<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 February 28, 1997
-----------------
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
---- ----
1,492,551 common shares were outstanding at April 2, 1997.
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
---------------------------------
Index
-----
<TABLE>
Part I. Financial Statements (unaudited)
--------------------------------
<S> <C>
Condensed Consolidated Balance Sheets, February 28, 1997
and August 31, 1996 2
Condensed Consolidated Statements of Operations, three and six
months ended February 28, 1997 and February 29, 1996 3
Condensed Consolidated Statement of Shareholders' Equity,
six months ended February 28, 1997 4
Condensed Consolidated Statements of Cash Flows, six
months ended February 28, 1997 and February 29, 1996 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2: Management's Discussion and Analysis of
---------------------------------------------
Financial Condition and Results of Operations 9-12
---------------------------------------------
Part II. Other Information:
Item 4: Submission of Matters to a Vote of
----------------------------------
Security Holders 13
----------------
Item 6: Exhibits and Reports on Form 8-K 13
--------------------------------
Signature 13
---------
</TABLE>
1
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
---------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
----------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Feb. 28, 1997 August 31, 1996
-------------- ----------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and equivalents $ 507,856 $ 556,745
Accounts receivable, net 922,947 932,255
Inventories 841,589 828,448
Other current assets 146,408 141,818
----------- -----------
Total current assets 2,418,800 2,459,266
Equipment, furniture and
improvements, net 354,287 301,300
Other assets:
Goodwill and other intangibles, net 280,171 325,313
Other 42,156 14,299
----------- -----------
322,327 339,612
----------- -----------
$ 3,095,414 $ 3,100,178
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 835,245 $ 592,137
Accrued expenses 905,573 703,133
Income taxes 23,000 40,000
Current portion of long-term
obligations 40,516 79,516
----------- -----------
Total current liabilities 1,804,334 1,414,786
Long-term obligations 54,207 409,451
Commitments
Shareholders' equity:
Common stock, $.01 par value:
Authorized 5,984,375 shares
Issued 1,527,551 and 1,527,051
shares 15,276 15,271
Capital in excess of par value 4,781,988 4,779,413
Accumulated deficit (3,521,747) (3,480,099)
Less treasury stock, at cost:
35,000 shares (38,644) (38,644)
----------- -----------
Total shareholders' equity 1,236,873 1,275,941
----------- -----------
$ 3,095,414 $ 3,100,178
=========== ===========
</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 Six months ended
------------------------------ -----------------------------
Feb. 28, 1997 Feb. 29, 1996 Feb 28, 1997 Feb. 29, 1996
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net sales $2,186,681 $2,045,554 $4,484,837 $3,990,877
Cost of sales 1,326,251 1,192,180 2,694,080 2,325,552
---------- ---------- ---------- ----------
Gross profit 860,430 853,374 1,790,757 1,665,325
Research and development costs 136,763 87,694 250,881 160,459
Selling, general and
administrative expenses 793,532 693,556 1,557,020 1,388,395
---------- ---------- ---------- ----------
Income (loss) from operations (69,865) 72,124 (17,144) 116,471
Interest expense (12,020) (13,062) (24,066) (27,088)
Other income 7,661 7,218 11,116 12,166
---------- ---------- ---------- ----------
Income (loss) before
extraordinary gain and taxes (74,224) 66,280 (30,094) 101,549
Extraordinary gain, net of
income tax expense of $1,000 10,446 - 10,446 -
---------- ---------- ---------- ----------
Income (loss) before taxes (63,778) 66,280 (19,648) 101,549
Provision for taxes 6,000 16,000 22,000 21,000
---------- ---------- ---------- ----------
Net income (loss) ($69,778) $ 50,280 ($41,648) $ 80,549
========== ========== ========== ==========
Net income (loss) per share:
Income (loss) before
extraordinary gain ($.06) $.03 ($.04) $.05
Extraordinary gain .01 - .01 -
---------- ---------- ---------- ----------
Net income ($.05) $.03 ($.03) $.05
========== ========== ========== ==========
Weighted average common and
equivalent shares outstanding 1,492,551 1,564,751 1,492,510 1,543,506
========== ========== ========== ==========
</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, 1996 1,527,051 $15,271 $4,779,413 ($3,480,099) 35,000 ($38,644) $1,275,941
Stock issued upon
exercise of employee
stock options 500 5 675 - - - 680
Issuance of stock
warrants - - 1,900 - - - 1,900
Net loss - - - (41,648) - - (41,648)
--------- ------- ---------- ------------ ------ --------- ----------
Balances,
February 28, 1997 1,527,551 $15,276 $4,781,988 ($3,521,747) 35,000 ($38,644) $1,236,873
========= ======= ========== ============ ====== ========= ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
4
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
---------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
----------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Six months ended
-----------------------------
Feb. 28,1997 Feb. 29, 1996
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($41,648) $ 80,549
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 130,766 116,351
Changes in operating assets and liabilities:
Accounts receivable 9,308 (105,454)
Inventories (13,141) (81,439)
Other current assets (4,590) 18,024
Income taxes (17,000) 21,000
Accounts payable and accrued
expenses 445,548 139,830
--------- ---------
Net cash provided by
operating activities 509,243 188,861
CASH FLOWS FROM INVESTING ACTIVITIES
AND OTHER:
Net purchase of equipment,
furniture and improvements (108,885) (70,342)
Goodwill and other intangibles and
other assets (27,857) 2,258
--------- ---------
Net cash used in investing
activities and other (136,742) (68,084)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions of notes payable
and debt obligations - 29,167
Issuance of common stock 2,580 89,057
Reduction of notes payable and debt
obligations (423,970) (38,184)
--------- ---------
Net cash provided by (used in)
financing activities (421,390) 80,040
--------- ---------
CASH AND EQUIVALENTS:
Net increase (decrease) during period (48,889) 200,817
Balances, beginning of period 556,745 327,812
--------- ---------
Balances, end of period $ 507,856 $ 528,629
========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH
TRANSACTIONS:
Equipment acquired under capitalized leases $ 29,726 $ 12,217
</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
February 28, 1997 and the results of operations for the three and six 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, 1996.
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
equivalent shares consist of stock options and warrants. Primary income
(loss) per share is computed by dividing net income (loss) by the weighted
average number of common and dilutive common equivalent shares outstanding
based on the average market price of the Company's common stock (under the
treasury stock method). Income (loss) per 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
earnings 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>
Feb. 28, 1997 Aug. 31, 1996
-------------- --------------
<S> <C> <C>
Federal Deposit Insurance Corporation
Agreement $ - $385,091
11-18% capitalized lease obligations,
due through April 2001 (Note G) 72,333 66,793
Other 14,000 14,000
13% equipment loan, collateralized
by equipment, final payment due
July, 1998 8,390 23,083
-------- --------
94,723 488,967
Less current portion (40,516) (79,516)
-------- --------
$ 54,207 $409,451
======== ========
</TABLE>
Federal Deposit Insurance Corporation (FDIC) Agreement - In February, 1997
------------------------------------------------------
the Company repaid approximately $358,000 representing the balance due the
FDIC for the outstanding note originally payable in full on December 31,
1997. The Company recognized an extraordinary gain of $10,446 on this
transaction representing a prepayment discount from the FDIC (Note F).
The aggregate principal payments on long-term obligations as of February 28,
1997, excluding capital leases are $5,762 (1998) and $16,628 (1999).
F. Bank Arrangements:
------------------
In February 1997, the Company established a bank working capital demand line
of credit with borrowings up to $1,000,000 and a $250,000 equipment line of
credit. Available borrowings under the working capital line are based on a
percentage of eligible accounts receivable and inventory. Both lines of
credit are at the bank's prime rate of interest and all the Company's assets
are collaterized under these arrangements. The credit agreements contain
certain restrictive covenants including covenants limiting the payment of
dividends, and required minimum current ratio and debt to tangible net worth
ratio. As of February 28, 1997, no borrowings have been made under the lines
of credit.
7
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
---------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------------------------------
(continued)
(unaudited)
G. 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 February 28, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 42,588
1999 20,041
2000 14,712
2001 7,250
2002 1,208
--------
Total minimum lease payments 85,799
Less interest (13,466)
--------
Net minimum lease payments 72,333
Less current portion (34,754)
--------
Long-term portion $ 37,579
========
</TABLE>
H. Capital Transactions:
---------------------
In September 1996, the Company granted warrants to two officers to purchase
an aggregate 19,000 shares of common stock at an exercise price of $2.12 per
share exercisable for a ten-year period. Each of the warrants were assigned
a value of $.10 per share to be paid by the officers.
8
<PAGE>
Management's Discussion and Analysis of
-------------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
Liquidity and Capital Resources
- -------------------------------
As of February 28, 1997, the Company had working capital of $614,466 compared to
$1,044,480 at August 31, 1996. The ratio of current assets to current
liabilities was 1.3 at February 28, 1997 as compared to 1.7 at August 31, 1996.
The debt to equity ratio was 1.5 at February 28, 1997 and 1.4 at August 31,
1996. The decrease in working capital and current ratio are the result of the
repayment of the loan due the Federal Deposit Insurance Corporation (FDIC). The
increase in the debt to equity ratio is the result of increases in accounts
payable and accrued expenses offset in part by a reduction in the FDIC debt.
Capital expenditures were $138,611 and $82,559 for the six months ended February
28, 1997 and February 29, 1996, respectively. The Company has no current
commitments for any material capital expenditures, but the Company anticipates
up to $550,000 in capital expenditures for the purchase of office and
manufacturing equipment, regulatory testing and tooling costs over the next
twelve months.
In February, 1997 the Company repaid approximately $358,000 representing the
balance due the FDIC for the outstanding note originally payable on December 31,
1997. In February, 1997 the Company also established two bank lines of credit.
The lines of credit are for working capital financing up to $1,000,000 and
$250,000 for equipment purchases. See Notes E and F to Unaudited Condensed
Consolidated Financial Statements. As of February 28, 1997, the Company had no
outstanding borrowings under the lines of credit.
Management believes that its current cash position, together with internally
generated funds at present sales levels and its available bank financing, 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
additional external funding will be obtainable, if such a need should arise.
Results of Operations
- ---------------------
Net sales for the second quarter of fiscal 1997 increased 7% as compared to the
second quarter of fiscal 1996. Net sales for the first six months of fiscal
1997 increased 12% as compared to the comparable period of fiscal 1996. The
increase in sales for the second quarter and first half of fiscal 1997 primarily
reflects increases in access control and keypad sales, offset in part by a
reduction in glassbreak detector sales.
The ratio of gross profit to sales for the three months ended February 28, 1997
and February 29, 1996 were 39% and 42%, respectively. The ratio of gross profit
to sales for the six months ended February 28, 1997 and February 29, 1996 were
40% and 42%, respectively. The decreases are primarily the result of product
mix and an increase in certain manufacturing costs.
The increase in research and development costs for the second quarter and first
half of fiscal 1997 as compared to the comparable periods of fiscal 1996 reflect
the hiring of additional personnel and related expenses and an increase in
contract services.
As a percentage of net sales, selling, general and administrative expenses were
36% and 34% for the three months ended February 28, 1997 and February 29, 1996,
respectively and were both 35% for the six months ended February 28, 1997 and
February 29, 1996. The increase in expenses is
9
<PAGE>
primarily due to an increase in promotional expenses and costs in establishing a
European sales office.
The gain on extinguishment of debt for the three and six months ended February
28, 1997 of $10,446 represents a prepayment discount from the FDIC. The
provision for income taxes for the second quarter and first half of fiscal 1997
represents foreign, federal alternative minimum taxes and state tax expense.
NEW ACCOUNTING STANDARDS
The Statement of Financial Accounting Standards ("SFAS") No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
will be effective for fiscal 1997. SFAS No. 128 "Earnings per Share" will be
effective commencing with the Company's second quarter in fiscal 1998. The
Company has not completed evaluating the impact that the adoption of SFAS No.
121 and SFAS No. 128 will have on its financial statements.
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. These 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 affect the Company's business and operating results for one
quarter or a series of quarters.
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 six
months ended February 28, 1997 and the years ended August 31, 1995 and 1994, the
Company has experienced losses of approximately ($42,000), ($231,000) and
($49,000), respectively. For the year ended August 31, 1996 the Company had net
income of approximately $162,000. There can be no assurance that the Company
will be profitible. 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.
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 effect 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
10
<PAGE>
technological changes or product announcements by competitors. Any failure or
delay in these goals could have a material adverse affect 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, 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 effect on the Company's operating
results. In addition, competitive pressure on pricing in a given quarter could
adversely effect 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. Although the Company has a substantial number of
customers, a significant portion of the Company's sales are 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 33% of the Company's
total net sales for the fiscal year ended August 31, 1996. 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 effected 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. Many 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.
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.
11
<PAGE>
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, 1996, 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. In March 1992, the NASD established higher standards
for a company's stock to maintain its listing on NASDAQ. The revised standards
include maintaining a minimum bid price of $1.00 per share for ten consecutive
trading days and shareholders' equity with a minimum balance of $1,000,000.
Although the Company has maintained its NASDAQ listing, the Company has, at
times, been unable to maintain the $1.00 minimum bid price criteria.
In November, 1996, the NASD proposed higher standards for a company to maintain
its stock listing on NASDAQ. If adopted as presently proposed, the new
standards would result in the Company's common stock losing its listing on
NASDAQ. The procedure for adopting such standards provides that there will be a
period of public comment and approval by the SEC. It is expected that the final
standards will be effective during the second quarter of calendar 1997.
One of the presently proposed standards include maintaining minimum net tangible
shareholders' equity of $2,000,000. As of February 29, 1997, the Company had net
tangible shareholders' equity of approximately $955,000. If this proposed
standard is adopted, the Company would not meet the standard and, unless the
Company increases its net tangible shareholders' equity to $2,000,000, the
Company's common stock would no longer be listed on NASDAQ. At the present time,
it is not possible to determine what the new standards will be, whether the
Company will be able to achieve and/or maintain the proposed standards, and
consequently, it is not possible to know whether the Company will be able to
have its common stock listed 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.
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.
12
<PAGE>
Part II. Other Information
- ---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On March 27, 1997, the Company held its Special Meeting in
Lieu of the Annual Meeting of Shareholders. At the
meeting, shareholders elected the following Board of
Directors for the ensuing year:
John Waldstein, Robert Voosen, Heath Paley, Diane Balcom,
and Robert Prager.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
11.1 Calculation of net income (loss) per share
(b) There were no reports on Form 8-K filed for the
three months ended February 28, 1997.
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: 4/11/97 /s/ John Waldstein
------- -------------------
John Waldstein, President,
Treasurer & Chief Financial and Accounting
Officer and duly authorized to sign.
13
<PAGE>
EXHIBIT 11.1
International Electronics, Inc.
Calculation of Net Income (Loss) Per Share
<TABLE>
<CAPTION>
Three months ended Six months ended
----------------------------- ------------------------------
Feb. 28, 1997 Feb. 29, 1996 Feb. 28, 1997 Feb. 29, 1996
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
PRIMARY NET INCOME (LOSS) PER SHARE
- ------------------------------------------------
Weighted average common and equivalent shares:
Common stock 1,492,551 1,433,892 1,492,510 1,420,780
Common equivalent shares resulting
from dilutive stock options and
warrants (treasury stock method
using the average market price) - 130,859 - 122,726
--------- ---------- --------- ----------
Total 1,492,551 1,564,751 1,492,510 1,543,506
========= ========== ========= ==========
Net income (loss) ($69,778) $ 50,280 ($41,648) $ 80,549
========= ========== ========= ==========
Net income (loss) per share:
Income (loss) before
extraordinary gain ($.06) $ .03 ($.04) $ .05
Extraordinary gain .01 - .01 -
--------- ---------- --------- ----------
Net income (loss) ($.05) $ .03 ($.03) $ .05
========= ========== ========= ==========
FULLY DILUTED NET INCOME (LOSS) PER SHARE
- -----------------------------------------
Weighted average common and equivalent shares:
Common stock 1,492,551 1,433,892 1,492,510 1,420,780
Common equivalent shares resulting
from dilutive stock options and
warrants (treasury stock method
using the higher of the ending
or average market price) - 258,338 - 260,143
--------- ---------- --------- ---------
Total 1,492,551 1,692,230 1,492,510 1,680,923
========= ========== ========= =========
Net income (loss) ($69,778) $ 50,280 ($41,648) $ 80,549
========= ========== ========= =========
Net income (loss) per share:
Income (loss) before
extraordinary gain ($.06) $ .03 ($.04) $ .05
Extraordinary gain .01 - .01 -
--------- ---------- --------- ---------
Net income (loss) ($.05) $ .03 ($.03) $ .05
========= ========== ========= ==========
</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 FEBRUARY
28, 1997 (UNAUDITED) AND THE RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED
FEBRUARY 28, 1997 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 507,856
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 841,589
<CURRENT-ASSETS> 2,418,800
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,095,414
<CURRENT-LIABILITIES> 1,804,334
<BONDS> 54,207
0
0
<COMMON> 15,276
<OTHER-SE> 1,221,597
<TOTAL-LIABILITY-AND-EQUITY> 3,095,414
<SALES> 4,484,837
<TOTAL-REVENUES> 4,495,953
<CGS> 2,694,080
<TOTAL-COSTS> 2,694,080
<OTHER-EXPENSES> 250,881
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,066
<INCOME-PRETAX> (19,648)
<INCOME-TAX> 22,000
<INCOME-CONTINUING> (52,094)
<DISCONTINUED> 0
<EXTRAORDINARY> 10,446
<CHANGES> 0
<NET-INCOME> (41,648)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
