Item 1. Financial Statements

The accompanying notes are an integral part of these unaudited condensed financial statements.

The accompanying notes are an integral part of these unaudited condensed financial statements.

The accompanying notes are an integral part of these unaudited condensed financial statements.

The accompanying notes are an integral part of these unaudited condensed financial statements.

IEH CORPORATION
Notes to Unaudited Condensed Financial Statements

Overview

IEH Corporation (hereinafter referred to as “IEH” or the “Company”) began operations in New York, New York in 1941 and was incorporated as a New York corporation in March 1943, when Louis Offerman founded L. Offerman Tool & Die with his two sons, Bernard and Seymour. 

The Company designs and manufactures Hyperboloid connectors that not only accommodate but exceed military and aerospace specification standards.

Basis of Presentation

The accompanying condensed financial statements and the related disclosures as of December 31, 2025 and for the three and nine months ended December 31, 2025 and 2024 are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States, (“U.S. GAAP”), and the rules and regulations of the SEC for interim financial statements. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These interim condensed financial statements should be read in conjunction with the audited financial statements and notes included in the Annual Report on Form 10-K for the fiscal year ended March 31, 2025, filed with the SEC on June 12, 2025. The balance sheet as of March 31, 2025 included herein was derived from the audited financial statements as of that date but does not include all disclosures including notes required by U.S. GAAP for complete financial statements. In the opinion of management, the condensed financial statements reflect all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of the Company’s financial position as of December 31, 2025 and March 31, 2025 and its results of operations for the three and nine months ended December 31, 2025 and 2024. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the fiscal year ending March 31, 2026, or any other interim period or future year or period.

Revenue Recognition

The core principle underlying Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers” (“ASC 606”) is to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASC 606 sets out the following steps for an entity to follow when applying the core principle to its revenue generating transactions:

IEH CORPORATION
Notes to Unaudited Condensed Financial Statements

Revenue Recognition - Continued

The Company recognizes 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.

The Company does not offer any discounts, credits or other sales incentives. Historically, the Company has not had an issue with uncollectible accounts receivable.

The Company will accept a return of defective products 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 will provide a replacement at its own cost. Historically, returns and repairs have not been material.

The Company’s disaggregated revenue by geographical location is as follows:

The Company’s disaggregated revenue by industry as a percentage of total revenue is provided below:

IEH CORPORATION
Notes to Unaudited Condensed Financial Statements

Inventories

Inventories are comprised of raw materials, work-in-process and finished goods, and are stated at cost, on an average basis, which does not exceed net realizable value. The Company manufactures products pursuant to specific technical and contractual requirements.

The Company reviews its purchase and usage activity of its inventory of parts as well as work in process and finished goods to determine which items of inventory have become obsolete within the framework of current and anticipated orders. 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. A periodic adjustment, based upon historical experience is made to inventory in recognition of this impairment. The Company’s allowance for obsolete inventory was $910,498 and $710,498 as of December 31, 2025 and March 31, 2025, respectively, and was reflected as a reduction of inventory.

Income Taxes

The Company’s provision for income taxes for interim accounting purposes recognizes income taxes using an estimated annual effective income tax rate. This estimated annual effective income tax rate is based upon its estimated annual taxable income in each of the jurisdictions in which it operates, 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 would not be realized, a valuation allowance against the deferred tax assets would be established in the period such determination was made.

Uncertain Tax Positions

Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for unrecognized tax benefits is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. The Company’s policy is to record expense in the statement of operations.

Net (Loss) Income Per Share

The Company accounts for earnings per share pursuant to ASC Topic 260, “Earnings per Share”, which requires disclosure on the financial statements of “basic” and “diluted” earnings per share. Basic net (loss) income per common share is computed by dividing net (loss) income by the weighted average number of common shares outstanding for the reporting period. Diluted net (loss) income per common share is computed by dividing net (loss) income by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive).

IEH CORPORATION
Notes to Unaudited Condensed Financial Statements

Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and disclosure of contingent assets and liabilities at the date of the financial statements. The Company utilizes estimates with respect to determining the useful lives of fixed assets, the fair value of stock-based instruments, an incremental borrowing rate for determining the present value of lease payments, the calculation of inventory obsolescence, as well as determining the amount of the valuation allowance for deferred income tax assets, net. Actual amounts could differ from those estimates.

IEH CORPORATION
Notes to Unaudited Condensed Financial Statements

Segment Information

The Company identifies its operating segments in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 280, “Segment Reporting”. Operating segments are defined as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker (“CODM”), its Chief Executive Officer, manages the Company’s operations on a combined basis for the purposes of allocating resources. Accordingly, the Company has determined it operates and manages its business in a single reportable operating segment. 

The Company’s CODM reviews the segment net income (loss) that also is reported on the income statement as net income (loss) on a monthly basis, and reviews revenues by industry on a quarterly basis. The measure of segment assets is reported on the balance sheet as total assets.

Depreciation and Amortization

The Company provides for depreciation and amortization on a straight-line basis over the estimated useful lives (5-7 years) of the related assets. Depreciation expense for the three months ended December 31, 2025 and 2024 was $193,139 and $183,514, respectively. Depreciation expense for the nine months ended December 31, 2025 and 2024 was $570,104 and $557,691, respectively.

Stock-Based Compensation

Compensation expense for stock options granted to directors, officers and key employees is based on the fair value of the award on the measurement date, which is the date of the grant. The expense is recognized ratably over the service period of the award. The fair value of stock options is estimated using the Black-Scholes valuation model. The fair value of any other stock awards is generally the market price of the Company’s common stock on the date of the grant.

The Company determined the fair value of the stock option grants based upon the assumptions as provided below.

IEH CORPORATION
Notes to Unaudited Condensed Financial Statements

Recent Accounting Standards Not Yet Adopted

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09 – Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 enhances the transparency of income tax disclosures, primarily by requiring public business entities to disclose specific categories in the rate reconciliation tabular presentation, as well as by providing additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 also requires disaggregated disclosures of federal and state income taxes paid. The standard is effective for public companies for annual periods beginning after December 15, 2024. Early adoption is available. ASU 2023-09 will modify the Company’s financial statement disclosures but will not have an impact on its Balance Sheet, Statement of Operations and Statement of Changes in Stockholders’ Equity.

In November 2024, the FASB issued ASU 2024-03, – Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). This ASU requires disclosures about specific types of expenses included in the expense captions presented on the face of the statement of operations as well as disclosures about selling expenses. The standard is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. The requirements will be applied prospectively with the option for retrospective application. Early adoption is permitted. The Company will evaluate the full extent of the adoption of ASU 2024-03, but believes it will not have a material impact on its financial statements and disclosures.

Subsequent Events

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements. 

Operating leases

Leases classified as operating leases are included in operating lease right-of use assets, operating lease liabilities and operating lease liabilities, non-current, in the Company’s condensed balance sheets.

Condensed balance sheet information related to our leases is presented below: 

The lease expense for the three months ended December 31, 2025 and 2024 was $143,520 and $144,070, respectively, and for the nine months ended December 31, 2025 and 2024 was $421,076 and $427,864, respectively, which was included in costs of product sold on the Company’s condensed statements of operations. In addition to the base rent, the Company pays insurance premiums and utility charges relating to the use of the premises. The Company considers its present facilities to be adequate for its present and anticipated future needs.

The basic minimum annual rental payments remaining on these leases was $2,216,617 as of December 31, 2025.

The weighted-average remaining lease term and the weighted average discount rate for operating leases were:

IEH CORPORATION
Notes to Unaudited Condensed Financial Statements

The total remaining operating lease payments included in the measurement of lease liabilities on the Company’s condensed balance sheet as of December 31, 2025 was as follows: 

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 of at least 1.20, tested annually, and matures on July 31, 2026. As of December 31, 2025, 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.

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, consistent with the requirements under the Revolving Line of Credit. As of December 31, 2025, the Company had an outstanding draw of $245,920, which is reflected within equipment financing line of credit on the condensed 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.  

IEH CORPORATION
Notes to Unaudited Condensed Financial Statements

The effective income tax rate for the three months ended December 31, 2025 and 2024 was a provision of 0% on loss before provision for income taxes of $660,286 and $61,640, respectively. The effective income tax rate for the nine months ended December 31, 2025 and 2024 was a provision of 0% on loss before provision for income taxes of $1,341,765 and on income before provision for income taxes of $577,590, respectively. The provision for income taxes of $0 for the three and nine months ended December 31, 2025 was principally attributable to the loss before provision for income taxes and the impact of maintaining a full valuation allowance on the Company’s deferred tax assets, net. The provision for income taxes of $0 for the three and nine months ended December 31, 2024 was principally attributable to the utilization of net operating loss carryforwards to offset taxable income and the impact of maintaining a full valuation allowance on the Company’s deferred tax assets, net.

The Company has previously recorded liabilities for underpayment of income taxes and related interest and penalties for uncertain tax positions based on the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. At December 31, 2025 the amount included in corporate income taxes receivable is a liability of $177,618, inclusive of penalties and interest. This amount is unchanged from March 31, 2025.

The One Big Beautiful Bill Act (the “Act”) was signed into law on July 4th. 2025. The Act contains significant tax law changes with various effective dates affecting business taxpayers. Among the tax law changes that may impact the Company relate to the timing of certain tax deductions including depreciation expense, research and development expenditures and interest expense. Based upon the Company’s preliminary analysis, we do not anticipate a material effect on the financial statements for the fiscal year ending March 31, 2026.

2020 Equity Incentive Plan

On November 18, 2020, the Board of Directors approved the Company’s 2020 Equity Based Compensation Plan (the “2020 Plan”) for submission to shareholders at the 2020 annual meeting of shareholders. On December 16, 2020, the Company’s shareholders approved the adoption of the 2020 Plan, which provides for the grant of stock options and restricted stock awards to purchase up to 750,000 shares of the Company’s common stock to award in the future as incentive compensation to employees, senior management and members of the Board of Directors of the Company.

Options granted to employees under both the 2011 Plan and the 2020 Plan (together the “Plans”) may be designated as options which qualify for incentive stock option treatment under Section 422A of the Internal Revenue Code, or options which do not qualify (non-qualified stock options).

Under the Plans, the exercise price of an option designated as an incentive stock option shall not be less than the fair market value of the Company’s common stock on the day the option is granted. In the event an option designated as an incentive stock option is granted to a ten percent (10%) or greater shareholder, such exercise price shall be at least 110 percent (110%) of the fair market value of the Company’s common stock and the option must not be exercisable after the expiration of ten years from the day of the grant. The Plans also provide that holders of options that wish to pay for the exercise price of their options with shares of the Company’s common stock must have beneficially owned such stock for at least six months prior to the exercise date.

IEH CORPORATION
Notes to Unaudited Condensed Financial Statements

Exercise prices of non-incentive stock options may not be less than the fair market value of the Company’s common stock.

The aggregate fair market value of shares subject to options granted to a participant(s), which are designated as incentive stock options, and which become exercisable in any calendar year, shall not exceed $100,000.

Stock-based compensation expense

Stock-based compensation expense is recorded in selling, general and administrative expenses included in the condensed statements of operations. For the three months ended December 31, 2025 and 2024, stock-based compensation expense was $0 and $141,500, respectively. For the nine months ended December 31, 2025 and 2024, stock-based compensation expense was $265,200 and $266,600, respectively.

As of December 31, 2025 there was no unrecognized compensation expense related to unamortized stock options. It is the Company’s policy that any unrecognized stock-based compensation cost would be adjusted for actual forfeitures as they occur.

The following table provides the stock option activity for the nine months ended December 31, 2025: 

The weighted average grant date fair value per share was $4.42 and $3.81 for the nine months ended December 31, 2025 and 2024, respectively.

Included within the stock option exercises for the nine months ended December 31, 2025 was a cashless exercise for which options for the purchase of 29,190 shares were forfeited, resulting in the net issuance of 17,027 shares of the Company’s common stock.

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their in-the-money options on those dates.

IEH CORPORATION
Notes to Unaudited Condensed Financial Statements

In 1987, the Company adopted a cash bonus plan (the “Cash Bonus Plan”) for non-union, management and administration staff. Unless otherwise approved by the Company’s Compensation Committee of the Board of Directors, contributions to the Cash Bonus Plan will only be funded by the Company for payment of bonuses with respect to any fiscal year, when the Company is profitable for such fiscal year. As of December 31, 2025, and March 31, 2025, the Company’s accrued bonus was $249,018 and $330,000, respectively, which is included in other current liabilities on the accompanying condensed balance sheets. Bonus expense recorded for the three months ended December 31, 2025 and 2024 was $98,648 and $70,500, respectively. Bonus expense recorded for the nine months ended December 31, 2025 and 2024 was $300,946 and $338,954, respectively.

Leases

The Company maintains its operations in facilities located in both New York and Pennsylvania.

On December 1, 2020, the Company entered into a 120-month extension of its lease agreement for an industrial building in Brooklyn, NY, expiring December 1, 2030. Monthly rent at inception was $20,400, and thereafter, such monthly rent escalates annually to a monthly rent of $28,426 for the final year of the lease term. The Company maintains a security deposit of $40,800, which is included in security deposits on the accompanying condensed balance sheets.

On January 29, 2021, the Company entered into an 87-month lease agreement for an industrial building in Allentown, Pennsylvania, expiring March 30, 2028. Monthly rent at inception was $18,046, and thereafter, such monthly rent escalates annually to a monthly rent of $20,920 for the final year of the lease term. The Company maintains a security deposit of $35,040, which is included in security deposits on the accompanying condensed balance sheets.

Multi-Employer Plan

The Company has a collective bargaining multi-employer pension plan (“Multi-Employer Plan”) with the United Auto Workers of America, Local 259 (ID No. 136115077). The Multi-Employer Plan is covered by a collective bargaining agreement with the Company, which expires on March 31, 2027.

The total contributions charged to operations under the provisions of the Multi-Employer Plan were $7,987 and $8,506 for the three months ended December 31, 2025 and 2024, and $21,530 and $26,268 for the nine months ended December 31, 2025 and 2024, respectively, and were reflected within cost of products sold included in the condensed statements of operations. The Company has not taken any action to terminate, withdraw or partially withdraw from the Multi-Employer Plan nor does it intend to do so in the future.

IEH CORPORATION
Notes to Unaudited Condensed Financial Statements

During the three months ended December 31, 2025, one customer accounted for 25.9% of the Company’s revenue.

During the nine months ended December 31, 2025, two customers accounted for 31.9% of the Company’s revenue, each represented 18.9% and 13.0% of revenue.

During the three months ended December 31, 2024, three customers accounted for 39.8% of the Company’s revenue, each represented 18.7%, 11.0% and 10.1% of revenue. 

During the nine months ended December 31, 2024, three customers accounted for 45.9% of the Company’s revenue, each represented 18.2%, 17.4% and 10.3% of revenue.

As of December 31, 2025, two customers accounted for 30.3% of accounts receivable, each represented 20.2% and 10.1%, respectively. As of March 31, 2025, one customer accounted for 12.0% of the Company’s accounts receivable.

During the three months ended December 31, 2025, three vendors accounted for 44.6% of the Company’s purchases, each represented 20.9%, 13.5% and 10.2% of purchases.

During the nine months ended December 31, 2025, three vendors accounted for 41.0% of the Company’s purchases, each represented 16.8%, 13.2%, and 11.0% of purchases.

During the three months ended December 31, 2024, four vendors accounted for 52.3% of the Company’s purchases, each represented 13.3%, 13.1%, 13.0% and 12.9% of purchases. 

During the nine months ended December 31, 2024, four vendors accounted for 47.0% of the Company’s purchases, each represented 13.2%, 12.4%, 11.1% and 10.3% of purchases.

As of December 31, 2025, three vendors accounted for 32.8% of accounts payable, each represented 11.5%, 11.2%, and 10.1%, respectively. As of March 31, 2025, one vendor accounted for 12.0% of the Company’s accounts payable.