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 27, 1998
[ ] 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:
Name of Each Exchange on Which
Title of Each Class Registered
None None
- ---------------------- -------------------------------
None None
- ---------------------- -------------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.50 Par Value
- --------------------------------------------------------------------------------
(Title of Class)
- --------------------------------------------------------------------------------
(Title of Class)
<PAGE>
Indicate 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 [ ]
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
27, 1998 were $4,750,099.
On June 19, 1998, the aggregate market value of the voting stock of
Registrant held by non-affiliates of Registrant (consisting of Common Stock,
$.50 par value) computed by reference to the closing bid price at which the
stock was sold on such date ($.375 ) was approximately $387,832.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
On June 19, 1998, there were 2,303,502 shares of Common Stock, $.50 par
value, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
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 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 forces (the amount of pressure needed to make the connection) and
electrically 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.
<PAGE>
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
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 continuing downturn in government contracts over the last few
years, the Company has been striving the past several years to develop
commercial accounts.
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 27, 1998, 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 27 % and 72%,
respectively, of the Company's net sales for the year ended March 27, 1998.
Approximately 1% of the Company's net sales for the year ended March 27, 1998,
were made directly to the federal government.
<PAGE>
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 has lead to
substantial repeat business in the past fiscal year. The Company now has 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. To date early orders for pre-production
units have been completed and the Company is awaiting commencement of
production.
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, 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. During fiscal year 1996, the company's business with this
customer doubled from the previous fiscal year.
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 27, 1998 sales of
COMTAC connectors accounted for over 10 % of the Company's total sales. The
Company has sent to certain of its customers and potential customers
pre-production units for evaluation. Although there can be no assurance of
future sales, the Company is optimistic that this new technology will lead to an
increase in sales.
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 3% to 8% over the term of the
loan. The loan proceeds were used to finance construction and renovation of the
new facility. As of March 27, 1998, principal due under this loan equaled
$285,916. As of its fiscal year ended April 1, 1994, the Company failed to meet
the tangible net worth covenant as well as other financial covenants 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 has requested an additional waiver of
this covenant from the UDC for additional periods of time. To date, the Company
has not obtained such a waiver nor has the UDC declared a default. 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.
<PAGE>
As of March 27, 1998, 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 United Automobile
Workers Local 259 (the "Union"). In December 1993, the Company reached a verbal
understanding with the Union 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 had agreed to pay
$10,000 per month until the total debt in arrears has been paid in full. As of
March 27, 1998, the amount in arrears with respect to the Union Funds was
$230,827. 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.
On June 30, 1995, the Company applied to the Pension Benefit Guaranty
Corporation ("PBGC") to have the PBGC assume all of the Company's
responsibilities and liabilities under its Salaried Pension Plan. On April 26,
1996, the Company was notified that the PBGC had granted the Company's request
and agreed to assume the Company's obligations under the Salaried Pension Plan.
The PBGC has not issued a final accounting and order with respect to the
Salaried Pension Plan. It is possible that the PBGC will require that the
Company make future payments to PBGC.
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 has been servicing a niche in the
market by manufacturing HYPERTAC(TM) connectors and innovative Company-designed
printed circuit connectors such as the Comtac connectors. Previously, the
Company was one of only three licensed manufacturers of the HYPERTAC(TM) design
in the United States. In fiscal year 1996, the Company learned that the other
two licensees had merged. Moreover, the Company, based upon advice of counsel,
determined that the HYPERTAC technology was no longer protected by a patent, and
therefore was in the public domain. As a result, the Company notified the
licensor that it would no longer be bound by the terms of its license agreement
and the Company ceased making license payments. See Financial Statements and
Notes thereto. The Company has received a brief notice from the licensor that it
disputed the Company's interpretations and demanded return of certain equipment.
No legal proceedings have been instituted by the licensor and the Company has
not received any further notices. 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.
<PAGE>
The Company is primarily a manufacturer and its products are
essentially basic components of larger assemblies of finished goods.
Approximately 95% of the Company's net sales for the years ended March 27, 1998
and March 28, 1997, 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.
Two (2) of the Company's customers accounted for 30% and 33% of the
Company's net sales for the years ended March 27, 1998 and March 28, 1997,
respectively. One of the Company's customers accounted for 12% and 8% of the
Company's sales for the years ended March 27, 1998 and March 28, 1997
respectively.
The Company currently employs 16 independent sales representatives 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 27,
1998.
International sales accounted for less than l% of sales for the years
ended March 27, 1998 and March 28, 1997.
Backlog Of Orders/Capital Requirements
The backlog of orders for the Company's products amounted to
approximately $1,300,000 at March 27, 1998, as compared to $1,200,000 at March
28, 1997. At June 15, 1997, the backlog had increased to approximately
$1,400,000. 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 $450,000. The Company
does not foresee any problems which would prevent it from fulfilling its orders.
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. The Company
competes with respect to their abilities to adapt certain technologies 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 those utilized by the Company and are direct
competitors of the Company.
<PAGE>
The primary basis upon which the Company competes is product
performance 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.
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 $69,500 and $57,600 for the years
ended March 27, 1998 and March 28, 1997, 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 $103,800 and $129,000 for the years ended March 27, 1998
and March 28, 1997, respectively, pursuant to customer sponsored research
activities.
Employees
The Company presently employs approximately 65 people, four (4) of whom
are executive officers; three (3) are engaged in management activities; three
(3) provide general administrative services and approximately 55 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 expired on July
31, 1995 and was extended until March 31, 1996. On April 1, 1996, the Union and
the Company negotiated a new contract which expires on March 31, 1999. The
Company believes that it has a good relationship with its employees and the
Union.
<PAGE>
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.
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 under a ten (10) year lease
agreement dated August 23, 1991. The Company's net rent expense for the year
ended March 27, 1998. was $210,041 . 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. See
"Legal Proceedings" for certain matters involving the Company's operating
facility and offices.
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.
<PAGE>
As previously reported, the Company reached an agreement with its
landlord, the New York Urban Development Corporation ("NYUDC") to settle certain
matters related to the lease of its principal offices located in Brooklyn New
York, including a lawsuit brought by the NYUDC against the Company. The lawsuit,
entitled New York City Economic Development Corporation against IEH Corporation,
had been commenced in the Civil Court of the City of New York, Kings County
(Index No. L&T 88890/97). The NYUDC claimed that IEH had not paid the proper
rent due under its lease for the period from September 1, 1992 through April
1997. The NYUDC claimed damages of $236,000 plus interest of approximately
$41,000.
The Company determined it was in its best interest to settle the
lawsuit. The parties agreed to a settlement, effective as of May, 1997 whereby
the Company agreed to a repayment schedule for the amount due payable with
interest at 8.25% per year. The monthly installments equal approximately $5,790
per month. The settlement provides for the entry, following notice and a cure
period, of a default judgement by the NYUDC in the event the Company fails to
timely pay amounts due under the lease and the settlement.
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 27, 1998.
<PAGE>
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, 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 over the
Electronic Bulletin Board (OTCBB).
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 over the Electronic Bulletin Board (OTCBB). Set forth below is a table
indicating the high and low bid prices of the Common Stock during the periods
indicated.
<PAGE>
<TABLE>
<CAPTION>
Year High Bid Low Bid
---- -------- -------
<S> <C> <C>
Fiscal Year ended March 27, 1998(1)
1st Quarter .1565 .15625
2nd Quarter .25 .15625
3rd Quarter .25 .25
4th Quarter .3125 .25
Fiscal Year ended March 28, 1997(1)
1st Quarter .135 1/16
2nd Quarter 3/16 1/16
3rd Quarter 1/16 1/32
4th Quarter 1/8 1/32
</TABLE>
(1) As reported by the OTCBB.
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.
On June 23, 1998 the high bid for the Common Stock was 5/8 and the low
bid was 3/8.
<PAGE>
Dividends
The Company has not paid any cash dividends on its Common Stock during
the last five (5) 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.
Approximated Number of Equity Security Holders
The number of record holders of the Company's Common Stock as of June
19, 1998 was approximately 1,252. 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.
<PAGE>
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:
<TABLE>
<CAPTION>
Relationship to Total Revenues
March 27, 1998 March 28, 1997
<S> <C> <C>
Operating Revenues (in thousands) $4,750 $4,729
Operating Expenses:
(As a percentage of Operating Revenues)
Costs of Products Sold 72.1% 72.6%
Selling, General and Administrative 17.6% 16.1%
Interest Expense 2.4% 3.2%
Depreciation and amortization 5.6% 5.7%
TOTAL COSTS AND EXPENSES 97.7% 97.6%
Operating Income (loss) 2.3% 2.4%
Other Income .0% .0%
Income (loss) before Income Taxes 2.3% 2.4%
Income Taxes (.3%) (.2%)
Net Income (loss) 2.0% 2.2%
</TABLE>
<PAGE>
Year End Results: March 27, 1998 vs. March 28, 1998
Operating revenues for the year ended March 27, 1998 amounted to $4,750,099
reflecting a .1% increase versus prior year 1997 revenues of $4,729,277. The
increase in revenues, though marginal, is a direct result of the Company's
continuing efforts to redirect its sales efforts to the commercial electronic
market and away from the governmental and military procurement sector.
Cost of products sold amounted to $3,424,932 for the fiscal year ended
March 27, 1998, or 72% of operating revenues. This reflected a decrease of .1%
in the cost of products sold from $3,433,204 or 72.6% of operating revenues for
the fiscal year ended March 28, 1997. This decrease, though marginal, is
primarily due to management's efforts to control manufacturing costs.
Selling, general and administrative expenses were $ 835,025 and
$760,432 or 17.6% and 16.1% of operating revenues for the fiscal years ended
March 27, 1998 and March 28, 1997, respectively. This category of expense
increased 9.8% from the prior year. The increase can be attributed to increased
variable expenses which are reflective of increased sales.
Interest expense was $116,104 for the fiscal year ended March 27, 1998
or 2.4% of operating revenues. For the fiscal year ended March 28, 1997,
interest expense was $149,735 or 3.2% of operating revenues. The decrease of
22.5% reflects decreased interest rates in fiscal 1998 as compared to the prior
year.
Depreciation and amortization of $268,173 or 5.6% of operating revenues
was reported for the fiscal year ended March 27, 1998. This reflects an decrease
of 1.7% from the prior year ended March 28, 1997 of $272,894 or 5.7% of
operating revenues. The decrease is a result of reduced levels of acquisitions
of new plant and equipment.
The Company reported net income of $95,651 for the year ended March 27,
1998 representing basic income of $.042 per share as compared to net income of
105,709 or $.05 per share for the year ended March 28, 1997. The net income
decrease for the current year can in part be attributed to an increase of 22.5%
in selling, general and administrative expenses over the prior year.
Liquidity and Capital Resources
The Company reported working capital of $102,821 as compared to a
working capital deficit of $61,543 at March 28, 1997. The increase in working
capital of $164,364 was attributable to the following items:
Net income (loss) (excluding depreciation and amortization) $ 263,824
Capital expenditures (192,957)
Other transactions (6,503)
As a result of the above, the current ratio (current assets to current
liabilities) was 1.1 to 1 at March 27, 1998 as compared to .97 to at March 28,
1997. Current liabilities at March 27, 1998 were $1,742,860 compared to
$1,918,911 at March 28, 1997. This decrease is primarily reflective of an
increase in accounts receivable as well as a decrease in accounts payable.
<PAGE>
The Company expended $192,957 in capital expenditures in fiscal 1998 as
against depreciation of $268,173 for the year ended March 27, 1998.
The net income of $95,651 for the year ended March 27, 1998 increased
stockholders' equity to $655,033 as compared to stockholders' equity of $559,382
at March 28, 1997.
The Company has an accounts receivable financing agreement with a
factor which bears interest at 2.5% above prime. At March 27, 1998 the amount
outstanding was $656,015 as compared to $536,457 at March 28, 1997.
As of March 27, 1998 and as of March 28, 1997, the Company failed to
meet the tangible net worth covenant contained in its loan agreement with the
Urban Development Corporation ("UDC"). The Company has not been in compliance
with this ratio since fiscal year 1994. 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. To date, the UDC has not declared an
event of default. The Company has been notified that the loan was recently sold
by UDC to a third party. 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 noncompliance with 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 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.
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 no disagreements with its accountants during the last
two fiscal years.
<PAGE>
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:
Name Age Office
---- --- ------
Michael Offerman 57 Chairman of the Board of
Directors and President
Ralph Acello 61 Vice-President - Production
and Director
Robert Knoth 56 Secretary and Treasurer
Murray Sennet 75 Director
Allen Gottlieb 57 Director
Robert Pittman 73 Director
Joan Prideaux 65 Vice President - Sales and Marketing
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.
Executive Officers and 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 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 for over five
(5) years.
<PAGE>
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.
Joan Prideaux joined the Company in July, 1995 as National Sales
Manager. Prior to such time Ms. Prideaux was employed as an account executive of
Viking Connectors for the previous five years.
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.
Stephen Reich is the Director of Purchasing, a position he has held
since July 1995. Prior to joining the Company, Mr. Reich owned and operated a
retail business. lawrence Schwartz is the Quality Control manager, a position he
has held since July 1997. Mr. Schwartz was employed by Precision International a
manufacturing compnay of automotive parts.
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.
Item 10. Executive Compensation
The following table sets forth below the summary compensation paid or
accrued by the Corporation during the fiscal years ended March 27, 1998,March
28, 1997 and March 29, 1996 for the Corporation's Chief Executive Officer:
<TABLE>
<CAPTION>
Other Annual
Name and Principal Position Year Salary Bonus Compensation
---- ------ ----- ------------
<S> <C> <C> <C> <C>
Michael Offerman, Chief March 27, 1998 $100,000 - 0
Executive Officer, President(1) March 28, 1997 92,404 - 0
March 29, 1996 86,875 - 0
</TABLE>
<PAGE>
(1) During the years ended March 27, 1998, March 28, 1997 and March 29,
1996 , and the Corporation provided automobile allowances to Mr.
Offerman. This does not include the aggregate incremental cost to the
Corporation of such automobile or automobile allowances. The
Corporation is unable to determine without unreasonable effort and
expense the specific amount of such benefit, however, the Corporation
has concluded that the aggregate amounts of such personal benefit for
Mr. Offerman does not exceed $25,000 or 10% of the compensation
reported as total salary and bonus reported. Effective January 1, 1995,
Mr. Offerman entered into an employment agreement with the Company to
increase his salary to $100,000 per annum. Mr. Offerman agreed that,
not withstanding the terms of his new employment agreement, he was paid
at the rate of $92,404 for fiscal1997. Commencing September1997, Mr.
Offerman began receiving his salary at the rate of $100,000 per year.
See "Employment Agreements". No other officer of the Corporation
received compensation (salary and bonus) in excess of $100,000 during
the fiscal years ended March 27, 1998 orMarch 28, 1997 or March 29,
1996.
Pension/Benefit Incentive Plan
In 1964, the Corporation's Shareholders and Board of Directors adopted
a contributory pension plan (the "Salaried Pension Plan") effective April 1,
1964, for salaried employees of the Corporation. The Salaried Pension Plan as
revised on April 1, 1987, provides for retirement benefits for qualified
employees upon or prior to retirement. For early retirement, employees are
eligible to receive a portion of their retirement benefits, starting 10 years
prior to the employees anticipated normal retirement date (age 65), if the
employee has completed l5 years of service to the Corporation. The employee is
eligible to receive reduced retirement benefits based on an actuarial table for
a period not exceeding ten (l0) years or his lifetime. In no event would
benefits exceed $12,000 per year.
For normal retirement at the age of sixty-five (65) the employee is
entitled to receive full retirement benefits for a period not exceeding ten (10)
years or his lifetime. If the employee should die prior to the ten year period,
his beneficiaries will continue to receive the full benefit for the remainder of
the ten year term. In no event will benefits exceed $12,000 per year.
If payment is made on the "joint and survivor basis" as elected by the
employee, benefits will be provided to both the employee and spouse on a reduced
basis over the life of both the employee and his spouse. If the employee should
die prior to the guaranteed ten year period, the spouse will receive the
employee benefit for the remainder of the term, after which, the spouse will
receive the reduced spousal benefit for the life of the spouse. In no event will
the benefits pursuant to the joint and survivor basis exceed $12,000 per year.
In June, 1995, the Company applied to the Pension Benefit Guarantee
Corporation for a distress termination of the Salaried Pension Plan. The PBGC
has notified the Company that it has agreed to take over the Salaried Pension
Plan. The PBGC has not issued its final order and may require that the Company
enter into an agreement to make future payments to the PBGC.
<PAGE>
Under an agreement dated June 16, 1978, the Corporation entered into a
retirement compensation agreement with Michael Offerman, which provides that
upon reaching the age of 65, or the earlier of death, total disability, or
employment termination by mutual consent, Michael Offerman or his beneficiary
would be entitled to retirement payments of $30,000 per year for a period of
five years.
Employment Agreements
In August, 1995, the Board of Directors approved the terms of an
employment agreement with Michael Offerman, its President and Chairman of the
Board. Effective as of January 1, 1995, the terms of the Employment Agreement
provide that Mr. Offerman's salary will be $100,000 per year and that he will be
employed as President of the Company until a term expiring on December 31, 1999.
Mr. Offerman agreed to defer the increase in his salary from the previous year's
rate of compensation ($86,875) until October 20, 1995 and further agreed to
receive only $92,404 in salary for the fiscal year endedMarch 28, 1997.
Commencing in September1997, Mr. Offerman began receiving compensation at the
rate of $100,000 per year in accordance with his employment agreement. As
further provided under the terms of the Employment Agreement, the Company will
provide certain benefits such as health benefits and the use of a full size
automobile during the term. The Company also agreed to pay the premium for a
$150,000 term life insurance policy payable to Mr. Offerman's beneficiary. In
the event the Company declines to enter into a new employment agreement with Mr.
Offerman at the expiration of his term, the Company has agreed to pay Mr.
Offerman the sum of $75,000. Additionally, in the event there occurs a "change
of control" of the Company, and within the one (1) year period thereafter Mr.
Offerman's employment is terminated or he resigns, then Mr. Offerman will be
entitled to receive a sum equal to the balance of his base salary for the
remainder of the term plus $75,000. A "change of control" is defined to mean (i)
a person becomes the holder of 30% or more of the combined voting power of the
Company's outstanding securities (ii) the stockholders of the Company approve a
merger or consolidation whereby the Company's voting securities fail to
represent, after such merger or consolidation, at least 50.1% of the voting
securities of the surviving entity. Additionally, in the event the Company
relocates outside of the New York City Metropolitan area, it has agreed to pay
Mr. Offerman the sum of $75,000.
In August, 1995, the Board of Directors approved the terms of an
employment agreement with Ralph Acello, its Vice President-Production. Effective
as of January 1, 1995, the terms of the Employment Agreement provide that Mr.
Acello's salary will be $61,300 per year and that he will be employed as Vice
President-Production of the Company until a term expiring on December 31, 1999.
As further provided under the terms of the Employment Agreement, the Company
will provide certain benefits such as health benefits and the use of a full size
automobile during the term. The Company also agreed to pay the premium of a
$150,000 term life insurance policy payable to Mr. Acello's beneficiary. In the
event the Company declines to enter into a new employment agreement with Mr.
Acello at the expiration of his term, the Company has agreed to pay Mr. Acello
the sum of $45,975. Additionally, in the event there occurs a "change of
control" of the Company, and within the one (1) year period thereafter Mr.
Acello's employment is terminated or he resigns, then Mr. Acello will be
entitled to receive a sum equal to the balance of his base salary for the
<PAGE>
remainder of the term plus $45,975. A "change of control" is defined to mean (i)
a person becomes the holder of 30% or more of the combined voting power of the
Company's outstanding securities (ii) the stockholders of the Company approve a
merger or consolidation whereby the Company's voting securities fail to
represent, after such merger or consolidation, at least 50.1% of the voting
securities of the surviving entity. Additionally, in the event the Company
relocates outside of the New York City Metropolitan area, it has agreed to pay
Mr. Acello the sum of $45,975.
In August, 1995, the Board of Directors approved the terms of an
employment agreement with Robert Knoth. Effective as of January 1, 1995, the
terms of the Employment Agreement provide that Mr. Knoth's salary will be
$59,500 per year and that he will be employed as Secretary and Treasurer until a
term expiring on December 31, 1999. As further provided under the terms of the
Employment Agreement, the Company will provide certain benefits such as health
benefits. The Company also agreed to pay the premium of a $150,000 term life
insurance policy payable to Mr. Knoth's beneficiary. In the event the Company
declines to enter into a new employment agreement with Mr. Knoth at the
expiration of his term, the Company has agreed to pay Mr. Knoth the sum of
$44,625. Additionally, in the event there occurs a "change of control" of the
Company, and within the one (1) year period thereafter Mr. Knoth's employment is
terminated or he resigns, then Mr. Knoth will be entitled to receive a sum equal
to the balance of his base salary for the remainder of the term plus $44,625. A
"change of control" is defined to mean (i) a person becomes the holder of 30% or
more of the combined voting power of the Company's outstanding securities (ii)
the stockholders of the Company approve a merger or consolidation whereby the
Company's voting securities fail to represent, after such merger or
consolidation, at least 50.1% of the voting securities of the surviving entity.
Additionally, in the event the Company relocates outside of the New York City
Metropolitan area, it has agreed to pay Mr. Knoth the sum of $44,625.
In December 1997, the Board of Directors approved the terms of an
employment agreement with Joan Prideaux. The terms of the employment agreement
provide that Ms. Prideaux's salary will be $57,000 per year and that she will be
employed as Vice President-Sales and Marketing. The agreement is for a period of
five years. As further provided under the terms of the employment agreement, the
Company will provide certain benefits such as health benefits. The Company also
agreed to pay the premium of a $150,000 term life insurance policy payable to
Ms. Prideaux's beneficiary. In the event the Company declines to enter into a
new employment agreement with Ms. Prideaux at the expiration of the term, the
Company has agreed to pay Ms. Prideaux the sum of $42,750. Additionally, in the
event there occurs a "change of control" of the Company, and within the one (1)
year period thereafter Ms. Prideaux's employment is terminated or he resigns,
then she will be entitled to receive a sum equal to the balance of her base
salary for the remainder of the term plus $42,750. A "change of control" is
defined to mean (i) a person becomes the holder of 30% or more of the combined
voting power of the Company's outstanding securities (ii) the stockholders of
the Company approve a merger or consolidation whereby the Company's voting
securities fail to represent, after such merger or consolidation, at least 50.1%
of the voting securities of the surviving entity. Additionally, in the event the
Company relocates outside of the New York City Metropolitan area, it has agreed
to pay Ms. Prideaux the sum of $42,750.
<PAGE>
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 27, 1998, March 28, 1997 or March 29, 1996.
Item 11. Security Ownership of Certain Beneficial
Owners and Management
The following table sets forth certain information as of June 22, 1998
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 June 22, 1998, there were 2,303,502 shares of Common Stock issued
and outstanding.
<PAGE>
<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) 17.4%
Par Value 140 58th Street
Brooklyn, NY 11220
Murray Sennet 24,500 1.1%
1900 Manor Lane
Plano, TX 75093
Allen Gottlieb 0 0
325 Coral Way
Ft. Lauderdale. FL
33301
Robert Pittman 20,000 *
45 Ocean Avenue
Monmouth Bch, NJ
07750
Gerard Deiss
16 Rue De La Mart 547,000(2) 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
Southampton, NY
11968
All Officers & 444,284 19.3%
Directors 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.
All shares set forth above are directly by the named individual unless otherwise
stated.
<PAGE>
Item 12. Certain Relationships and Related Transactions
See "Executive Compensation-Employment Agreements" for a discussion of
the employment agreements between the Company and management.
Item 13. Exhibits, List and Reports on Form 8-K
(a) Exhibits filed with Form 10-KSB:
See annexed 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.
<PAGE>
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: June 24, 1997
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.
/s/Michael Offerman June 24, 1997
- -------------------
Michael Offerman, Chairman of the
Board and President
/s/Ralph Acello June 24, 1997
- ---------------
Ralph Acello
Vice President and Director
/s/Robert Knoth June 24, 1997
- ---------------
Robert Knoth, Secretary and
Treasurer
/s/Murray Sennet June 24, 1997
- ----------------
Murray Sennet, Director
/s/Robert Pittman June 24, 1997
- -----------------
Robert Pittman, Director
<PAGE>
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].
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].
<PAGE>
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 together with Amendment No. 1 dated November
27,1997. [filed as Exhibit 10.9 to Form 10KSB for the fiscal
year ended March 28, 1997]
10.10 Form of Employment Agreement between the Company and Ralph
Acello together with Amendment No. 1 dated November
27,1997.[filed as Exhibit 10.10 to Form 10KSB for the fiscal
year ended March 28, 1997]
10.11 Form of Employment Agreement between the Company and Robert
Knoth together with Amendment No. 1 dated November
27,1997.[filed as Exhibit 10.11 to Form 10KSB for the fiscal
year ended March 28, 1997]
10.12 Form of Employment Agreement between the Company and Joan
Prideaux. [filed as Exhibit 10.12 to Form 10KSB for the
fiscal year ended March 28, 1997]
11. Statement re:Computation of per share earnings
21. Subsidiaries: None
23.1* Consent of Jerome Rosenberg CPA, independent auditor of the
Company
27* EDGAR Financial Date Schedule
99.1 Stipulation and Escrow Agreement dated December 18, 1997
between the Company and New York Urban Development
Corporation together with Stipulation, Consent and Final
Judgement.[filed as Exhibit 99.1 to Form 10-QSB for the
quarter ended December 26, 1997]
-----------------------------
<PAGE>
ITEM 7- FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
IEH CORPORATION
CONTENTS
March 27, 1998 and March 28, 1997
Page
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT F-1
FINANCIAL STATEMENTS:
BALANCE SHEETS F-2
STATEMENTS OF OPERATIONS F-4
STATEMENTS OF STOCKHOLDERS' EQUITY F-5
STATEMENTS OF CASH FLOWS F-6
NOTES TO FINANCIAL STATEMENTS F-8
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
Board of Directors
IEH Corporation
I have audited the accompanying balance sheets of IEH Corporation as of March
27, 1998 and March 28, 1997 and the related statements of operations,
stockholders' equity and cash flows for each of the two years in the period
ended March 27, 1998 and March 28, 1997. 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 the I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. 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 27,
1998 and March 28, 1997 and the results of its operations and its cash flows for
each of the two years in the period ended March 27, 1998 and March 28, 1997 in
conformity with generally accepted accounting principles.
/s/Jerome Rosenberg, CPA, P.C.
- ------------------------------
Jerome Rosenberg, CPA, P.C.
Syosset, New York
May 28, 1998
F-1
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
BALANCE SHEETS
As of March 27, 1998 and March 28, 1997
March 27, March 28,
1998 1997
---------- ----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 19,454 $ 15,274
Accounts receivable, less allowance for
doubtful accounts of $10,062 at March 27, 1998
and March 28, 1997 838,721 651,873
Inventories (Note 2) 949,282 1,107,100
Prepaid expenses and other current assets (Note 3) 38,224 52,629
Other receivables -- 30,492
---------- ----------
Total current assets 1,845,681 1,857,368
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, less
accumulated depreciation and amortization of
$4,504,267 at March 27, 1998 and $ 4,238,093
at March 28, 1997 (Note 4) 1,405,625 1,480,841
---------- ----------
OTHER ASSETS:
Prepaid pension cost 43,949 43,949
Other assets 47,429 47,798
---------- ----------
91,378 91,747
---------- ----------
Total assets $3,342,684 $3,429,956
========== ==========
</TABLE>
See accompanying notes to financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
BALANCE SHEETS
As of March 27, 1998 and March 28, 1997
March 27, March 28,
1998 1997
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts receivable financing (Note 5) $ 656,015 $ 536,457
Notes payable, current portion (Note 7) 56,000 1,789
Loans payable, current portion (Note 8) 48,530 45,710
Accrued corporate income taxes 15,332 8,217
Union pension and health & welfare,
current portion (Note 7) 120,000 120,000
Accounts payable 722,957 1,074,903
Other current liabilities (Note 6) 124,026 131,835
----------- -----------
Total current liabilities 1,742,860 1,918,911
----------- -----------
LONG-TERM LIABILITIES:
Pension plan payable (Note 10) 516,966 516,966
Notes payable, less current portion (Note7) 132,558 --
Loan payable, less current portion (Note 8) 184,440 240,206
Union pension & health & health & welfare,
less current portion (Note11) 110,827 194,491
----------- -----------
Total long-term liabilities 944,791 951,663
----------- -----------
Total liabilities 2,687,651 2,870,574
----------- -----------
STOCKHOLDERS' EQUITY:
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) (2,112,592) (2,208,243)
Total stockholders' equity 655,033 559,382
----------- -----------
Total liabilities and stockholders' equity $ 3,342,684 $ 3,429,956
=========== ===========
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENT OF OPERATIONS
Years Ended
--------------------------
March 27, March 28,
1998 1997
---------- ----------
<S> <C> <C> <C>
REVENUES, net sales (Note 12) $4,750,099 $4,729,277
---------- ----------
COSTS AND EXPENSES:
Cost of products sold 3,424,932 3,433,704
Selling, general and administrative 835,025 760,432
Interest expense 116,104 149,735
Depreciation and amortization 268,173 272,894
---------- ----------
4,644,234 4,616,765
---------- ----------
OPERATING INCOME (LOSS) 105,865 112,512
OTHER INCOME 1,131 1,414
---------- ----------
INCOME BEFORE INCOME TAXES 106,996 113,926
PROVISION FOR INCOME TAXES 11,345 8,217
---------- ----------
NET INCOME $ 95,651 $ 105,709
========== ==========
Basic and Diluted Earnings per common share
(Note 1) $ .042 $ .046
========== ==========
Weighted average number of common shares
outstanding (in thousands) 2,304 2,304
========== ==========
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended March 27, 1998 and March 28, 1997
Capital in Retained
Common Stock Excess of Earnings
Shares Amount Par Value (Deficit)
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balances, March 29, 1996 2,303,502 $ 1,151,751 $ 1,615,874 $(2,313,952)
Net income: Year ended March 28, 1997 105,709
--------- ----------- ----------- -----------
Balances, March 28, 1997 2,303,502 1,151,751 1,615,874 (2,208,243)
Net income: Year ended March 27, 1998 95,651
--------- ----------- ----------- -----------
Balances, March 27, 1998 2,303,502 $ 1,151,751 $ 1,615,874 $(2,112,592)
========= =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
Years Ended
------------------------
March 27, March 28,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 95,651 $ 105,709
--------- ---------
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 268,173 272,894
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (186,848) 209,230
(Increase) decrease in inventories 157,818 (90,828)
(Increase) decrease in prepaid expenses and
other current assets 14,405 1,371
(Increase) Decrease in other receivables 30,492 30,918
Decrease in other assets 369 712
(Decrease) increase in accounts payable (351,946) (23,021)
(Decrease) increase in other current liabilities (7,809) (23,940)
Increase (decrease) in accrued corporate income taxes 7,115 (20,847)
(Decrease) in due to union pension & health & welfare (83,664) (88,610)
--------- ---------
Total adjustments (151,895) 267,879
--------- ---------
NET CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES (56,244) 373,588
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (192,957) (215,762)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (192,957) (215,762)
--------- ---------
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
March 27, March 28,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable $ (49,231) $ (2,753)
Increase in notes payable 236,000 --
Proceeds from accounts receivable financing 119,558 --
Principal payments on accounts receivable financing -- (106,923)
Principal payments on loan payable (52,946) (36,292)
--------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 253,381 (145,968)
--------- ---------
INCREASE IN CASH 4,180 11,858
CASH, beginning of period 15,274 3,416
--------- ---------
CASH, end of period $ 19,454 $ 15,274
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Interest expense $ 116,104 $ 149,735
========= =========
Income Taxes $ 11,345 $ 8,217
========= =========
</TABLE>
See accompanying notes to financial statements
F-7
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMEMTS
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 in providing
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 with 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 communications
systems, testing systems and other areas. The Company also
services its connectors to meet specified 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 years ended March 27, 1998 and March 28, 1997
were comprised of 52 weeks.
Revenue Recognition
Revenues are recognized at the shipping date of the Company's
products.
Inventories
Inventories are stated at cost, on a first-in, first-out basis,
which does not exceed market value.
Concentration of Credit Risk
The Company maintains cash balances at one bank. Amounts on
deposit are insured by the Federal Deposit Insurance
Corporation up to $100,000 in aggregate. There were no
uninsured balances at either March 27, 1998 or March 28, 1997.
F-8
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1- SUMMARY OF SIGNIFICIANT ACCOUNTING POLICIES (continued)
Property, Plant and Equipment
Property, plant and equipment is stated at cost less
accumulated depreciation and amortization. The Company provides
for depreciation and amortization using the straight-line
method over the estimated useful lives (3-10 years) of the
related assets.
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 amortization account any gain or
loss thereon is either credit 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".
Net Income Per Share
For the year ended March 27, 1998, the Company adopted the
provisions of SFAS No. 128, "Earnings Per Share", which
requires the disclosure of "basic" and "diluted" earnings
(loss) per share. Basic earnings per share is computed by
dividing net income by the weighted average number of common
shares outstanding during each period. Diluted earnings per
share is similar to basic earnings per share except that the
weighted average number of common shares outstanding is
increased to reflect the dilutive effect of potential common
shares, such as those issuable upon the exercise of stock or
warrants, as if they had been issued. For the years ended March
27, 1998 and March 28, 1997, there were no differences between
basic and diluted earnings per share.
Fair Value of Financial Instruments
The carrying value of the Company's financial instruments,
consisting of accounts receivable, accounts payable, and
borrowings, approximate their fair value.
F-9
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles 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. Actual amounts could differ from
those estimates.
Impairment of Long-Lived Assets
SFAS No. 121, "Accounting For the Impairment of Long-Lived
Assets To Be Disposed Of", requires that long-lived assets and
certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. The Company has adopted SFAS 121 effective
March 27, 1998. There was no impact of such adoption on the
Company's financial condition and results of operations.
Effect of New Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income". This statement established standards for
reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in an
entity's financial statements. This Statement requires an
entity to classify items of other comprehensive income by their
nature in a financial statement and display the accumulated
balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section
of a statement of financial position. This pronouncement is
effective for fiscal years beginning after December 15, 1997
and the Company expects to adopt the provision statement in the
fiscal year ending March 26, 1999. Management does not expect
this statement to significantly impact the Company's financial
statements.
F-10
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Effect of New Accounting Pronouncements (continued)
In June 1997, the FASB issued SFAS No. 131, Disclosure About
Segment Of An Enterprise and Related Information". This
statement requires public enterprises to report financial and
descriptive information about its reportable operating segments
and establishes standards for related disclosures about product
and services, geographic areas, and major customers. This
pronouncement is effective for fiscal years beginning after
December 15, 1997 and the Company expects to adopt the
provisions of this statement in the fiscal year ending March
26, 1999. Management does not expect this statement to
significantly impact the Company's financial statements.
In April 1998, the American Institute of Certified Public
Account's Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-5, " Reporting On The Costs Of
Start-Up Activities". The SOP, which is effective for fiscal
years beginning after December 15, 1998 with earlier
application encouraged, requires entities to expense start-up
costs and organization costs for establishing new operations.
Management does not expect this statement to significantly
impact the Company's financial statements.
Note 2- INVENTORIES:
Inventories are comprised of the following:
March 27, March 28,
1998 1997
---------- ----------
Raw materials $ 651,975 $ 791,452
Work in process 99,523 37,476
Finished goods 197,784 278,172
---------- ----------
$ 949,282 $1,107,100
========== ==========
Note 3- PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets are comprised of the
following:
March 27, March 28,
1998 1997
------- -------
Prepaid insurance $34,356 $48,054
Other current assets 3,868 4,575
------- -------
$38,224 $52,629
======= =======
F-11
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 4- PROPERTY, PLANT AND EQUIPMENT:
Details of property, plant and equipment are as follows:
March 27, March 28,
1998 1997
---------- ----------
Leasehold improvements $ 568,006 $ 568,006
Machinery and equipment 3,810,971 3,714,312
Tools and dies 1,370,899 1,276,600
Furniture and fixtures 148,770 148,770
Transportation equipment 11,246 11,246
---------- ----------
5,909,892 5,718,934
Less: accumulated depreciation and amortization 4,504,267 4,238,093
---------- ----------
$1,405,625 $1,480,841
========== ==========
Note 5- ACCOUNTS RECEIVABLE FINANCING:
The Company entered into an accounts receivable financing
agreement whereby it can borrow up to eighty percent of its
eligible receivables ( as defined in the agreement) at an
interest rate of 2 1/2% above The Chase Manhattan Bank's
publicly announced rate (8.50%) at March 27, 1998, with a
maximum 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
receiving sixty days prior written notice. The loan is secured
by the Company's accounts receivable and inventories.
Note 6- OTHER CURRENT LIABILITIES:
Other current liabilities are comprised of the following:
March 27, March 28,
1998 1997
-------- --------
Payroll and vacation accruals $ 28,300 $ 12,817
Sales commissions 9,574 9,591
Pension plan payable 65,489 65,489
Other 20,663 43,938
-------- --------
$124,026 $131,835
======== ========
F-12
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 7- NOTES PAYABLE:
The Company was in arrears in the amount of $236,000 to the New
York City Economic Development Corporation ("NYCEDC") for rent
due for its offices and manufacturing facilities. In May 1997,
the Company and the NYCEDC negotiated an agreement for the
Company to pay off its indebtedness over a 48 month period, by
the Company issuing notes payable to NYCDEC. The notes bear
interest at the rate of 8.25% per annum. The balance remaining
at March 27, 1998 was $188,558, with $56,000 being reported as
a current liability and the remainder being reported as a
long-term liability.
Note 8- 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% per annum.
The balance remaining at March 27, 1998 was $232,970..
Aggregate future principal payments are as follows:
Fiscal Year Ending March:
1999 $ 48,530
2000 50,693
2001 54,289
2002 58,795
Thereafter 20,663
--------
$232,970
========
In April 1997, the Company was informed by the UDC that the
loan was sold and conveyed to WAMCO XXIV, Ltd. All the terms
and conditions of the loan remained in effect.
As of March 27, 1998, the Company had failed to meet one of the
financial covenants of the loan agreement; namely that the
"Company shall be obligated to maintain a tangible net worth of
not less than $1,300,000 and the Company shall be obligated to
maintain a ratio of current assets to current liabilities of
1.1 to 1.0.
The Company reported tangible net worth of $655,033. The ratio
of current assets to current liabilities was 1.1 to 1.0.
The Company has applied for additional waivers of this
covenant. Neither the UDC or WAMCO XXIV has acted on these
requests. 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 and the entire loan plus
interest will become due and payable.
F-13
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 9- INCOME TAXES:
The Company has available at March 27, 1998, for federal income
tax purposes, a net operating loss of approximately $2,034,000
of which approximately $1,300,000 will expire in 2007 with the
balance in 2010. In addition, the Company has unused investment
tax credits of approximately $86,000 which expire between 1998
and 2002.
Note 10- PENSION PLAN-SALARIED PERSONNEL:
On June 30, 1995, the Company applied to the Pension Benefit
Guaranty Corporation ("PBGC") to have the PBGC assume all of
the Company's responsibilities and liabilities under its
Salaried Pension Plan. On April 26, 1996, the PBGC determined
that the Salaried Pension Plan did not have sufficient assets
available to pay benefits which were and are currently due
under the terms of the Plan. PBGC further determined that
pursuant to the provisions of the Employment Retirement Income
Security Act of 1974, as amended ("ERISA") that the Plan must
be terminated in order to protect the interests of the Plan's
participants. Accordingly, the PBGC proceeded pursuant to ERISA
to have the Plan terminated and the PBGC appointed as statutory
trustee, and to have July 31, 1995 established as the Plan's
termination date.
The PBGC has advised the Company that since the assets of the
Plan are combined with the assets of other plans and invested
by the Financial Operations Department of the PBGC, it does not
invest or track the assets separately by plan. Accordingly, the
PBGC was unable to provide any financial data relative to the
Plan, including return on investments, unrecognized gain or
loss or other information regarding the Plan assets at March
27, 1998.
At March 27, 1998 and March 28, 1997, $65,389 of the pension
liability is included in other current liabilities, with the
balance of $516,966 shown as a long-term liability. At March
27, 1998 and March 28, 1997, the long-term portion includes
$226,041, which represents the recognition of the additional
minimum liability to comply with the requirements of Statement
of Financial Accounting Standards No.87.
Note 11- COMMITMENTS:
The Company had entered into employment agreement with certain
of its officers. The agreements provided for retirement
compensation of $30,000 per annum for a period of five years
upon reaching either age 65, death, total disability or
employment terminated 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.
F-14
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 11- COMMITMENTS (continued)
On August 23, 1993, the Company entered into a lease with the
New York City Economic Development Corporation for its office
and manufacturing facilities. The Company is obligated under
this lease through September 1, 2001, at minimum annual rentals
as follows:
Fiscal Year Ending::
1999 $194,236
2000 194,236
2001 274,630
--------
$663,102
========
Net rental expense for the year ended March 27, 1998 for this
lease was $210,041.
(See Note 7- Notes Payable relating to rent arrears agreement)
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 1990 ("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 currently not available. The amount of
accumulated benefits and net assets of such Plan also is not
currently available to the Company. The total contributions
charged to operations under this pension plan were $40,176 for
the year ended March 27, 1998 and $42,140 for the year ended
March 28, 1997.
As of March 27, 1998, the Company reported 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
$155,189 and the amount due the pension plan was $75,638.
The total amount due of $230,827 is reported on the
accompanying balance sheet in two components; $120,000 reported
as a current liability and $110,827 as a long-term liability.
F-15
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 11- COMMITMENTS (continued)
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.
Note 12- REVENUES FROM MAJOR CUSTOMERS:
In the fiscal year ended March 27, 1998, more than 30% of the
Company's total revenues were earned from three customers.
Total sales to these customers were approximately $1,428,000.
Individually, sales to these three customers were $376,000,
$497,000 and $555,000.
F-16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-27-1998
<PERIOD-END> MAR-27-1998
<CASH> 19,454
<SECURITIES> 0
<RECEIVABLES> 838,721
<ALLOWANCES> 10,062
<INVENTORY> 949,282
<CURRENT-ASSETS> 1,845,681
<PP&E> 5,909,892
<DEPRECIATION> 4,504,267
<TOTAL-ASSETS> 3,342,684
<CURRENT-LIABILITIES> 1,742,860
<BONDS> 0
0
0
<COMMON> 1,151,751
<OTHER-SE> (496,718)
<TOTAL-LIABILITY-AND-EQUITY> 3,342,684
<SALES> 4,750,099
<TOTAL-REVENUES> 4,751,230
<CGS> 3,424,932
<TOTAL-COSTS> 3,424,932
<OTHER-EXPENSES> 1,103,198
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 116,104
<INCOME-PRETAX> 106,996
<INCOME-TAX> 0
<INCOME-CONTINUING> 106,996
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 95,651
<EPS-PRIMARY> .042
<EPS-DILUTED> .042
</TABLE>
