<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 May 31, 1996
---------------------------------------------------------------
Commission File Number 2-91218-B
----------------------------------------------------------
International Electronics, Inc.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2654231
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
427 Turnpike Street, Canton, Massachusetts 02021
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(617) 821-5566
- --------------------------------------------------------------------------------
(Issuer's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------
(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
------ ------
1,492,052 common shares were outstanding at July 2, 1996.
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
---------------------------------
Index
-----
Part I. Financial Statements (unaudited)
--------------------------------
Condensed Consolidated Balance Sheets, May 31, 1996
and August 31, 1995 2
Condensed Consolidated Statements of Operations, three and nine
months ended May 31, 1996 and 1995 3
Condensed Consolidated Statement of Shareholders' Equity, nine
months ended May 31, 1996 4
Condensed Consolidated Statements of Cash Flows, nine months
ended May 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2: Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations 9-14
-----------------------------------
Part II. Other Information:
------------------
Item 6: Exhibits and Reports on Form 8-K 15
--------------------------------
Signature 15
---------
-1-
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
---------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
----------------------------------------
(unaudited)
<TABLE>
<CAPTION>
May 31, 1996 August 31, 1995
------------- ----------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and equivalents $ 517,726 $ 327,812
Accounts receivable, net 886,774 836,705
Inventories 811,118 623,913
Other current assets 119,204 104,451
----------- -----------
Total current assets 2,334,822 1,892,881
Equipment, furniture and
improvements, net 287,730 280,326
Other assets:
Goodwill and other intangibles, net 347,884 415,597
Other 14,299 17,285
----------- -----------
362,183 432,882
----------- -----------
$ 2,984,735 $ 2,606,089
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------
Current liabilities:
Accounts payable $ 624,291 $ 651,176
Accrued expenses 592,577 431,389
Income taxes 45,000 -
Current portion of long-term
obligations 90,675 69,095
----------- -----------
Total current liabilities 1,352,543 1,151,660
Long-term obligations 424,927 452,685
Commitments
Shareholders' equity:
Common stock, $.01 par value:
Authorized 5,984,375 shares
Issued 1,510,851 and 1,442,669
shares 15,109 14,427
Capital in excess of par value 4,756,425 4,668,050
Accumulated deficit (3,525,625) (3,642,089)
Less treasury stock, at cost:
35,000 shares (38,644) (38,644)
----------- -----------
Total shareholders' equity 1,207,265 1,001,744
----------- -----------
$ 2,984,735 $ 2,606,089
=========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
-2-
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
---------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
---------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------------ ------------------------
May 31, May 31, May 31, May 31,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $2,249,281 $1,596,519 $6,240,158 $4,722,326
Cost of sales 1,276,964 902,574 3,602,516 2,702,840
---------- ---------- ---------- ----------
Gross profit 972,317 693,945 2,637,642 2,019,486
Research and development
costs 109,056 81,194 269,515 235,088
Selling, general and
administrative expenses 790,554 691,082 2,178,949 1,952,787
---------- ---------- ---------- ----------
Income (loss) from
operations 72,707 (78,331) 189,178 (168,389)
Interest expense (13,740) (16,077) (40,828) (44,668)
Other income (expense) 948 8,056 13,114 38,025
---------- ---------- ---------- ----------
Income (loss) before taxes 59,915 (86,352) 161,464 (175,032)
Provision for taxes 24,000 - 45,000 2,000
---------- ---------- ---------- ----------
Net income (loss) $ 35,915 ($86,352) $ 116,464 ($177,032)
========== ========== ========== ==========
Net income (loss)
per common share $.02 ($.06) $.07 ($.13)
========== ========== ========== ==========
Weighted average number
of common shares
outstanding 1,739,869 1,407,669 1,627,723 1,416,098
========== ========== ========== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
-3-
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
---------------------------------
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
Issuance of stock in
a private placement 68,182 682 88,375 - - - 89,057
Net income - - - 116,464 - - 116,464
--------- ------ --------- --------- ------ ------ ---------
Balances,
May 31, 1996 1,510,851 $15,109 $4,756,425 ($3,525,625) 35,000 ($38,644) $1,207,265
========= ======= ========== =========== ======== ========== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
-4-
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
---------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
----------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
----------------------------
May 31, 1996 May 31, 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 116,464 ($177,032)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 179,474 206,895
Changes in operating assets and liabilities:
Accounts receivable (50,069) (143,707)
Inventories (187,205) (101,140)
Other current assets (14,753) 30,221
Income taxes 45,000 2,000
Accounts payable and accrued
expenses 134,303 225,023
--------- ----------
Net cash provided by
operating activities 223,214 42,260
CASH FLOWS FROM INVESTING ACTIVITIES
AND OTHER:
Net purchase of equipment,
furniture and improvements (87,626) (28,756)
Goodwill and other intangibles and
other assets 2,986 1,850
--------- ----------
Net cash used in investing
activities and other (84,640) (26,906)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions of notes payable
and debt obligations 29,167 -
Issuance of common stock 89,057 -
Purchase of treasury stock - (19,042)
Reduction of notes payable and debt
obligations (66,884) (122,440)
--------- ----------
Net cash provided by (used in)
financing activities 51,340 (141,482)
--------- ----------
CASH AND EQUIVALENTS:
Net increase (decrease) during period 189,914 (126,128)
Balances, beginning of period 327,812 498,663
--------- ----------
Balances, end of period $ 517,726 $ 372,535
========= ==========
SUPPLEMENTAL SCHEDULE OF NONCASH
TRANSACTIONS:
Equipment acquired under capitalized leases $ 31,539 $ 55,000
</TABLE>
See notes to unaudited condensed consolidated financial statements.
-5-
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
---------------------------------
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 May 31,
1996 and the results of operations for the three and nine 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 (Loss) per Share:
----------------------------
Net income (loss) per share is based on the weighted average common and
dilutive common equivalent shares outstanding during the periods. Common
stock equivalents consist of stock options and warrants. Primary income
(loss) per common share is computed by dividing net income (loss) by the
weighted average number of common and common equivalent shares outstanding
based on the average market price of the Company's common stock (under the
treasury stock method). Income (loss) per common share, on a fully diluted
basis, is computed as described above utilizing the higher of the ending or
average market price of the Company's common stock. Primary and fully
diluted income (loss) per share are the same for each period.
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.
-6-
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
---------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------------------------------
(continued)
(unaudited)
E. Long-term Obligations:
----------------------
Long-term obligations are summarized as follows:
<TABLE>
<CAPTION>
May 31, 1996 Aug. 31, 1995
------------- --------------
<S> <C> <C>
Federal Deposit Insurance Corporation
Agreement $390,366 $406,192
11-18% capitalized lease obligations,
due through April 2001 (Note F) 76,946 80,740
Other 34,417 14,000
9-13% equipment loans, collateralized
by equipment, final payment due
July, 1998 13,873 20,848
-------- --------
515,602 521,780
Less current portion (90,675) (69,095)
-------- --------
$424,927 $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 $48,372 (1997), $389,216 (1998) and $1,068 (1999).
-7-
<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 May 31, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 50,535
1998 19,746
1999 7,250
2000 7,250
2001 6,646
--------
Total minimum lease payments 91,427
Less interest (14,481)
---------
Net minimum lease payments 76,946
Less current portion 42,303
--------
Long-term portion $ 34,643
========
</TABLE>
G. Capital Transactions:
---------------------
In September, 1995, the Company approved and reserved 70,000 shares of
common stock for an additional non-qualified stock option plan.
In January, 1996, the Company sold in a private placement, 68,182 shares of
restricted common stock for net proceeds of $89,057 with issuance costs of
$943.
In January, 1996, the Company granted warrants to a consulting firm to
purchase 10,000 shares of common stock at an exercise price of $1.65 per
share exercisable until 2006.
H. Subsequent Event:
-----------------
In June, 1996, the Company issued 16,201 shares of common stock upon the
exercise of stock warrants for proceeds of $12,151.
-8-
<PAGE>
Management's Discussion and Analysis of
-------------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
Liquidity and Capital Resources
- -------------------------------
As of May 31, 1996, the Company had working capital of $982,279 compared to
$741,221 at August 31, 1995. The ratio of current assets to current liabilities
was 1.7 at May 31, 1996 as compared to 1.6 at August 31, 1995. The debt to
equity ratio was 1.5 at May 31, 1996 and 1.6 at August 31, 1995. The increase
in working capital and current ratio and decrease in the debt to equity ratio
are the result of the Company's operating cash flow for the first nine months of
fiscal 1996 and a private placement of stock in January, 1996 for net proceeds
of approximately $89,000.
Capital expenditures were $119,165 and $83,756 for the nine months ended May 31,
1996 and 1995, respectively. The Company has no current commitments for any
material capital expenditures, but the Company anticipates up to $300,000 in
capital expenditures for the purchase of office and manufacturing equipment,
regulatory testing and tooling costs over the next twelve months.
As of May 31, 1996, the Company had indebtedness of approximately $390,000 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.
Results of Operations
- ---------------------
Net sales for the third quarter of fiscal 1996 increased 41% as compared to the
third quarter of fiscal 1995. Net sales for the first nine months of fiscal
1996 increased 32% as compared to the comparable period of fiscal 1995. The
increase in sales for the third quarter and first nine months of fiscal 1996
primarily reflects increases in access control, keypad, voice verification and
OEM product sales, offset in part by a reduction in glassbreak detector sales.
-9-
<PAGE>
Management's Discussion and Analysis
---------------------------------------
of Financial Condition and Results of Operations
-------------------------------------------------
(continued)
Results of Operations (continued)
- ---------------------
The ratio of gross profit to sales for the three months ended May 31, 1996 and
1995 were both 43%. The ratio of gross profit to sales for the nine months
ended May 31, 1996 and 1995 was 42% and 43%, respectively. The decrease in
gross profit percentage for the nine months ended May 31, 1996 as compared to
the comparable period of fiscal 1995 is primarily the result of product mix.
The increase in research and development costs for the third quarter and first
nine months of fiscal 1996 as compared to the comparable periods of fiscal 1995
reflect the hiring of additional employees and related expenses.
As a percentage of net sales, selling, general and administrative expenses were
35% and 43% for the three months ended May 31, 1996 and 1995, respectively and
35% and 41% for the nine months ended May 31, 1996 and 1995, respectively. The
increase in selling, general and administrative expenses in absolute dollars for
the three and nine months ended May 31, 1996, as compared to the corresponding
periods of the prior year primarily relates to additions in the Company's work
force and related expenses, salary increases and promotional expenses.
The decrease in other income (expense) for the three months ended May 31, 1996
as compared to the comparable period of fiscal 1995, primarily relates to a
decrease in commission revenue. The provision for taxes for the first nine
months of fiscal 1996 represents federal alternative minimum taxes and state
income tax expense. The Company's effective income tax rate for the nine months
ended May 31, 1996 of 28% was less than the combined federal and state statutory
rate, primarily as a result of the utilization of available net operating loss
carryforwards.
Factors that May Affect Future Results
- --------------------------------------
Information provided by the Company in writing and orally, from time to time may
contain certain "forward-looking" information as this term is defined by: (1)
the Private Securities Litigation Reform Act of 1995 (the "Act") and (2) in
releases made by the Securities and Exchange Commission. The following
Cautionary Statements are being made pursuant to the provisions of the Act and
with the intention of obtaining the benefits of the "safe harbor" provisions of
the Act. The Company cautions investors that any forward-looking statements
made by the Company involve risks and uncertainties, which could cause actual
results to differ materially from those projected.
The Company has identified certain risks and uncertainties as factors which may
impact on its operating results which are detailed below. All of these factors
are difficult for the Company to forecast, and these or other factors can
materially adversely effect the Company's business and operating results for one
quarter or a series of quarters.
-10-
<PAGE>
Management's Discussion and Analysis
---------------------------------------
of Financial Condition and Results of Operations
-------------------------------------------------
(continued)
Factors that May Affect Future Results (continued)
- --------------------------------------
Limited Financial Resources and Losses from Operations. The Company has limited
financial resources. It is therefore subject to all the risks generally
associated with a small business having limited financial resources. For the
years ended August 31, 1995, 1994 and 1993, the Company has experienced losses
of approximately ($231,000), ($49,000), and ($315,000), respectively. For the
nine months ended May 31, 1996 the Company had net income of approximately
$116,000. There can be no assurance that the Company will continue profitable
operations. Continued operations after the expenditure of the Company's
existing cash reserves may require additional working capital to be generated by
profitable operations or additional financing. There can be no assurance that
profits will continue or that external funding will be obtainable, if such a
need should arise.
No Access to Additional Financing. In December, 1994 the Company renegotiated
debt with the FDIC which provided for repayment of the then current balance
utilizing a 20-year amortization with payment in full at December 31, 1997.
When the FDIC note becomes due in full, if the Company is unable to replace the
debt partially or in full, it may have a substantial adverse effect on the
Company's operations. The Company currently has no access to additional or
replacement financing.
Dependence on Key Employees. The business of the Company is dependent upon the
efforts of John Waldstein and certain other key management and technical
employees. The loss or prolonged disability of such personnel could have a
significant adverse effect on the business of the Company. The Company
presently maintains a key man life insurance policy of $1,000,000 on John
Waldstein, President and Treasurer.
Limited Design Engineering Staff. The Company is engaged in an industry which,
as a result of extensive research and development, introduces new products on a
regular basis. Current competitors or new market entrants may develop new
products with features that could adversely affect the competitive position of
the Company's products. There can be no assurance that the Company will be
successful in selecting, developing, manufacturing and marketing new products or
enhancing its existing products or that the Company will be able to respond
effectively to technological changes or product announcements by competitors.
Any failure or delay in these goals could have a material adverse effect on the
Company.
Fluctuations in Sales and Operating Results. The quarterly growth rates
recently experienced by the Company are not necessarily indicative of future
quarterly growth rates. Operating results may also fluctuate due to factors
such as the timing of new product announcements and introductions by the
Company, its major customers and its competitors, market acceptance of new or
enhanced versions of the Company's products, changes in the product mix of
sales, changes in the relative proportions of sales among distribution channels
or among customers within each distribution channel, changes in manufacturing
costs,
-11-
<PAGE>
Management's Discussion and Analysis
----------------------------------------
of Financial Condition and Results of Operations
-------------------------------------------------
(continued)
Factors that May Affect Future Results (continued)
- --------------------------------------
competitive pricing pressures, the gain or loss of significant customers,
increased research and development expenses associated with new product
introductions and general economic conditions. A limited number of customers
have accounted for a significant portion of sales in any particular quarter. In
addition, the Company typically operates with a relatively small backlog. As a
result, quarterly sales and operating results generally depend on the volume,
timing of, and ability to fulfill orders received within the quarter which are
difficult to forecast. In this regard, the Company may recognize a substantial
portion of its sales in a given quarter from sales booked and shipped in the
last weeks of that quarter. A delay in customer orders, resulting in a shift of
product shipment from one quarter to another, could have a significant affect on
the Company's operating results. In addition, competitive pressure on pricing
in a given quarter could adversely affect the Company's operating results, or
such price pressure over an extended period could adversely effect the Company's
long-term profitability.
The Company establishes its expenditure levels for sales and marketing and other
expenses based, in large part, on its expected future results. As a result, if
sales fall below expectations, there would likely be a material adverse effect
on operating results because only a small portion of the Company's expenses vary
with its sales in the short-term.
Concentration of Customers. The Company has a substantial number of customers
but principally sells its products to a small number of large customers. This
concentration of customers may cause net sales and operating results to
fluctuate from quarter to quarter based on major customers' requirements and the
timing of their orders and shipments. Sales to the Company's largest customer
accounted for approximately 30% of the Company's total net sales for the fiscal
year ended August 31, 1995. The Company's agreements with its customers
generally do not include minimum purchase requirements. There can be no
assurance that the Company's major customers will place additional orders, or
that the Company will obtain orders of similar magnitude from other customers.
The Company's operating results could be materially and adversely affected if
any present or future major customer were to choose to reduce its level of
orders, were to experience financial, operational or other difficulties that
resulted in such a reduction in orders to the Company or were to delay paying or
fail to pay the Company's receivables from such customer. In fiscal 1995, the
Company lost a major domestic distributor who filed for bankruptcy with accounts
receivable due the Company of approximately $80,000.
Competition. Other companies in the industry offer products in competition with
those of the Company. Most of the companies with which the Company competes are
substantially larger, have greater resources and market a larger line of
products. The Company expects competition to increase significantly in the
future from existing competitors and new companies that may enter the Company's
existing or future markets. Increased competition could adversely affect the
Company's sales and profitability. There can be no assurance that the Company
will be able to continue to compete successfully with its existing competitors
or with new competitors.
-12
<PAGE>
Management's Discussion and Analysis
---------------------------------------
of Financial Condition and Results of Operations
-------------------------------------------------
(continued)
Factors that May Affect Future Results (continued)
- --------------------------------------
Lack of Patent Protection. Although the Company has obtained some patent and
copyright protection for certain of its products and software, management
believes that competitors may be able to market certain products similar to
those sold by the Company.
Production in Asia. The Company presently maintains certain manufacturing molds
in Asia and has a significant amount of components for some products
manufactured in Asia. There can be no assurance that the Asian political or
economic environment will remain sufficiently stable to allow reliable and
consistent delivery of product.
Dependence on Single Source of Supply. The Company is dependent upon sole
source suppliers for a number of key components and parts used in the Company's
products. There can be no assurance that these suppliers will be able to meet
the Company's future requirements for such components or that the components
will be available to the Company at favorable prices. Any extended interruption
in the supply or significant increase in price of any such components could have
a material adverse effect on the Company's operating results in any given
period.
Foreign Sales. During the year ended August 31, 1995, the Company's foreign
sales represented approximately 12% of net sales. There may be a reduction in
the Company's foreign sales in the event of significant changes in foreign
exchange rates or political and economic instability in foreign countries.
Limited Market for Common Stock. There is a limited market for the Company's
common stock and there can be no assurance that even this limited market will be
sustained. Holders of the Company's common stock may have difficulty selling
their shares or may have difficulty selling them at a favorable price.
Maintain Listing on NASDAQ. Effective March 2, 1992, the National Association
of Securities Dealers, Inc. established higher standards for a company's stock
to maintain its listing on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"). The new standards include maintaining a
minimum bid price of $1.00 per share for ten consecutive trading days and
stockholders' equity with a minimum balance of $1,000,000. The Company has, at
times, been unable to maintain the $1.00 minimum bid price criteria and as of
May 31, 1996 had stockholders' equity of approximately $1,210,000. At the
present time, it is not possible to determine whether the Company will be able
to continue to achieve and/or maintain the new standards and have its common
stock listed on NASDAQ. There is no assurance that NASDAQ in the future will
not adopt even higher standards for a company to maintain its stock listing on
NASDAQ. If the Company is unable to maintain its listing on NASDAQ, holders of
the Company's common stock may have additional difficulty selling their shares
or may have difficulty selling them at a favorable price.
-13-
<PAGE>
Management's Discussion and Analysis
---------------------------------------
of Financial Condition and Results of Operations
-------------------------------------------------
(continued)
Factors that May Affect Future Results (continued)
- --------------------------------------
Volatility of Stock Price. The Company's stock price is subject to significant
volatility. If revenues or earnings in any quarter fail to meet the investment
community's expectations, announcements of new products by the Company or its
competitors and other events or factors could have an immediate impact on the
Company's stock price. The stock price may also be affected by broader market
trends unrelated to the Company's performance.
-14-
<PAGE>
Part II. Other Information
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
11.1 Statement regarding computation of per share
income (loss)
27 Financial data schedule
(b) There were no reports on Form 8-K filed for the
three months ended May 31, 1996.
SIGNATURE
---------
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: 7/11/96 /s/ John Waldstein
------- -----------------------------
John Waldstein, President,
Treasurer & Chief Financial and Accounting
Officer and duly authorized to sign.
-15-
<PAGE>
Exhibit 11.1
International Electronics, Inc.
Calculation of Net Income (Loss) Per Common Share
Three months ended Nine months ended
------------------ -----------------
<TABLE>
<CAPTION>
May 31, May 31, May 31, May 31,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PRIMARY NET INCOME (LOSS)
PER SHARE
- ---------------------------
Weighted Average Number of
Shares Outstanding:
Common Stock 1,475,851 1,407,669 1,439,272 1,416,098
Common equivalent shares
resulting from dilutive
stock options and warrants
(treasury stock method
using the average
market price) 264,018 - 188,451 -
---------- ----------- ---------- ----------
Total 1,739,869 1,407,669 1,627,723 1,416,098
========== =========== ========== ==========
Net Income (Loss) $35,915 ($86,352) $116,464 ($177,032)
========== =========== ========== ==========
Net Income (Loss)
Per Common Share $.02 ($.06) $.07 ($.13)
========== =========== ========== ==========
</TABLE>
FULLY DILUTED NET INCOME (LOSS) PER SHARE
- -----------------------------------------
<TABLE>
<CAPTION>
Weighted Average Number of
Shares Outstanding:
<S> <C> <C> <C> <C>
Common Stock 1,475,851 1,407,669 1,439,272 1,416,098
Common equivalent shares
resulting from dilutive stock
options and warrants (treasury
stock method using the higher
of the ending or average
market price) 264,018 - 246,115 -
---------- --------- ---------- ---------
Total 1,739,869 1,407,669 1,685,387 1,416,098
========== ========= ========== =========
Net Income (Loss) $35,915 ($86,352) $116,464 ($177,032)
========== ========= ========== =========
Net Income (Loss)
Per Common Share $ .02 ($.06) $.07 ($.13)
========== ========= ========== =========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENT OF FINANCIAL CONDITION AT MAY 31,
1996 (UNAUDITED) AND THE RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MAY 31,
1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 517,726
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 811,118
<CURRENT-ASSETS> 2,334,822
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,984,735
<CURRENT-LIABILITIES> 1,352,543
<BONDS> 424,927
<COMMON> 15,109
0
0
<OTHER-SE> 1,192,156
<TOTAL-LIABILITY-AND-EQUITY> 2,984,735
<SALES> 6,240,158
<TOTAL-REVENUES> 6,253,272
<CGS> 3,602,516
<TOTAL-COSTS> 3,602,516
<OTHER-EXPENSES> 269,515
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,828
<INCOME-PRETAX> 161,464
<INCOME-TAX> 45,000
<INCOME-CONTINUING> 116,464
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 116,464
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
