<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
/X/ Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 (Fee required)
For the fiscal year ended March 31, 1995
/ / Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required)
For the transition period from to
------------------- --------------------
Commission file number 0-5278
--------------------------------------------------
IEH CORPORATION
------------------------------------------------------
(Name of Small Business Issuer in Its Charter)
New York 13-5549348
- - ------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
140 58th Street, Suite 8E, Brooklyn, New York 11220
- - --------------------------------------------- ------------
(Address of Principal Executive Offices) (Zip Code)
(718) 492-4440
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
<TABLE>
<CAPTION>
Name of Each Exchange on Which
Title of Each Class Registered
------------------- ----------
<S> <C>
None None
----------------------------- --------------------
None None
----------------------------- --------------------
</TABLE>
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.50 Par Value
- - --------------------------------------------------------------------------------
(Title of Class)
- - --------------------------------------------------------------------------------
(Title of Class)
Indicated by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports),and (2) has been subject to such filing
requirements for past 90 days.
Yes X No
----- -----
<PAGE> 2
Indicate by check mark if disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained in this form, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. / /
The Registrant's revenues for its most recent fiscal year ended March
31, 1995 were $4,958,600.
On July 18, 1995, the aggregate market value of the voting stock of
Registrant held by non-affiliates of Registrant (consisting of Common Stock,
$.50 par value) computed by reference to the price at which the stock was sold,
or the average of the high bid and asked prices of $.15625 and $.4375,
respectively, such stock was approximately $296,174.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
On June 30, 1995, there were 2,303,502 shares of Common Stock, $.50
par value, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
2
<PAGE> 3
PART I
Item 1. Business
IEH Corporation (hereinafter referred to as the "Company") was
organized under the laws of the State of New York on March 22, 1943 under the
name Industrial Heat Treating Company, Inc. On March 15, 1989, the Company
changed its name to its current name. The Company's executive offices and
manufacturing facilities are located at 140 58th Street, Suite 8E, Brooklyn,
New York 11220. The Company's telephone number is (718) 492-4440.
The Industry in Which the Company is Engaged
The Company is engaged in the design, development, manufacture and
distribution of high performance electronic printed circuit connectors and
specialized interconnection devices. Electronic connectors and interconnection
devices are used to provide connections between electronic component
assemblies. The Company develops and manufactures connectors which are
designed for a variety of high technological and high performance applications.
These connectors are primarily utilized by those users who require highly
efficient and dense (the space between connection pins within the connector)
electrical connections.
Printed circuit boards in computers contain the components necessary
to perform specific system sub-functions. These functions require connections
which relay information between electronic components and circuit boards,
enabling the commands that are input by the user to be performed. Electronic
connectors, in essence, enable circuit boards and electronic components to
communicate with each other, via direct electrical connection. Connectors also
are fundamental to modular construction of electronic assemblies enabling the
3
<PAGE> 4
disconnection and removal of circuit boards and other electronic components for
testing, repair, and replacement.
Connectors may be designed and manufactured in various shapes, sizes
and specifications to meet specific customer requirements and applications.
High performance connectors are designed to meet various density and pin count
(the number of individual connection points within each connector) criteria and
to provide low impact (the amount of pressure needed to make the connection)
and efficient connections.
Constant advances in the design of solid state devices have resulted
in significantly denser component packaging configurations on circuit boards.
Historically, a 5" X 8" circuit board may have consisted of thousands of
circuits with 10 to 30 lines of communication. Under those conditions, an
insertion force of one pound per contact for each of the communication lines
formed a common and acceptable standard in connection devices. As a result of
technological developments in recent years, the same 5" X 8" circuit board may
contain hundreds of thousands of circuits with hundreds of communication
lines, and an insertion force of one (1) ounce per contact as the standard in
the industry.
The Company's Product Line
The Company primarily manufactures printed circuit board connectors
that meet military or individual customer specifications. Certain of the
Company's manufacturing and sales involve the competitive bidding process
because of the military and/or government status of customers. The Company
also manufactures a line of standard universal connectors which have common
usage in the high technology and commercial electronics industries. The
Company serves both the commercial and military marketplace, manufacturing
connectors for
4
<PAGE> 5
avionics, electronics, satellite, radar systems, test equipment, medical
electronics and related industries.
The Company is continuously redesigning and adapting its connectors to
keep pace with developments in the electronics industry, and has, for example,
developed connectors for use with flex-circuits which are used in aerospace
programs, computers, air-borne communication systems, testing systems and other
areas. The Company also provides engineering services to its customers to
assist in the development and design of connectors to meet specific product
requirements.
The Company's electronic printed circuit connectors are sold to
original equipment manufacturers and distributors. The Company supplies its
connectors to manufacturers who principally produce and distribute finished
products as well as to distributors who resell the Company's products. Prior
to the decrease in military and government spending over the last five (5)
years, the Company's sales were made primarily to the government, military
defense contractors and aerospace companies. However, since the decrease in
military and government spending the Company has modified its product line so
as to concentrate its sales efforts to commercial electronics companies. The
Company still continues to market its connectors for use in government and
military computers; military defense equipment and information systems;
terrestrial, airborne and aerospace communications products; avionics and
guidance systems and instrumentation and electronic testing equipment.
With the downturn in government contracts, the Company has been
striving the past several years to develop commercial accounts.
5
<PAGE> 6
Management has instituted several steps to increase productivity and
increase sales such as downsizing the labor force, implementing material
changes to make the Company's products more competitive and developing
machinery and equipment to increase production rates. Management believes
these initiatives have decreased costs and will continue to do so in the near
future.
For the fiscal year ended March 31, 1995, the Company's principal
customers included manufacturers of commercial electronics products, military
defense contractors and distributors who service these markets. Sales to the
commercial electronics and military defense markets comprised 24% and 75% of
the Company's net sales for the year ended March 31, 1995. Approximately 1% of
the Company's net sales for the year ended March 31, 1995, were made directly
to the federal government.
The Company licenses an interconnect technology known as HYPERTAC(TM)
from Brevetron, S.A., a Swiss corporation. HYPERTAC is an acronym for a
hyperbolic contact. This is a unique electronic circuit connector with a
singular geometry, multi-wire design, which provides enhanced performance
characteristics for low insertion force electronic connection devices. This
technology is licensed under an agreement dated January 1, 1979, as amended on
September 28, 1982 and September 20, 1991, (the "HYPERTAC(TM) Agreement"),
which agreement covers the patents listed therein. The HYPERTAC(TM) Agreement
expires on the expiration of the last patent or on the date all of the
"know-how" under the patents become public knowledge. The HYPERTAC(TM)
connectors and the adaptations thereof, are the Company's principal products
accounting for 55% and 50% of the Company's sales for the fiscal years ended
March 31, 1995 and April 1, 1994, respectively. The loss of its license to
6
<PAGE> 7
manufacture connectors utilizing the HYPERTAC(TM) design would have a material
adverse effect on the Company. The Company is not currently in breach of any
of the terms of the HYPERTAC(TM) Agreement.
New Product Development
The Company maintains a program to increase the efficiency and
performance of its connectors to meet anticipated and specific market needs.
Computer and electronics technology is continuously changing and requires the
redesign and development of connectors to adapt to these changes. Primarily,
new technology has dictated a decrease in the size of solid state electronic
components and smaller and denser high performance connectors. Management
believes that a key ingredient to the Company's success is its ability to
assist customer with a new design effort and prepare necessary drawing packages
in a short period of time. After the customer approves the design, prototypes
are built, approved by the customer and production is released. As an example,
six new connectors have been introduced to a major commercial account. The
Company's design effort on this product line began mid-year 1994 and was
recently completed. The new development process with this commercial client
may lead to substantial repeat business and the ability to introduce this line
to other commercial accounts.
The Company has also recently commenced production of two new
connectors for the aerospace industry.
One of the nation's leading radar system manufacturers has contracted
with the Company for six new designs. The design work is complete, approvals
have been obtained,
7
<PAGE> 8
and the Company is now in small scale production. The Company anticipates full
scale production when the radar system is released for sale by the customer.
The Company has developed a prototype connector for the medial
electronics industry; however, the device employing the product is an implant
and, as such, is subject to approval of the Food and Drug Administration
("FDA"). More than one year is anticipated for conversion to full scale
production. There can be no assurance that the product will be approved by the
FDA.
Several years ago, the Company has recently designed and developed a
form of compliant termination connector, which is named, "COMTAC". This
product, which utilizes technology known as "Solderless Pin Technology", does
not require the soldering of connector pins, but instead utilizes a spring type
locking system in attaching the connector to the printed circuit board. This
technology was patented in the United States under patent No. 4,720,268 and
assigned to the Company on January 19,1988. During fiscal year ended March 31,
1995 sales of COMTAC connectors accounted for 1% of the Company's total sales.
Most Recent Business Developments
In connection with relocation of the Company's facilities in
August 1991, the City of New York granted the Company utility and tax
incentives. Additionally, in July 1992, the New York State Urban Development
Corp. ("UDC") loaned the Company $435,000. The loan is repayable over a ten
(10) year period, with interest rates progressively increasing from 4% to 7%
over the term of the loan. The loan proceeds were used to finance construction
and renovation of the new facility. As of March 31, 1995, principal due under
this loan equalled $364,137. As of its fiscal year ended April 1, 1994, the
Company failed to meet the tangible
8
<PAGE> 9
net worth covenant contained in this loan agreement and to date remains in
default of this loan agreement as a result thereof. The Company has previously
obtained waivers from the UDC for this breach of loan covenant. The Company
will request an additional waiver of this covenant from the UDC for additional
periods of time. There can be no assurance that the Company will be able to
obtain a waiver of the loan covenant or that the UDC will not declare a default
of the loan.
As of March 31, 1995, the Company was in arrears with respect to the
Health & Welfare Fund and Pension Funds (together, the "Union Funds") which it
is required to maintain under its labor agreements with the Industrial
Electronics Hardware and United Automobile Workers Local 259 (together
"Unions"). In December 1993, the Company reached a verbal understanding with
its Unions pursuant to which the Company agreed to a payment schedule to make
current its obligations under the Union Funds. At December 1, 1993, the
Company owed $388,777 to the Health & Welfare Funds and $129,286 to the Pension
Fund. Pursuant to the understanding the Company has agreed to pay $10,000 per
month until the total debt in arrears has been paid in full. As of
March 31, 1995, the amount in arrears with respect to the Union Funds was
$445,947. There can be no assurance that the Company will be able to meet
its obligations, in full or in part, in accordance with this understanding.
9
<PAGE> 10
Marketing and Sales
The market for connectors and interconnect devices, domestic and
worldwide, is highly fragmented as a result of the manufacture by many
companies of a multitude of different types and varieties of connectors. For
example, connectors include: printed circuit, rectangular I/O, circular, planar
(IOC) RF coax, IC socket and fiber optic. The Company believes it has found a
niche in the market by manufacturing the HYPERTAC(TM) connectors and
innovative Company-designed printed circuit connectors such as the Comtac
connectors. The Company is one of only three licensed manufacturers of the
HYPERTAC(TM) design in the United States. The Company does not currently have
the resources to manufacture other types of connectors and believes there is a
sufficient market for printed circuit connectors in order to meet future sales
goals. Therefore, the Company does not anticipate manufacturing other types of
connectors in the immediate future. The Company is continuously experimenting
with innovative connection designs, which may cause it to alter its marketing
plans in the future if a market should develop for any of its current or future
innovative designs.
The Company's products are marketed to original equipment
manufacturers directly and through distributors serving primarily the
government, military, aerospace and commercial electronics markets. The
Company is also involved in developing new connectors for specific uses which
result from changes in technology. This includes the COMTAC connectors. The
Company assists customers in the development and design of connectors for
specific customer applications. This service is marketed to customers who
require the development of connectors and interconnect devices specially
designed to accommodate the customers own products.
10
<PAGE> 11
The Company is primarily a manufacturer and its products are
essentially basic components of larger assemblies of finished goods.
Approximately 95% and 95% of the Company's net sales for the years ended
March 31, 1995 and April 1, 1994, respectively, were made directly to
manufacturers of finished products with the balance of the Company's products
sold to distributors. Distributors often purchase connectors for customers who
do not require large quantities of connectors over a short period of time but
rather require small allotments of connectors over an extended period of time.
Three (3) of the Company's customers accounted for 33.8% and 36.9% of
the Company's net sales for the years ended March 31, 1995 and April 1, 1994,
respectively. A single customer accounted for 14.45% of sales while a second
customer accounted for 11.7% of sales. Three of the Company's customers
accounted for 11.1% of the Company's sales for the years ended March 31, 1995
and April 1, 1994, respectively.
The Company currently employs 14 independent sales representatives
and one western regional office to market its products in all regions in the
United States. These independent sales representatives also promote the
product lines of other electronics manufacturers; however, they do not promote
the product lines of competitors which compete directly with the Company's
products. These sales representatives accounted for approximately 94% of
Company sales (with the balance of Company sales being generated via direct
customer contact) for the year ended March 31, 1995.
International sales accounted for less than 1% of sales for the years
ended March 31, 1995 and April 1, 1994.
11
<PAGE> 12
Backlog Of Orders/Capital Requirements
The backlog of orders for the Company's products amounted to
approximately $1,000,000 at March 31, 1995, as compared to $1,500,000 at April
1, 1994. At June 30, 1995, the backlog had decreased to $900,000. A
significant portion of these 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 estimated funds required to manufacture
the current backlog of orders is estimated at $400,00. The Company presently
does not have the funds to manufacture all of their orders and, therefore, it
cannot estimate the portion of those orders which will be manufactured or
delivered.
Competition
The design, development, manufacture and distribution of electrical
connectors and interconnection devices is a highly competitive field. The
Company principally competes with companies who produce high performance
connectors in printed circuits and wireboards for high technology application
which includes Hypertronics Corporation and Si-Tac Connectors, Inc.
Hypertronics Corporation and Si-Tac Connectors, Inc. are the only other
companies licensed to manufacture the HYPERTAC(TM) designed connectors in the
United States. The Company competes with these companies with respect to their
abilities to adapt the HYPERTAC(TM) design to meet specific product
applications; in producing connectors cost-effectively; and in production
capabilities. In addition, there are many companies who offer connectors with
designs similar to the HYPERTAC(TM) and are direct competitors of the Company.
12
<PAGE> 13
The Company also competes with those companies who provide standard
universal printed circuit connectors. These companies include: Airborne,
Inc., Texas Instrument, Inc., and Winchester Electronics, Inc.
The primary basis upon which the Company competes is price and
production capabilities. The Company usually receives job orders after
submitting bids pursuant to customer-issued specifications. The Company also
offers engineering services to its customers in designing and developing
connectors for specialized products and specific customer applications. This
enables the Company to receive a competitive advantage over those companies who
basically manufacture connectors based solely or primarily on cataloged
specifications. Many of the Company's competitors have greater financial
resources, market penetration and experience than the Company and no assurances
can be given that the Company will be able to compete effectively with these
companies in the future.
Suppliers of Raw Materials and Component Parts
The Company utilizes a variety of raw materials and manufactured
component parts which it purchases from various suppliers. These materials and
components are available from numerous sources and the Company does not believe
that it will have a problem obtaining such materials in the future. However,
any delay in the Company's ability to obtain necessary raw materials and
component parts may affect its ability to meet customer production needs. In
anticipation of such delays, the Company carries an inventory of raw materials
and components parts to avoid shortages and to insure continued production.
13
<PAGE> 14
Engineering/Research & Development
The Company provides personalized engineering services to its
customers by designing connectors for specific customer applications. The
employment of electromechanical engineers is the anticipated cornerstone of the
Company's future growth. The Company maintains a testing laboratory where its
engineers experiment with new connector designs based on changes in technology
and in an attempt to create innovative, more efficient connector designs.
The Company expended an estimated $51,050 and $69,600 for the years
ended March 31, 1995 and April 1, 1994, respectively, on Company sponsored
research and development activities relating to the development of new designs,
techniques and the improvement of existing designs. In addition, the Company
received revenues of $82,700 and $11,800 for the years ended March 31, 1995
and April 1, 1994, respectively, pursuant to customer sponsored research
activities.
Employees
The Company presently employs approximately 90 people, three (3) of
whom are executive officers; three (3) are engaged in management activities;
seventeen (17) provide general administrative services and approximately 67 are
employed in manufacturing and testing activities. The employees engaged in
manufacturing and testing activities are covered by a collective bargaining
agreement with the United Auto Workers of America, Local 259 (the "Union")
which expires on July 31, 1995. The Company and the Union are currently
negotiating a new collective bargaining agreement. There can be no assurance
that a new
14
<PAGE> 15
agreement will be negotiated as terms favorable to the Company. The Company
believes that it has a good relationship with its employees and the Union.
Patents and Licenses
Electrical connectors and interconnection devices are usually the
subject of standard designs, therefore, only innovations of standard designs or
the discovery of a new form of connector are patentable. The Company is
continuously attempting to develop new forms of connector or adaptations of
current connector designs in an attempt to increase performance and decrease
per unit costs. The Company has developed and designed the COMTAC connector
which was patented on January 19, 1988, at which time the patent was assigned
to the Company.
The Company has entered into a non-exclusive license agreement with
Brevetron, S.A., with respect to the HYPERTAC(TM) connector. This agreement
was amended on September 20, 1991 to include the licensing of patents which
provide the technology and "know-how" to manufacture the Company's MICROTAC
connectors. The HYPERTAC(TM) Agreement extends until the expiration of the
last patent under the HYPERTAC(TM) Agreement or until such time as the know-how
underlying the production of the HYPERTAC(TM) design becomes public knowledge.
The HYPERTAC(TM) Agreement provides for the payment of royalties of 3% of sales
of products utilizing the HYPERTAC(TM) technology with a minimum annual royalty
payment of $10,000. The HYPERTAC(TM) Agreement may be terminated by either
party upon default of the other party or at the Company's option upon six (6)
months written notice.
15
<PAGE> 16
Governmental Regulations
The Company is subject to federal regulations under the Occupational
Safety and Health Act ("OSHA") and the Defense Electric Supply Command
("DESC"). OSHA provides federal guidelines and specifications to companies in
order to insure the health and safety of employees. DESC oversees the quality
and specifications of products and components manufactured and sold to the
government and the defense industry. Although DESC continuously requires
suppliers to meet changing specifications, the Company has not encountered any
significant problems meeting such specifications and its products have, in the
past, been approved. The Company is unaware of any changes in the government's
regulations which are expected to materially affect the Company's business.
Item 2. Properties
In August 1991, the Company relocated its offices and manufacturing
facilities to the Brooklyn Army Terminal at 140 58th Street, Brooklyn, New York
pursuant to a lease agreement with the New York City Economic Development
Corporation. This facility occupies one floor of an eight (8) story concrete
building and includes the Company's executive and administrative offices as
well as its manufacturing facilities. The manufacturing facilities include a
tooling and machine shop, a plating operation and a testing laboratory. The
Company leases approximately 40,000 feet of space, of which it estimates;
10,000 square feet are used as executive, sales and administrative offices;
22,000 square feet are used for its manufacturing and plating facilities; 4,000
square feet are used for its laboratory facilities; and 4,000 square feet are
used as warehouse space. The premises are occupied by the Company
16
<PAGE> 17
under a ten (10) year lease agreement dated August 23, 1991. The Company's net
rent expense for the year ended March 31, 1995 was $186,952. The basic rent
under the lease agreement is approximately $194,236 per year for the balance of
the term of the lease except for the last year, in which the rent increased to
$274,630. In addition to the base rent, the Company pays real estate taxes,
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.
Item 3. Legal Proceedings
The Company is not a party to or aware of any pending or threatened
legal proceedings which would result in any material adverse effect on its
operations or its financial condition.
Item 4. Submission of Matters to Vote of Security Holders
No matters were submitted to shareholders during the fourth quarter
for the fiscal year ended March 31, 1995.
PART II
Item 5. Market For Common Equity and
Related Stockholder Matters
Principal Market
The Common Stock of the Registrant (the "Common Stock") is traded in
the Over-The-Counter Market and is quoted on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") System Bulletin Board under
the symbol "IEHC". On January 11,
17
<PAGE> 18
1993, the Company's Common Stock was deleted from listing on the NASDAQ SmallCap
Market System because of the Company's failure to maintain the minimum asset and
shareholders equity requirements. On January 12, 1993, the Company's Common
Stock was first quoted on the NASDAQ Bulletin Board.
Market Information
The range of high and low bid prices for the Company's Common Stock,
for the periods indicated as set forth below. For the period prior to October
29, 1991, the Company was listed on the NASDAQ National Market System. On
October 29, 1991, the Company's Common Stock was delisted from the NASDAQ
National Market System and from October 29, 1991 to January 11, 1993, the
Company's Common Stock was listed on the NASDAQ SmallCap Market System. On
January 11, 1993, the Company's Common Stock was delisted from the NASDAQ Small
Cap Market System and on January 13, 1993, the Company's Common Stock was first
quoted on the NASDAQ Bulletin Board. Set forth below is a table indicating the
high and low bid prices of the Common Stock during the periods indicated.
18
<PAGE> 19
<TABLE>
<CAPTION>
YEAR HIGH BID LOW BID
---- -------- -------
<S> <C> <C>
Fiscal Year ended April 1, 1994(1)
----------------------------------
1st Quarter 3/32 1/32
2nd Quarter 3/16 1/32
3rd Quarter 1/4 1/8
4th Quarter 7/32 .30
Fiscal Year ended March 31, 1995(1)
-----------------------------------
1st Quarter 1/4 1/8
2nd Quarter 1/4 1/8
3rd Quarter 7/32 1/8
4th Quarter 7/32 1/8
</TABLE>
___________________________________________________
(1) As reported by the NASDAQ Bulletin Board.
The above quotations, as reported, represent prices between dealers
and do not include retail mark-up, mark-down or commissions. Such quotations
do not necessarily represent actual transactions.
Dividends
The Company has not paid any cash dividends on its Common Stock during
the last four (4) fiscal years. At present, the Company does not anticipate
issuing any cash dividends on its Common Stock in the foreseeable future by
reason of its contemplated future financial requirements and business plans.
The Company will retain earnings, to the extent that there are any, to finance
the development of its business.
19
<PAGE> 20
Approximated Number of Equity Security Holders
The number of record holders of the Company's Common Stock as of July
10, 1995 was approximately 1,317. Such number of record owners was determined
from the Company's stockholder records, and does not include the beneficial
owners of the Company's Common Stock whose shares are held in the names of
various security holders, dealers and clearing agencies. The Company believes
there are approximately 2,000 beneficial holders of its Common Stock held by
others or in nominee names.
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
The following table sets forth for the periods indicated, percentages
for certain items reflected in the financial data as such items bear to the
revenues of the Company:
20
<PAGE> 21
Relationship to Total Revenues
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------
March 31, 1995 April 1, 1994
-------------- -------------
<S> <C> <C>
Operating Revenues (in thousands) $4,959 $5,997
Operating Expenses:
(As a percentage of Operating Revenues)
Cost of Products Sold 79.2% 75.4%
Selling, General and Administrative 16.3% 17.0%
Interest Expense 2.9% 1.9%
Depreciation and amortization 5.2% 4.8%
TOTAL COSTS AND EXPENSES 103.6% 99.1%
Operating Income (loss) (3.6%) .9%
Other Income (Expense)
Other Non-Operating Income .1% .2%
Income (Loss) Before Income Taxes (3.5%) 1.1%
Income taxes (.1%) (.4%)
Net Income (Loss) (3.6%) 7%
</TABLE>
____________________
21
<PAGE> 22
COMPARATIVE ANALYSIS:
Year End Results: March 31, 1995 vs. April 1, 1994
Operating revenues for the year ended March 31, 1995 amounted to
$4,958,600, reflecting a 17.3% decrease versus prior year revenues of
$5,996,594. The decrease in revenues is a direct result of a continued
decrease in governmental and military procurement and the Company's efforts to
redirect its sales efforts to commercial electronic sales.
Cost of products sold amounted to $3,925,204 for the fiscal year ended
March 31, 1995 , or 79.2% of operating revenues. This reflected a 13.2%
decrease in the cost of products sold from $4,521,732 or 75.4% of operating
revenues for the fiscal year ended April 1, 1994. This decrease is primarily
due to cost reductions achieved as a result of the Company's cost control
efforts to reduce variable operating expenses in a more competitive
marketplace.
Selling, general and administrative expenses were $809,235 and
$1,019,855 or 16.3% and 17.0% of operating revenues for the fiscal years ended
March 31, 1995 and April 1, 1994 respectively. This category of expense
decreased 20.7% in fiscal 1995 from the prior year. The decrease can be
attributed to management's efforts to better control selling and administrative
costs.
Interest expenses was $144,620 for the fiscal year ended March 31,
1995 or 2.9% of operating revenues. For the fiscal year ended April 1, 1994,
interest expenses was $111,776 or 1.9% of operating revenues. The increase of
29.4% reflects the interest burden on a loan of $435,000 obtained in fiscal
1993 from the New York State Urban Development Corporation as well as increased
interest rates in fiscal 1995 as compared to the prior year.
22
<PAGE> 23
Depreciation and amortization of $258,765 or 5.2% of operating
revenues was reported for the fiscal year ended March 31, 1995. This reflects
a decrease of 9.3% from the prior year ended April 1, 1994 of $285,230 or 4.8%
of operating revenues. The decrease is as a result of the continued
utilization of fully depreciated assets beyond their estimated useful lives as
well as a result of increase revenues in the current fiscal year ended March
31, 1995.
The Company reported net income of $177,505 for the year ended March
31, 1995, representing a loss per common share of $.08 as compared to income
before income taxes of $68,668 or $.03 per share for the year ended April 1,
1994. The net loss amounted to $181,598 or $.08 per common share for the year
ended March 31, 1995 as compared to net income of $45,673 or $.03 per common
share for the year ended April 1, 1994. The resultant net loss can be
attributed to an decrease of 17.3% in operating revenues over the prior year.
Liquidity and Capital Resources
The Company reported a deficit working capital of $56,684 at March 31,
1995 as compared to a working capital of $90,627 at April 1, 1994. The
decrease in working capital of $147,311 was attributable to the following
items: "(approximate)"
<TABLE>
<S> <C> <C>
Net Income (excluding depreciation and amortization) $77,000
Capital expenditures (218,000)
Other transactions (6,000)
</TABLE>
As a result of the above, the current ratio (current assets to current
liabilities) was .97 to 1 at March 31, 1995 as compared to 1.04 to 1 at April
1, 1994.
23
<PAGE> 24
Current liabilities at March 31, 1995 were $1,995,148 compared to
$2,303,414 at April 1, 1994. This decrease is primarily reflective of a
decrease in revenue and resultant accounts receivable.
The Company expended $218,354 in capital expenditures as against
depreciation of $258,765 for the year ended March 31, 1995.
The net loss for the year ended March 31, 1995 of $181,598 decreased
stockholders' equity to $693,456 as compared to stockholders' equity of
$875,054 at April 1, 1994.
As of March 31, 1995 and as of April 1, 1994, the Company failed to
meet the tangible net worth covenant contained in its loan agreement with the
UDC. The Company received a waiver of this covenant from the UDC for the
period ending March 31, 1994. The Company has requested a continued waiver
from the UDC. There are no assurances that the Company will receive any
additional waivers of this covenant and therefor, the Company may be deemed to
be in default of its loan obligation to the UDC.
Effects of Inflation
The Company does not view the effects of inflation to have a material
effect upon its business. Increases in costs of raw materials and labor costs
have been offset by increases in the price of the Company's products, as well
as reductions in costs of production, reflecting management's efforts in this
area. While the Company has in the past increased its prices to its customers,
it has maintained its relative competitive price position. However,
significant decreases in government, military and military subcontractor
spending has provided excess production capacity in the industry which in turn
has tightened pricing margins.
24
<PAGE> 25
Item 7. Financial Statements
See Index to Financial Statements attached hereto.
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
The Company had had no disagreements with its accountants during the
last two fiscal years.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Office
---- --- ------
<S> <C>
Michael Offerman Chairman of the Board of
Directors and President
Ralph Acello Vice-President - Production
and Director
Robert Knoth Secretary and Treasurer
Murray Sennet Director
Allen Gottlieb Director
Robert Pittman Director
</TABLE>
______________________
All Directors serve for a term of two years and until their successors are
duly elected. All officers serve at the discretion of the Board of Directors.
Michael Offerman has been a member of the Board of Directors since
1973. In May, 1987, Mr. Offerman was elected President of the Company and has
held that position since
25
<PAGE> 26
that date. Prior to his becoming President, Mr. Offerman served as Executive
Vice-President of the Company.
Ralph Acello has been a member of the Board of Directors since 1988.
In August, 1984, Mr. Acello was elected the Company's Vice-President of
Production and has held the position since that date.
Robert Knoth joined the Company as Controller in January, 1990 and was
elected Treasurer of the Company in March, 1990. Mr. Knoth was elected as
Secretary of the Company in September 1992 and Mr. Knoth has held these
positions since said dates. From 1986 to January, 1990, Mr. Knoth was employed
as controller by G&R Preuss, Inc., a company engaged in the business of
manufacturing truck bodies and accessories.
Murray Sennet has been a member of the Company's Board of Directors
since 1970. Mr. Sennet was the Secretary and Treasurer of the Company at the
time of his retirement in April, 1986.
Allen Gottlieb has been a member of the Company's Board of Directors
since 1992. Mr. Gottlieb has been an attorney in private practice in New York
City for over five (5) years.
Robert Pittman has been a member of the Board of Directors since 1987.
Mr. Pittman retired in October 1992, at which time he had held the position of
Vice-President of Engineering and Secretary of the Company.
26
<PAGE> 27
Significant Employees
Thomas Hunt is the director of Quality Control, a position he has held
since October, 1992. Mr. Hunt joined the Company in 1987 as the laboratory
director and senior inspector and held such positions until his promotion in
October, 1992.
Richard Barry is the Director of Purchasing, a position he has held
since January 1993. Prior to joining the Company, from July 1992 to December
1992 Mr. Barry was a foreman at L&L Masons in New York and was in charge of
project control, material planning and manpower management. From March 1989
through July 1992, Mr. Barry held a similar position at Arey Construction Corp.
in New York. Mr. Barry ceased to be employed by the Company in June, 1995.
Joan Prideaux joined the Company in July, 1995 as National Sales
Manager. Prior to such time Ms. Prideaux was employed as an account executive
at Viking Connectors.
Certain Reports
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers and persons who own, directly or indirectly,
more than 10% of a registered class of the Corporation's equity securities, to
file with the Securities and Exchange Commission ("SEC") reports of ownership
and reports of changes in ownership of Common Stock of the Corporation.
Officers, directors and greater than 10% shareholders are required to furnish
the Company with copies of all Section 16(a) reports that they file. Based
solely on review of the copies of such reports received by the Company, the
Company believes that filing requirements applicable to officers, directors and
10% shareholders were complied with during the fiscal year except by Allen
Gottlieb, who did not timely file a Form 4 report.
27
<PAGE> 28
Item 10. Executive Compensation
The following table sets forth below the summary compensation paid or
accrued by the Company during the fiscal years ended March 31, 1995, April 1,
1994 and March 27, 1993, for the Company's Chief Executive Officer , Michael
Offerman, the Company's President:
<TABLE>
<CAPTION>
Other Annual
Name and Principal Position Year Salary Bonus Compensation(1)
- - --------------------------- ---- ------ ----- ---------------
<S> <C> <C> <C> <C>
Michael Offerman, President(2) March 31, 1995 $86,875 - $1,000
April 1, 1994 85,000 - 1,000
March 27, 1993 86,408 - 1,000
</TABLE>
(1) Represents a Director's fee of $1,000 per annum for service on the Board of
Directors.
(2) During the years ended March 31, 1995, April 1, 1994, and March 27, 1993,
the Company provided automobile allowances or the use of a Company-owned
vehicle to Mr. Offerman. This does not include the aggregate incremental cost
to the Company of such automobile or automobile allowances. The Company is
unable to determine without unreasonable effort and expense the specific amount
of such benefit; however, the Company has concluded that the aggregate amounts
of such personal benefit for the named individual does not exceed $25,000 or
10% of the compensation reported in the salary column.
No other officer of the Company received compensation (salary and/or bonus)
equal to or in excess of 100.000 during the fiscal year.
Pension/Benefit/Incentive/Stock Option Plans
In 1964, the Company's Shareholders and Board of Directors adopted a
contributory pension plan (the "Plan") effective April 1, 1964, for salaried
employees of the Company. The Plan as revised on April 1, 1987, provides for
retirement benefits for qualified employees upon or prior to retirement.
Employees are eligible to receive a portion of their retirement benefits,
starting 10 years prior to the employees anticipated retirement date, if the
employee has completed 15 years of service to the Company. The employee is
eligible to receive full retirement benefits for a period of ten (10) years.
After the ten year period, the employee will continue to receive a reduced
retirement benefit. If the employee dies prior to the ten year period, then
the spouse will receive 50% of the retirement benefits up to the ten year
period and thereafter will receive a 50% reduction in the retirement benefit
for the life of the spouse. The employee may elect to have the retirement
benefits altered to suit his anticipated future needs.
28
<PAGE> 29
Under an agreement dated January 3, 1961, as amended June 22, 1978,
the Company entered into an employment agreement with Michael Offerman,
providing for retirement compensation. Upon reaching the age of 65, or the
earlier of death, total disability, or employment termination by mutual
consent, the employee or his beneficiary would be entitled to retirement
payments of $30,000 per year for a period of five years.
On August 8, 1986, the Board of Directors granted to Mr. Murray
Sennet, a supplemental pension, effective upon his retirement on April 11,
1986, in the amount of $600 per month, which pension is to continue for a
period of ten (10) years or, in the event of the earlier death of Mr. Sennet.
29
<PAGE> 30
Cash Bonus Plan
In 1987, the Company adopted a cash bonus plan ("Cash Bonus Plan") for
Executive Officers. Contributions to the Bonus Plan are made by the Company
only after pre-tax operating profits exceed $150,000 for a fiscal year, and
then to the extent of 10% of the excess of the greater of $150,000 or 25% of
pre-tax operating profits. There were no contributions to the Bonus Plan for
the fiscal years ended March 31, 1995, April 1, 1994, and March 26, 1993.
Item 11. Security Ownership of Certain Beneficial
Owners and Management
The following table sets forth certain information as of July 10, 1995
with respect to (i) the persons (including any "group" as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934), known by the Company
to be the beneficial owner of more than five percent (5%) of any class of the
Company's voting securities; (ii) each Executive Officer and Director who owns
Common Stock in the Company; and (iii) all Executive Officers and Directors as
a group. As of July 18, 1995, there were 2,303,502 shares of Common Stock
issued and outstanding.
30
<PAGE> 31
<TABLE>
<CAPTION>
Amount of and Nature
Name and Address of of Beneficial
Title of Class Beneficial Owner Ownership Percentage of Class
- - ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock $.50 Michael Offerman 399,784(1) 17.3%
Par Value 140 58th Street
Brooklyn, NY 11220
Murray Sennet 24,500 1.1%
1900 Manor Lane
Plano, TX 75093
Allen Gottlieb 82,300 3.5%
50 Charles Lindberg Blvd
Uniondale, NY 11553
Robert Pittman 20,000 *
45 Ocean Avenue
Monmouth Bch, NJ
07750
Common Stock $.05 Gerard Deiss
Par Value 16 Rue De La Mart 547,000(3) 23.7%
Chartreuil
6-68 490
Mere Par Montfort
L'Amaury, France
David Lopez and 278,000 12.1%
Nancy Lopez
Edge of Woods
P.O. Box 323
Southhampton, NY 11968
All Officers & Directors 481,284 20.89%
as a Group (4 in number)
</TABLE>
________________________________________
* Less than 1%.
(1) 43,600 shares of Common Stock are jointly owned by Mr. Offerman and
his wife, Gail Offerman.
(2) These shares are beneficially owned by Mr. Deiss through a
Liechtenstein trust.
31
<PAGE> 32
Item 12. Certain Relationships and Related Transactions
None.
Item 13. Exhibits, List and Reports on Form 8-K
(a) Exhibits filed with Form 10-KSB:
See attached Exhibit Index.
(b) Reports on Form 8-K
The Company did not file any Reports on Form 8-K during the last
quarter of the period covered by this Report.
32
<PAGE> 33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
IEH CORPORATION
By: /s/ Michael Offerman
---------------------------
Michael Offerman, President
Dated: July 22, 1995
Pursuant to the requirements of the Securities Exchange Act of l934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ Michael Offerman July 22, 1995
- - -----------------------------------
Michael Offerman, Chairman of the
Board and President
/s/ Ralph Acello July 22, 1995
- - -----------------------------------
Ralph Acello
Vice President and Director
/s/ Robert Knoth July 22, 1995
- - -----------------------------------
Robert Knoth, Secretary and
Treasurer
/s/ Murray Sennet July 22, 1995
- - -----------------------------------
Murray Sennet, Director
/s/ Robert Pittman July 22, 1995
- - -----------------------------------
Robert Pittman, Director
</TABLE>
33
<PAGE> 34
EXHIBIT INDEX
The following Exhibits have previously been filed with the Securities
and Exchange Commission and, pursuant to 17 C.F.R. Secs. 201.24 and
240.12b-32, are incorporated by reference to the document referenced in
brackets following the descriptions of such Exhibits. Those Exhibits
designated by an asterisk (*) are filed herewith.
Exhibit No. Description
----------- -----------
3.1 Amended and Restated Certificate of
Incorporation of the Company [Exhibit
C-4 to Current Report filed on From 8-K,
dated February 27, 1991].
3.2 By-Laws of the Company Filed as Exhibit
3.2 on Report on Form 10-KSB for the
fiscal year ended March 27, 1994.
4.1 Form of Common Stock Certificate of
Company. Filed as Exhibit 4.1 on Report
on Form 10-KSB for the fiscal year ended
March 27, 1994.
4.2 Form of Secured Promissory Note payable,
New York State Urban Development
Corporation [Exhibit 10B to Current
Report on Form 8-K, dated July 22,
1992].
10.1 License Agreement between the Company
and Brevetron, S.A., Lugano,
Switzerland, dated January 1, 1979.
Filed as Exhibit 10.1 on Report on Form
10-KSB for the fiscal year ended March
27, 1994.
10.2 Amendment to License Agreement between
the Company and Brevetron, S.A. dated
September 28, 1982. Filed as Exhibit
10.2 on Report on Form 10-KSB for the
fiscal year ended March 27, 1994.
10.3 Amendment to License Agreement between
the Company and Brevetron, S.A. dated
September 20, 1991. Filed as Exhibit
10.3 on Report on Form 10-KSB for the
fiscal year ended March 27, 1994.
10.4 Lease for premises 140 58th Street,
Brooklyn, New York 11220 [Exhibit A to
Current Report filed on Form 8-K, dated
August 23, 1991].
<PAGE> 35
Exhibit No. Description
----------- -----------
10.5 Form of Loan Agreement between the
Company and the New York State Urban
Development Corporation [Exhibit 10A to
Current Report filed on Form 8-K, dated
July 22, 1992].
10.6 Form of Security Agreement between the
Registrant and New York State Urban
Development Corporation [Exhibit 10C to
Current Report filed on Form 8-K, dated
July 22, 1992].
10.7 Form of financing agreement between the
Company and Milberg Factors, Inc.
[Exhibit C-1 to the Current Report filed
on Form 8-K, dated March 1, 1990].
10.8 Form of Collective Bargaining Agreement
between Company and Local 259 of the
United Auto Workers Union, dated October
1, 1991.
10.9 Form of Employment Agreement between
Company and Michael Offerman
23.1* Consent of Jerome Rosenberg CPA,
independent auditor of the Company
27* EDGAR Financial Date Schedule
_____________________________
35
<PAGE> 36
ITEM 7- FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA:
IEH CORPORATION
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT FOR THE YEARS ENDED MARCH 31, 1995
AND APRIL 1, 1994 F-1
BALANCE SHEETS AT MARCH 31, 1995 AND APRIL 1, 1994 F-2
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED MARCH 31, 1995
AND APRIL 1, 1994 F-4
STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
MARCH 31, 1995 AND APRIL 1, 1994 F-5
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MARCH 31, 1995
AND APRIL 1, 1994 F-6
NOTES TO FINANCIAL STATEMENTS F-8
</TABLE>
<PAGE> 37
INDEPENDENT AUDITOR'S REPORT
To the stockholders and Board of Directors of
IEH Corporation
I have audited the accompanying balance sheets of IEH Corporation as of March
31, 1995 and April 1, 1994 and the related statements of operations,
stockholders equity and cash flows for each of the years ended March 31, 1995
and April 1, 1994. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based upon my audit.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audits provide a reasonable basis for
my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of IEH Corporation as of March
31, 1995 and April 1, 1994 and the results of its operations and its cash flows
for the years ended March 31, 1995 and April 1, 1994 in conformity with
generally accepted accounting principles.
/s/ Jerome Rosenberg CPA PC
Syosset, New York
June 2, 1995
F-1
<PAGE> 38
IEH CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, April 1,
1995 1994
---------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 300 $ 8,173
Accounts receivable, less allowance for
doubtful accounts of $10,062 in 1995 and $28,017
in 1994 (Note 5) 793,083 1,155,867
Inventories (Notes 1 and 2) 1,020,309 1,155,589
Prepaid expenses and other current assets (Note 3) 89,001 44,611
Other receivables 35,771 29,530
Prepaid and refundable income taxes -- 271
---------- ----------
Total current assets 1,938,464 2,394,041
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization of $4,704,880 in
1995 and $4,446,115 in 1994 (Notes 1 and 4) 1,630,362 1,670,773
---------- ----------
OTHER ASSETS:
Prepaid pension cost (Notes 1 and 10) 160,652 216,102
Other 49,007 56,837
---------- ----------
209,659 272,939
---------- ----------
Total assets $3,778,485 $4,337,753
========== ==========
</TABLE>
See accompanying notes to financial statements
<PAGE> 39
IEH CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, April 1,
1995 1994
----------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts receivable financing (Note 5) $ 585,620 $ 708,501
Notes payable, current portion (Note 6) 15,706 23,266
Loan payable, current portion (Note 7) 43,604 42,508
Accrued corporate income taxes 13,794 22,995
Union pension and health and welfare, current portion (Note 11) 120,000 120,000
Accounts payable 953,532 956,250
Other current liabilities (Note 9) 262,892 429,894
----------- -----------
Total current liabilities 1,995,148 2,303,414
----------- -----------
LONG-TERM LIABILITIES:
Pension plan payable (Notes 1 and 10) 438,651 396,249
Notes payable, less current portion (Note 6) 4,750 --
Loan payable, less current portion (Note 7) 320,533 364,137
Union pension and health and welfare, less current portion (Note 11) 325,947 385,099
Deferred income taxes
----------- -----------
13,800
1,089,881 1,159,285
----------- -----------
Total liabilities 3,085,029 3,462,699
----------- -----------
COMMITMENTS (Note 11)
STOCKHOLDERS' EQUITY: (Note 12)
Common stock, $.50 par value:
10,000,000 shares authorized;
2,303,502 shares issued and outstanding 1,151,751 1,151,751
Capital in excess of par value 1,615,874 1,615,874
Retained earnings (Deficit) (2,074,169) (1,892,571)
----------- -----------
Total stockholders' equity 693,456 875,054
----------- -----------
Total liabilities and stockholders' equity $ 3,778,485 $ 4,337,753
=========== ===========
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE> 40
IEH CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
------------------------------
March 31, April 1,
1995 1994
---------- ----------
<S> <C> <C>
REVENUES:
Net sales (Note 13) $4,958,600 $5,992,294
Other -- 4,300
---------- ----------
4,958,600 5,996,594
---------- ----------
COSTS AND EXPENSES:
Cost of products sold 3,925,204 4,521,732
Selling, general and administrative 809,235 1,019,855
Interest 144,620 111,776
Depreciation and amortization 258,765 285,230
---------- ----------
5,137,824 5,938,593
---------- ----------
OPERATING INCOME (LOSS) (179,224) 58,001
---------- ----------
OTHER INCOME 1,719 10,667
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (177,505) 68,668
PROVISION FOR INCOME TAXES 4,093 22,995
---------- ----------
NET INCOME (LOSS) $ (181,598) $ 45,673
========== ==========
INCOME (LOSS) PER COMMON SHARE
BEFORE INCOME TAXES $ (.08) $ (.03)
========== ==========
NET INCOME (LOSS) PER
COMMON SHARE(Note 1) $ (.08) $ (.02)
========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 2,303,502 2,303,502
========== ==========
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE> 41
IEH CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended March 31, 1995 and April 1, 1994
<TABLE>
<CAPTION>
Common Stock Capital in Retained
----------------------- Excess of Earnings
Shares Amount Par Value (Deficit)
------ ------ --------- ---------
<S> <C> <C> <C> <C>
BALANCES, March 26, 1993 2,303,502 1,151,751 1,615,874 (1,938,244)
NET INCOME-Year Ended April 1, 1994 45,673
--------- ---------- ---------- -----------
BALANCES, April 1, 1994 2,303,502 1,151,751 1,615,874 (1,892,571)
NET LOSS-Year Ended March 31, 1995 (181,598)
--------- ---------- ---------- -----------
BALANCES, March 31, 1995 2,303,502 $1,151,751 $1,615,874 $(2,074,169)
========= ========== ========== ===========
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE> 42
IEH CORPORATION
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Year Ended
-----------------------------
March 31, April 1,
1995 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $(181,598) $ 45,673
--------- ---------
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 258,765 285,230
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 362,784 (507,988)
(Increase) decrease in inventories 135,280 (146,779)
(Increase) decrease in prepaid expenses
and other current assets (44,390) 21,268
(Increase) decrease in other receivables (6,241) (27,762)
(Increase) decrease in prepaid pension costs 55,450 (31,654)
(Increase) decrease in other assets 7,830 (3,956)
(Increase) decrease in prepaid and refundable
income taxes 271 729
(Decrease) increase in accounts payable (2,718) (513,426)
(Decrease) increase in other current liabilities (167,002) 49,866
Increase in accrued corporate income taxes payable (9,201) 22,995
Increase in due to union pension and health and welfare (59,152) 505,099
Decrease in deferred taxes (13,800) --
(Decrease) increase in pension plan payable
42,402 69,980
--------- ---------
Total adjustments 560,278 (276,398)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES 378,680 (230,725)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (218,354) (219,481)
--------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (218,354) (219,481)
--------- ---------
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE> 43
IEH CORPORATION
STATEMENTS OF CASH FLOWS (CONTINUED)
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Year Ended
---------------------------
March 31, April 1,
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable $ (2,810) $ 15,178
Proceeds from loan payable -- --
Proceeds from accounts receivable financing -- 392,938
Principal payments on accounts receivable financing (122,881) --
Principal payments on loan payable (42,508) (28,355)
-------- --------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (168,199) 379,761
-------- --------
INCREASE (DECREASE) IN CASH (7,873) (70,445)
CASH, beginning of year 8,173 78,618
-------- --------
CASH, end of quarter
$ 300 $ 8,173
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION, cash paid during the quarter for:
Interest $144,620 $111,776
======== ========
Income taxes $ 4,093 $ 22,995
======== ========
</TABLE>
See accompanying notes to financial statements
F-7
<PAGE> 44
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS:
The Company is engaged in the design, development, manufacture and
distribution of high performance electronic printed circuit connectors
and specialized interconnection devices. Electronic connectors and
interconnection devices are used to provide electrical connections
between electronic component assemblies. The Company develops and
manufactures connectors which are designed for a variety of high
technology and high performance applications, and are primarily
utilized by those users who require highly efficient and dense(the
space between connection pins within the connector) electrical
connections.
The Company is continuously redesigning and adapting its connectors to
meet and keep pace with developments in the electronics industry, and
has, for example, developed connectors for use with flex-circuits now
being used in aerospace programs, computers, air-borne communication
systems, testing systems and other areas. The Company also services its
customers, by working directly with the customers in the development
and design of connectors to meet specific product requirements.
ACCOUNTING PERIOD:
The Company maintains an accounting period based upon a 52-53 week year
which ends on the nearest Friday in business days to March 31. The year
ended March 41, 1995 was comprised of 52 weeks, while the year ended
April 1, 1994 was comprised of 53 weeks.
INVENTORIES:
Inventories are stated at cost, on a first-in, first-out basis, which
does not exceed market value.
PROPERTY,PLANT AND EQUIPMENT:
Property, plant and equipment is stated at cost less accumulated
depreciation and amortization.The Company provides for depreciation and
amortization on the straight-line method over estimated useful lives of
four to ten years.
Maintenance and repair expenditures are charged to operations, and
renewals and betterments are capitalized. Items of property, plant and
equipment which are sold, retired or otherwise disposed of are removed
from the asset and accumulated depreciation or mortization account and
any gain or loss thereon is credited or charged to operations.
INCOME TAXES:
The Company follows the policy of treating investment tax credits as a
reduction in the provision for Federal income tax in the year in which
the credit arises or may be utilized. Deferred income taxes arise from
temporary differences resulting from different depreciation methods
used for financial and income tax purposes. The Company has adopted
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" effective for the year ended March 26, 1993.
F-8
<PAGE> 45
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
PENSION PLAN:
The Company has a defined benefit pension plan covering its salaried
employees. The Company's policy is to fund amounts equal to the tax
minimum funding requirements.
NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) per common share is based upon the weighted average
number of common shares outstanding during each year.
NOTE 2- INVENTORIES:
Inventories are comprised of the following:
<TABLE>
<CAPTION>
March 31, April 1,
1995 1994
------------ ----------
<S> <C> <C>
Raw materials $ 575,144 $ 652,009
Work in process 115,070 118,954
Finished goods 330,095 384,626
---------- ----------
$1,020,309 $1,155,589
========== ==========
</TABLE>
NOTE 3- PREPAID AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets are comprised of the
following:
<TABLE>
<CAPTION>
March 31, April 1,
1995 1994
---------- ---------
<S> <C> <C>
Prepaid insurance $ 20,843 $ 34,177
Other 68,158 10,434
-------- --------
$ 89,001 $ 44,611
========= =========
</TABLE>
F-9
<PAGE> 46
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 4- PROPERTY, PLANT AND EQUIPMENT:
Details of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
March 31, April 1,
1995 1994
---------- ----------
<S> <C> <C>
Leasehold improvements $ 568,006 $ 566,706
Machinery and equipment 3,636,802 3,452,871
Tools and dies 1,642,855 1,623,194
Furniture and fixtures 432,760 430,544
Transportation equipment 54,819 43,573
---------- ----------
6,335,242 6,116,888
Less: accumulated depreciation and amortization 4,704,880 4,446,115
---------- ----------
$1,630,362 $1,670,773
========== ==========
</TABLE>
NOTE 5- ACCOUNTS RECEIVABLE FINANCING:
The Company entered into an accounts receivable financing agreement
whereby it can borrow up to ninety percent of its eligible receivables
(as defined in the agreement) at an interest rate of 2 1/2% above The
Chemical Bank's publicly announced rate (6.25% at March 31, 1995),with
a minimum of 12% per annum. The agreement has an initial term of one
year and will automatically renew for successive one year terms,
unless terminated by the Company or Lender upon providing sixty days
prior written notice. The loan is secured by the Company's accounts
receivable and inventories.
NOTE 6- NOTES PAYABLE:
The following is a summary of notes payable:
<TABLE>
<CAPTION>
Interest March 31, April 1,
Rate 1995 1994
-------- --------- --------
<S> <C> <C> <C>
Note payable in monthly installments
of $297 through August, 1997 and
collateralized by transportation equipment 9.75% $ 8,313 $ 2,964
Insurance financing payable 11.25% 13,876 21,746
----- ------- -------
22,189 24,710
Less: unamortized discount 1,733 1,444
------- -------
20,456 23,266
Less: current portion 15,706 23,266
------- -------
Long-term portion
$ 4,750 $ --
======= =======
</TABLE>
F-10
<PAGE> 47
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 7- LOAN PAYABLE
On July 22, 1992, the Company obtained a loan of $435,000 from the New
York State Urban Development Corporation (UDC), collateralized by
machinery and equipment. The loan is payable over ten years, with
interest rates progressively increasing from 4% to 7%. The terms of
the loan required only monthly interest payments from September 1,
1992 until August 1, 1993. Payment of principal and interest began on
September 1, 1993. The balance remaining at March 31, 1995 amounted to
$364,137.
Aggregate future principal payments are as follows:
Fiscal Year Ending March:
<TABLE>
<S> <C>
1996 43,603
1997 44,543
1998 46,314
1999 50,693
Thereafter 178,984
--------
$364,137
========
</TABLE>
As of March 31, 1995 and as of March 31, 1994, the Company had failed
to meet one of the financial covenants; namely that the "Company"
shall be obligated to maintain a tangible net worth of not less than
$1,000,000 through 1994". The Company reported tangible net worth of
$693,456 at March 31, 1995 and $875,054 at April 1, 1994. The
inability of the Company to meet this covenant is ascribed to the
reported net loss of $637,899 for the year ended March 26, 1993, which
reduced tangible net worth from $1,467,280 as reported at March 27,
1992. The reported net income of $45,673 for the year ended April 1,
1994 did not increase tangible net worth to the required level.
The Company had previously received a waiver of this covenant from the
UDC through the period ended July 8, 1993 and has subsequently
received an additional waiver of this covenant through the period
ending March 31, 1994. The Company has applied to the UDC for an
additional waiver of this covenant. However, there are no assurances
that the Company will receive any additional waivers of this covenant.
Should the Company not receive any additional waivers, then it will be
deemed to be in default of this loan obligation to the UDC and the
entire loan plus interest will become due and payable.
F-11
<PAGE> 48
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 8- INCOME TAXES:
The Company has available at March 31, 1995, for federal income tax
purposes, a net operating loss of approximately $1,900,000 of which
approximately $1,300,000 will expire in 2007 with the balance expiring
in 2008. In addition, the Company has unused investment tax credits of
approximately $86,000 which expire between 1997 and 2002.
NOTE 9- OTHER CURRENT LIABILITIES:
Other current liabilities are comprised of the following:
<TABLE>
<CAPTION>
March 31, April 1,
1995 1994
-------- --------
<S> <C> <C>
Payroll and vacation pay accruals $ 15,075 $ 66,137
Sales commissions 7,315 41,884
License fees 75,417 68,602
Pension plan payable 35,049 72,463
Other 130,036 180,808
-------- --------
$262,892 $429,894
======== ========
</TABLE>
NOTE 10- PENSION PLAN - SALARIED PERSONNEL:
Pension plan expense for the years ended March 31, 1995, and April 1,
1994 include the following components:
<TABLE>
<CAPTION>
Year Ended
---------------------
March 31, April 1,
1995 1994
------- -------
<S> <C> <C>
Service cost $ 6,867 $ 6,976
Interest cost on
projected benefit obligation 27,509 31,317
Actual return on assets
held in plan 4,107 32,771
Net amortization of
transition liability
and net gain 21,755 25,021
------- -------
Pension plan expense $52,024 $46,043
======= =======
</TABLE>
F-12
<PAGE> 49
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 10- PENSION PLAN-SALARIED PERSONNEL: (CONTINUED)
The unfunded status of the plan at March 31, 1995 and April 1,
1994 is as follows:
<TABLE>
<CAPTION>
March 31, April 1,
1995 1994
-------- --------
<S> <C> <C>
Vested benefit obligation $478,934 $577,681
======== ========
Accumulated benefit obligation $503,201 $598,827
======== ========
Projected benefit obligation $514,175 $607,900
Plan assets at fair value 38,208 130,115
-------- --------
Unfunded status 475,967 477,785
Unrecognized net gain 1,125 27,656
Unrecognized liability at transition 172,751 197,429
Adjustment required to recognize
minimum liability 162,902 216,012
-------- --------
Net pension liability recognized in
the balance sheet $464,993 $468,712
======== ========
</TABLE>
The weighted discount rate used to measure the projected benefit
obligation is 5.25%, the rate of increase in future compensation levels
is 5.25% and the expected long-term rate of return on assets is 9%.
At March 31, 1995 and April 1, 1994, $35,049 and $72,463 respectively,
of the pension liability is included in other current liabilities,
with the balance of $396,249 and $326,269 respectively, shown as a
long-term liability. At March 31, 1995 and April 1, 1994, the
long-term portion includes $160,652 and $216,012 respectively,
representing the recognition of the additional minimum liability, to
comply with the requirements of Statement of Financial Accounting
Standards No. 87
All Plan assets are invested in the Cigna Guaranteed Deposit
Administration Fund.
F-13
<PAGE> 50
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 11- COMMITMENTS:
The Company had entered into employment agreements with certain of its
officers. The agreements provide for retirement compensation of
$30,000 per annum for a period of five years upon reaching either age
65, death, total disability or employment termination by mutual
consent between the Company and the respective officer. Prior to March
26, 1993, all but one of these agreements had expired. The remaining
agreement is with the President of the Company.
The Company is the licensee under a licensing agreement pertaining to
the use, sale and know-how of certain technical products relating to
the Company's operations. The agreement provides for payment of
license fees of 3% of certain sales, with a minimum annual payment of
$10,000. The agreement expires on the earlier of the date of
expiration of the licensed patents or until the know-how becomes
public knowledge. In addition, the Company, at its discretion, can
terminate the agreement upon providing six months written notice to
the licensor. License fees incurred pursuant to the agreement for the
years ended March 31, 1995 and April 1, 1994 were approximately
$80,000 and $103,000 respectively.
On August 23, 1991, the Company entered into a lease with the New York
City Economic Development Corporation for its office and manufacturing
facility. The Company is obligated under this lease through September
1, 2001, at minimum annual rentals as follows:
<TABLE>
<CAPTION>
Fiscal Year Ending:
<S> <C>
1996 $194,236
1997 194,236
1998 194,236
1999 194,236
2000 194,236
Thereafter 274,630
----------
$1,245,810
==========
</TABLE>
Net rental expense for the year ended April 1, 1994 for this lease was
$186,952.
F-14
<PAGE> 51
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 11- COMMITMENTS: (CONTINUED)
The Company has, with the United Auto Workers of America, Local 259, a
collective bargaining multi-employer pension plan. Contributions are
made in accordance with a negotiated labor contract and are based on
the number of covered employees employed per month. With the passage
of the Multi-Employer Pension Plan Amendments Act of 1980 ("The Act"),
the Company may become subject to liabilities in excess of
contributions made under the collective bargaining agreement.
Generally, these liabilities are contingent upon the termination,
withdrawal, or partial withdrawal from the Plan. The Company has not
taken any action to terminate, withdraw or partially withdraw from the
Plan nor does it intend to do so in the future. Under the Act,
liabilities would be based upon the Company's proportional share of
the Plan's unfunded vested benefits which is not currently available.
The amount of accumulated benefits and net assets of such plan also is
not currently available to the Company. Total contributions charged to
expense under this pension plan were $69,526 and $65,254 for the
fiscal years ending March 31, 1995 and April 1, 1994.
As of March 31, 1995, the Company was in arrears with respect to its
contributions to the union's health and welfare and pension plans. The
amount due the health and welfare plan was $239,889 and the amount due
the pension plan was $206,058, for a total amount due of $445,947.
In December, 1993, the Company and Local 259 entered into a verbal
agreement whereby the Company would satisfy this debt by the following
payment schedule:
The sum of $10,000 will be paid by the Company each month in
satisfaction of the current arrears until this total debt has
been paid. Under this agreement, the projected payment
schedule for arrears will satisfy the total debt in 52 months.
Additionally, both parties have agreed that current obligatory
funding by the Company will be made on a timely current basis.
The total amount due of $445,947 is reported on the accompanying
balance sheet in two components; $120,000 reported as a current
liability and $325,947 as a long-term liability.
NOTE 12- STOCK OPTION PLAN:
On December 4, 1986 and as supplemented on January 6, 1987 and March
11, 1987, the Company's Board of Directors proposed the establishment
of a non-qualified stock option plan for key employees, which was
ratified on September 11, 1987 by a majority vote of the Company's
stockholders at the Company' annual meeting. The plan provided for the
granting of options to purchase an aggregate of 125,000 shares of the
Company's common stock. The Plan lapsed in September 1992. There are
currently no options outstanding nor exercisable at March 31, 1995.
F-15
<PAGE> 52
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 13- REVENUES FROM MAJOR CUSTOMERS:
In the fiscal year ended March 31, 1995, more than 10% of the Company's
total revenues were earned from three customers. Total sales to these
customers were approximately $1,680,000. Individually, sales to these
three customers were $717,000, $581,000 and $382,000. In the fiscal
year ended April 1, 1994, more than 10% of the Company's total revenues
were earned from three customers. Total sales to these customers were
approximately $964,000, $662,000 and $503,000.
F-16
<PAGE> 53
IEH CORPORATION
Statement re: Computation of Net Income (Loss) Per Common Share
Net income or (loss) per common share is computed by dividing the net income or
(loss) by the weighted average number of common shares outstanding during each
year as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------
March 31, April 1,
1995 1994
----------- -----------
<S> <C> <C>
Income (Loss) before income taxes $ (177,505) $ 68,668
Net Income (Loss) $ (181,598) $ 45,673
Weighted Average Number of
Common Shares Outstanding 2,303,502 2,303,502
Income (Loss) per common share before
income taxes $ (.08) $ (.03)
Net Income (Loss) per
Common Share $ (.08) $ (.02)
</TABLE>
<PAGE> 54
EXHIBIT INDEX
The following Exhibits have previously been filed with the Securities
and Exchange Commission and, pursuant to 17 C.F.R. Secs. 201.24 and
240.12b-32, are incorporated by reference to the document referenced in
brackets following the descriptions of such Exhibits. Those Exhibits
designated by an asterisk (*) are filed herewith.
Exhibit No. Description
----------- -----------
3.1 Amended and Restated Certificate of
Incorporation of the Company [Exhibit
C-4 to Current Report filed on From 8-K,
dated February 27, 1991].
3.2 By-Laws of the Company Filed as Exhibit
3.2 on Report on Form 10-KSB for the
fiscal year ended March 27, 1994.
4.1 Form of Common Stock Certificate of
Company. Filed as Exhibit 4.1 on Report
on Form 10-KSB for the fiscal year ended
March 27, 1994.
4.2 Form of Secured Promissory Note payable,
New York State Urban Development
Corporation [Exhibit 10B to Current
Report on Form 8-K, dated July 22,
1992].
10.1 License Agreement between the Company
and Brevetron, S.A., Lugano,
Switzerland, dated January 1, 1979.
Filed as Exhibit 10.1 on Report on Form
10-KSB for the fiscal year ended March
27, 1994.
10.2 Amendment to License Agreement between
the Company and Brevetron, S.A. dated
September 28, 1982. Filed as Exhibit
10.2 on Report on Form 10-KSB for the
fiscal year ended March 27, 1994.
10.3 Amendment to License Agreement between
the Company and Brevetron, S.A. dated
September 20, 1991. Filed as Exhibit
10.3 on Report on Form 10-KSB for the
fiscal year ended March 27, 1994.
10.4 Lease for premises 140 58th Street,
Brooklyn, New York 11220 [Exhibit A to
Current Report filed on Form 8-K, dated
August 23, 1991].
<PAGE> 55
Exhibit No. Description
----------- -----------
10.5 Form of Loan Agreement between the
Company and the New York State Urban
Development Corporation [Exhibit 10A to
Current Report filed on Form 8-K, dated
July 22, 1992].
10.6 Form of Security Agreement between the
Registrant and New York State Urban
Development Corporation [Exhibit 10C to
Current Report filed on Form 8-K, dated
July 22, 1992].
10.7 Form of financing agreement between the
Company and Milberg Factors, Inc.
[Exhibit C-1 to the Current Report filed
on Form 8-K, dated March 1, 1990].
10.8 Form of Collective Bargaining Agreement
between Company and Local 259 of the
United Auto Workers Union, dated October
1, 1991.
10.9 Form of Employment Agreement between
Company and Michael Offerman
23.1* Consent of Jerome Rosenberg CPA,
independent auditor of the Company
27* EDGAR Financial Date Schedule
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITOR
I consent to the reference to my firm under the caption "Experts", and to
the use of my report dated June 2, 1995 in the form 10-KSB for the year ended
March 31, 1995.
/s/ Jerome Rosenberg, CPA
Syosset, New York
July 12, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
AUDITED FINANCIAL STATEMENTS OF IEH CORPORATION FOR THE YEAR ENDED
MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH 10KSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 300
<SECURITIES> 0
<RECEIVABLES> 803,145
<ALLOWANCES> 10,062
<INVENTORY> 1,020,309
<CURRENT-ASSETS> 1,938,454
<PP&E> 6,335,242
<DEPRECIATION> 4,704,880
<TOTAL-ASSETS> 3,770,485
<CURRENT-LIABILITIES> 1,995,148
<BONDS> 325,203
<COMMON> 1,151,751
0
0
<OTHER-SE> (458,295)
<TOTAL-LIABILITY-AND-EQUITY> 3,778,485
<SALES> 4,958,600
<TOTAL-REVENUES> 4,960,319
<CGS> 3,925,204
<TOTAL-COSTS> 4,183,969
<OTHER-EXPENSES> 809,235
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 144,620
<INCOME-PRETAX> (177,505)
<INCOME-TAX> 4,093
<INCOME-CONTINUING> (181,598)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (181,596)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
