<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended November 30, 1995
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Commission File Number 2-91218-B
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International Electronics, Inc.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2654231
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
427 Turnpike Street, Canton, Massachusetts 02021
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(Address of principal executive offices) (Zip Code)
(617) 821-5566
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(Issuer's telephone number, including area code)
Not applicable
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(former name, former address and former fiscal year, if changed
since last report)
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
the past 90 days. YES X NO
----- -----
1,407,669 common shares were outstanding at January 5, 1996.
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INTERNATIONAL ELECTRONICS, INC.
-------------------------------
Index
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<TABLE>
<CAPTION>
Part I. Financial Information: Page No.
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<S> <C>
Item 1: Financial Statements (unaudited)
--------------------------------
Condensed Consolidated Balance Sheets, November 30, 1995
and August 31, 1995 2
Condensed Consolidated Statements of Operations, three months
ended November 30, 1995 and 1994 3
Condensed Consolidated Statement of Shareholders' Equity,
three months ended November 30, 1995 4
Condensed Consolidated Statements of Cash Flows, three
months ended November 30, 1995 and 1994 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2: Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations 9-10
---------------------------------------------
<CAPTION>
Part II. Other Information:
<S> <C>
Item 6: Exhibits and Reports on Form 8-K 11
--------------------------------
Signatures 11
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</TABLE>
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INTERNATIONAL ELECTRONICS, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Nov. 30, 1995 August 31, 1995
-------------- ---------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and equivalents $ 350,695 $ 327,812
Accounts receivable, net 912,740 836,705
Inventories 664,696 623,913
Other current assets 86,534 104,451
----------- -----------
Total current assets 2,014,665 1,892,881
Equipment, furniture and
improvements, net 264,854 280,326
Other assets:
Goodwill and other intangibles, net 393,026 415,597
Other 16,985 17,285
----------- -----------
410,011 432,882
----------- -----------
$ 2,689,530 $ 2,606,089
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 657,379 $ 651,176
Accrued expenses 492,184 431,389
State income taxes 5,000 -
Current portion of long-term
obligations 66,190 69,095
----------- -----------
Total current liabilities 1,220,753 1,151,660
Long-term obligations 436,764 452,685
Commitments
Shareholders' equity:
Common stock, $.01 par value:
Authorized 5,984,375 shares
Issued 1,442,669 shares 14,427 14,427
Capital in excess of par value 4,668,050 4,668,050
Accumulated deficit (3,611,820) (3,642,089)
Less treasury stock, at cost:
35,000 shares (38,644) (38,644)
----------- -----------
Total shareholders' equity 1,032,013 1,001,744
----------- -----------
$ 2,689,530 $ 2,606,089
=========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
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INTERNATIONAL ELECTRONICS, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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(unaudited)
<TABLE>
<CAPTION>
Three months ended
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Nov. 30, 1995 Nov. 30, 1994
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<S> <C> <C>
Net sales $1,945,323 $1,595,281
Cost of sales 1,133,372 929,474
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Gross profit 811,951 665,807
Research and development costs 72,765 71,719
Selling, general and
administrative expenses 694,839 592,842
---------- ----------
Income from operations 44,347 1,246
Interest expense (14,026) (13,810)
Other income 4,948 25,521
---------- ----------
Income before taxes 35,269 12,957
Provision for taxes 5,000 1,000
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Net income $ 30,269 $ 11,957
========== ==========
Net income
per common share $.02 $.01
========== ==========
Weighted average number
of common shares outstanding 1,407,669 1,423,669
========== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
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<PAGE>
INTERNATIONAL ELECTRONICS, INC.
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CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
--------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Common Stock Capital in Treasury Stock
------------------ excess of Accumulated ----------------------------
Shares Amount par value Deficit Shares Cost Total
--------- ------- ---------- ------------ ----------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
September 1, 1995 1,442,669 $14,427 $4,668,050 ($3,642,089) 35,000 ($38,644) $1,001,744
Net income - - - 30,269 - - 30,269
Balances, --------- ------- ---------- ----------- ----------- -------------- ----------
November 30, 1995 1,442,669 $14,427 $4,668,050 ($3,611,820) 35,000 ($38,644) $1,032,013
========= ======= ========== =========== =========== ============== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
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INTERNATIONAL ELECTRONICS, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(unaudited)
<TABLE>
<CAPTION>
Three months ended
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Nov. 30, 1995 Nov. 30, 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 30,269 $ 11,957
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 54,874 67,367
Changes in operating assets and liabilities:
Accounts receivable (76,035) (140,249)
Inventories (40,783) 22,139
Other current assets 17,917 22,493
State income taxes 5,000 1,000
Accounts payable and accrued
expenses 66,998 183,239
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Net cash provided by
operating activities 58,240 167,946
CASH FLOWS FROM INVESTING ACTIVITIES
AND OTHER:
Net purchase of equipment,
furniture and improvements (16,831) (7,774)
Goodwill and other intangibles and
other assets 300 (2,681)
-------- ---------
Net cash used in investing
activities and other (16,531) (10,455)
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of notes payable and debt
obligations (18,826) (63,729)
-------- ---------
Net cash used in financing activities (18,826) (63,729)
-------- ---------
CASH AND EQUIVALENTS:
Net increase during period 22,883 93,762
Balances, beginning of period 327,812 498,663
-------- ---------
Balances, end of period $350,695 $ 592,425
======== =========
SUPPLEMENTAL SCHEDULE OF NONCASH
TRANSACTIONS:
Equipment acquired under capitalized leases $ - $ 37,258
</TABLE>
See notes to unaudited condensed consolidated financial statements.
-5-
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(unaudited)
A. Financial Statements:
---------------------
In the opinion of the Company, the unaudited condensed consolidated financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position as of
November 30, 1995 and the results of operations for the three months then
ended.
Certain disclosures normally included have been condensed or omitted pursuant
to the rules and regulations of the Securities and Exchange Commission,
although the Company believes the disclosures are adequate to make the
information presented not misleading. It is suggested that these financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's annual report on Form 10-KSB for the year
ended August 31, 1995.
B. Net Income per Share:
---------------------
Net income per share is based on the weighted average common shares
outstanding during the periods. Net income per common share assuming full
dilution have not been presented because the dilutive effect is not material.
C. Principles of Consolidation:
----------------------------
The accompanying condensed consolidated financial statements include the
accounts of the Company and its majority owned subsidiary, Ecco Industries,
Inc. All material intercompany transactions, balances and profits have been
eliminated.
D. Income Taxes:
-------------
The Company provides for income taxes at the end of each interim period based
on the estimated effective tax rate for the full fiscal year. Cumulative
adjustments to the tax provision are recorded in the interim period in which
a change in the estimated annual effective rate is determined.
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INTERNATIONAL ELECTRONICS, INC.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(continued)
(unaudited)
E. Long-term Obligations:
----------------------
Long-term obligations are summarized as follows:
<TABLE>
<CAPTION>
Nov. 30, 1995 Aug. 31, 1995
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<S> <C> <C>
Federal Deposit Insurance Corporation
Agreement $400,917 $406,192
9-15% capitalized lease obligations,
due through December, 1998 (Note F) 69,449 80,740
Other 14,000 14,000
7-15% equipment loans, collateralized
by equipment, final payment due
July, 1998 18,588 20,848
-------- --------
502,954 521,780
Less current portion (66,190) (69,095)
-------- --------
$436,764 $452,685
======== ========
</TABLE>
Federal Deposit Insurance Corporation (FDIC) Agreement - In May 1991, the
------------------------------------------------------
Company's bank, Boston Trade Bank, was declared insolvent and the FDIC became
the holder of the Company's debt to the bank. In December 1994, the Company
renegotiated this debt with the FDIC.
The agreement provided for repayment of $35,000 prior to October 8, 1994,
with payments on the remaining balance of $430,000 utilizing a 20-year
amortization with payment in full after 3 years. The debt is collateralized
by all of the Company's assets with interest at the prime rate plus 1% and
has been personally guaranteed by an officer of the Company.
The aggregate principal payments on long-term obligations, excluding capital
leases are $29,969 (1996), $40,683 (1997) and $362,853 (1998).
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<PAGE>
INTERNATIONAL ELECTRONICS, INC.
-------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(continued)
(unaudited)
F. Capital Lease Commitments:
--------------------------
The Company leases certain equipment under capital leases and, accordingly,
the present value of the net minimum payments has been reflected in
equipment, furniture and improvements and capitalized lease obligations.
Future minimum capital lease payments under lease terms in excess of one year
at November 30, 1995 are as follows:
<TABLE>
<S> <C>
1996 $ 44,208
1997 30,963
1998 4,593
1999 382
--------
Total minimum lease payments 80,146
Less interest (10,697)
--------
Net minimum lease payments 69,449
Less current portion (36,221)
--------
Long-term portion $ 33,228
========
</TABLE>
G. Capital Transactions:
---------------------
On September 7, 1995, the Company approved and reserved 70,000 shares of
common stock for an additional non-qualified stock option plan.
-8-
<PAGE>
Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
Liquidity and Capital Resources
- -------------------------------
As of November 30, 1995, the Company had working capital of $793,912 compared to
$741,221 at August 31, 1995. The ratio of current assets to current liabilities
was 1.7 at November 30, 1995 as compared to 1.6 at August 31, 1995. The debt to
equity ratio was 1.6 at both November 30, 1995 and August 31, 1995. The increase
in working capital and current ratio is primarily the result of the Company's
operating cash flow for the first quarter of fiscal 1996.
Net capital expenditures were $16,831 and $45,032 for the three months ended
November 30, 1995 and 1994, respectively. The Company has no current commitments
for any material capital expenditures, but the Company anticipates up to
$260,000 in capital expenditures for the purchase of office and manufacturing
equipment, regulatory testing and tooling costs over the next twelve months.
As of November 30, 1995, the Company had indebtedness of approximately $401,000
under an agreement with the Federal Deposit Insurance Corporation ("FDIC"). See
Note E to Unaudited Condensed Consolidated Financial Statements. In May, 1991,
the Commissioner of Banks of the Commonwealth of Massachusetts declared the
Company's bank insolvent, and appointed the FDIC as liquidating agent of the
bank. In December, 1994, the Company renegotiated this debt with the FDIC. The
revised agreement provided for repayments of the then current balance utilizing
a 20-year amortization with payment in full at December 31, 1997, and interest
at the prime rate plus 1%.
Management believes that its current cash position, together with internally
generated funds at present sales levels, will provide adequate cash reserves, to
satisfy its cash requirements for the next twelve months. Depending upon whether
or not sufficient revenue and working capital is generated from profitable
operations, the Company may require external funding. There is no assurance that
profits will be generated, or that external funding will be obtainable, if such
a need should arise.
-9-
<PAGE>
Management's Discussion and Analysis
------------------------------------
of Financial Condition and Results of Operations
------------------------------------------------
(continued)
Results of Operations
- ---------------------
Net sales for the first quarter of fiscal 1996 increased 22% as compared to the
first quarter of fiscal 1995. The increase in sales for the first quarter of
fiscal 1996 primarily reflects increases in access control and keypad and voice
verification product sales, offset in part by a reduction in glassbreak detector
sales. The Company continues to have a dependence on large volume sales to large
customers and therefore remains subject to quarterly fluctuations primarily as a
result of an uneven flow of orders from its current customer base.
The ratio of gross profit to sales for the three months ended November 30, 1995
and 1994 were both 42%. Research and development costs for the first quarter of
fiscal 1996 is comparable to the same period of the preceding year.
As a percentage of net sales, selling, general and administrative expenses were
36% and 37% for the three months ended November 30, 1995 and 1994, respectively.
The increase in such expenses in absolute dollars primarily relates to additions
in the Company's work force and related expenses, salary increases and promotion
expenses.
The decrease in other income in the first quarter of fiscal 1996 as compared to
the first quarter of fiscal 1995, primarily relates to a reduction in commission
revenue and a renegotiation of the Company's bank debt with the FDIC in
December, 1994. The provision for taxes represents state income tax expense due
by the Company after utilization of available net operating loss carryforwards.
-10-
<PAGE>
Part II. Other Information
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
(1) No. 27 - Financial Data Schedule
(b) There were no reports on Form 8-K filed for the
three months ended November 30, 1995.
SIGNATURES
----------
Pursuant to the requirements of the Exchange Act, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, who is duly
authorized to sign and is Chief Financial and Accounting Officer.
International Electronics, Inc.
Date: 1/9/96 /s/ John Waldstein
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John Waldstein, President,
Treasurer & Chief Financial and Accounting
Officer and duly authorized to sign.
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENT OF FINANCIAL CONDITION AT NOVEMBER
30, 1995 (UNAUDITED) AND THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
NOVEMBER 30, 1995 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 350,695
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 664,696
<CURRENT-ASSETS> 2,014,665
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,689,530
<CURRENT-LIABILITIES> 1,220,753
<BONDS> 436,764
<COMMON> 14,427
0
0
<OTHER-SE> 1,017,586
<TOTAL-LIABILITY-AND-EQUITY> 2,689,530
<SALES> 1,945,323
<TOTAL-REVENUES> 1,950,271
<CGS> 1,133,372
<TOTAL-COSTS> 1,133,372
<OTHER-EXPENSES> 72,765
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,026
<INCOME-PRETAX> 35,269
<INCOME-TAX> 5,000
<INCOME-CONTINUING> 30,269
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,269
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
