overall future economic environment. A recession or slowdown in the economy may cause a decline in demand for\nour products and have a negative impact on our business.\n\n \n\nWe are also impacted by changes in trade policy. We have\nobserved significant shifts in U.S. trade policy that could impact our supply chain and our business. While imposition of certain tariffs\nhave been temporarily paused, it is hard to predict the direction of future trade policy. Changes to current policies by the U.S. or other\ngovernments could affect our business, including potentially through increased import tariffs and other influences on U.S. trade relations\nwith other countries. The imposition of additional tariffs or other trade barriers could increase our costs in certain markets, and may\ncause our customers to find alternative sourcing. In addition, other countries may change their own policies on business and foreign investment\nin companies in their respective countries. Additionally, it is possible that U.S. policy changes and uncertainty about such changes could\nincrease market volatility and currency exchange rate fluctuations. Market volatility and currency exchange rate fluctuations could have\na material adverse effect on our business, financial condition, results of operations or cash flows. As a result of these dynamics, we\ncannot predict the impact to our business of any future changes to the U.S.’s trading relationships.\n\n \n\nA number of other economic and geopolitical factors both\nin the United States and abroad could have a material adverse effect on the Company’s business, financial condition, results of\noperations or cash flows, such as:\n\n \n\n \n●\na global or regional economic slowdown in any of the Company’s market segments;\n\n \n \n \n\n \n●\npostponement of spending, in response to tighter credit, financial market volatility and other factors;\n\n \n \n \n\n \n●\neffects of significant changes in economic, monetary and fiscal policies in the United States and abroad including significant income tax changes, currency fluctuations and inflationary pressures;\n\n \n \n \n\n \n●\nrapid material escalation of the cost of regulatory compliance and litigation;\n\n \n \n \n\n \n●\nchanges in government policies and regulations affecting the Company or its significant customers or suppliers;\n\n \n\n 11 \n\n \n\n \n\n \n●\nemployment regulations and local labor conditions, including increases in employment costs;\n\n \n \n \n\n \n●\nindustrial policies in various countries that favor domestic industries over multinationals or that restrict foreign companies altogether;\n\n \n \n \n\n \n●\nlonger payment cycles;\n\n \n \n \n\n \n●\ncredit risks and other challenges in collecting accounts receivable; and\n\n \n \n \n\n \n●\nongoing conflicts in Eastern Europe and the Middle East have impacted economic activity as well as the availability and price of raw materials and energy the effect of which on world markets is still to be determined.\n\n** **\n\n**The global nature of our operations exposes us to numerous\nrisks that could materially adversely affect our financial condition and results of operations.**\n\n \n\nWe serve customers in the United States and abroad, with\na sales presence in over 40 countries. Sales outside of the United States are subject to various risks that may not be present or as significant\nfor our U.S. operations. Economic uncertainty in some of the geographic regions in which we sell our products could result in the disruption\nof commerce and negatively impact cash flows from our operations in those areas. Risks inherent in our international operations include,\namong others:\n\n \n\n \n●\nPandemic-related uncertainties in the countries in which we operate;\n\n \n \n \n\n \n●\nImport and export regulations that could erode profit margins or restrict exports;\n\n \n \n \n\n \n●\nForeign exchange controls and tax rates;\n\n \n \n \n\n \n●\nForeign currency exchange rate fluctuations, including devaluations;\n\n \n \n \n\n \n●\nChanges in regional and local economic conditions, including local inflationary pressures;\n\n \n \n \n\n \n●\nDifficulty of enforcing agreements and collecting receivables through certain foreign legal systems;\n\n \n \n \n\n \n●\nVariations in protection of intellectual property and other legal rights;\n\n \n \n \n\n \n●\nInability or regulatory limitations on our ability to move goods across borders;\n\n \n \n \n\n \n●\nChanges in laws and regulations, including the laws and policies of the United States affecting trade, tariffs and foreign investment;\n\n \n \n \n\n \n●\nRestrictive governmental actions such as those on transfer or repatriation of funds and trade protection matters, including antidumping duties, tariffs, trade wars, embargoes and prohibitions or restrictions on acquisitions or joint ventures;\n\n \n \n \n\n \n●\nUnsettled political conditions and possible terrorist attacks against U.S. or other interests; and\n\n \n \n \n\n \n●\nPolitical tensions and armed conflict, such as the ongoing wars in Eastern Europe and Middle East.\n\n \n\nIf we are unable to anticipate and effectively manage these\nand other risks, it could have a material and adverse effect on our business, our results of operations and financial condition.\n\n \n\n**We are the primary source for various commercial and\naerospace applications in certain parts of Asia and Europe. There is always a risk of being second sourced by domestic manufacturers,\nand trade tensions or nationalizing supply chains adversely impacting our business.**\n\n** **\n\nSales to customers located outside the U.S. accounted for\napproximately 5.8% and 5.7% of our revenue in the fiscal years ended March 31, 2026 and 2025, respectively. Any weakness in the domestic\neconomy could result in a decrease in demand for consumer products that contain our products, which could materially and adversely affect\nour business. In addition, there is a risk that manufacturers in Asia and Europe may compete with us and replace us. The imposition by\nthe U.S. of tariffs on goods imported from overseas, countermeasures imposed in response, U.S. export restrictions on sales of\nproducts to certain overseas countries and other government actions that restrict or otherwise adversely affect our ability\nto sell our products may have a material adverse impact on our business. In addition, we may be subject to rules and regulations or the\njurisdiction of other governmental agencies that may adversely affect our rights and obligations. In the event of a dispute, we will likely\nbe subject to the exclusive jurisdiction of foreign courts. \n\n \n\n 12 \n\n \n\n  \n\n**Fluctuations in exchange rates could adversely affect\nour business and the value of our securities.**\n\n \n\nThe value of our securities will be indirectly affected by\nthe foreign exchange rate between the U.S. dollar and other currencies in which our sales may be denominated. Appreciation or depreciation\nin the value of the U.S. dollar relative to these foreign currencies would affect our financial results reported in U.S. dollar terms\nwithout giving effect to any underlying change in our business or results of operations.\n\n \n\nTo date, we have not entered into any hedging transactions.\nWhile we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and\nwe may not be able to successfully hedge our exposure at all.\n\n \n\n**Changes in defense expenditures may reduce the Company’s\nsales.**\n\n \n\nApproximately 63.2% and 65.7% of the Company’s net\nrevenues for the fiscal years ended March 31, 2026 and 2025, respectively, came from sales to the defense market. The Company participates\nin a broad spectrum of defense programs. Accordingly, the Company’s sales are affected by changes in the defense budgets and policies\nof the U.S. government. A significant decline in U.S. government defense expenditures for programs in which we participate could have\nan adverse effect on the Company’s business, financial condition and results of operations. U.S. government expenditures are also\nsubject to political and budgetary fluctuations and constraints, which may result in significant unexpected changes in levels of demand\nfor our products.\n\n** **\n\n**We may be adversely affected by natural disasters,\npandemics and other catastrophic events and by man-made problems such as terrorism that could disrupt our business operations, and our\nbusiness continuity and disaster recovery plans may not adequately protect us from a serious disaster.**\n\n** **\n\nOur business operations are located in Brooklyn, New York\nand Allentown, Pennsylvania. If a disaster, power outage, computer hacking, or other event occurred that prevented us from using\nall or a significant portion of our facilities, that damaged critical infrastructure, such as enterprise financial systems, IT systems,\nmanufacturing resource planning or enterprise quality systems, or that otherwise disrupted operations, it may be difficult or, in certain\ncases, impossible for us to continue our business for a substantial period of time. In addition, our suppliers’ facilities are located\nin locations susceptible to natural disasters or similar events, such as tornadoes, fires, explosions or large-scale accidents or power\noutages, or IT threats, pandemics, acts of terrorism and other geo-political unrest, which could severely disrupt our operations and have\na material adverse effect on our business, financial condition, operating results and prospects. All of the aforementioned risks may be\nfurther increased if we do not implement a disaster recovery plan or our partners’ or manufacturers’ disaster recovery plans\nprove to be inadequate. To the extent that any of the above should result in delays in the manufacture or distribution of our products,\nour business, financial condition, operating results and prospects would suffer.\n\n \n\n**Our business and operations would suffer in the event\nof system failures, cyber-attacks or a deficiency in our cyber-security.**\n\n** **\n\nDespite the implementation of security measures, our internal\ncomputer systems and those of our contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural\ndisasters, terrorism, war, artificial intelligence related cyber-attacks, and telecommunication and electrical failures. The risk of a\nsecurity breach or disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments,\nand cyber-terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around\nthe world have increased. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption\nof our development programs and our business operations or cause the release of highly sensitive confidential information.\n\n** **\n\n 13"}