<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, 1999
---------------------------------------------------------------
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)
(781) 821-5566
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(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_____
-
1,524,968 common shares were outstanding at January 7, 2000.
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
---------------------------------
Index
-----
<TABLE>
<CAPTION>
Part I. Financial Information: Page No.
--------
<S> <C>
Item 1: Financial Statements (unaudited)
--------------------------------
Condensed Consolidated Balance Sheets, November 30, 1999
and August 31, 1999 2
Condensed Consolidated Statements of Income, three months
ended November 30, 1999 and 1998 3
Condensed Consolidated Statement of Shareholders' Equity,
three months ended November 30, 1999 4
Condensed Consolidated Statements of Cash Flows, three
months ended November 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6-9
Item 2: Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations 10-15
---------------------------------------------
Part II. Other Information:
Item 6: Exhibits and Reports on Form 8-K 16
--------------------------------
Signature 16
---------
</TABLE>
-1-
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Nov. 30, 1999 August 31, 1999
-------------- ----------------
ASSETS
- ------
<S> <C> <C>
Current assets:
Cash and equivalents $ 1,456,113 $ 1,327,032
Accounts receivable, net 873,657 724,332
Inventories 1,053,446 1,033,097
Deferred income taxes 250,000 260,000
Other current assets 185,582 182,171
----------- -----------
Total current assets 3,818,798 3,526,632
Equipment, furniture and improvements, net 477,728 494,463
Other assets:
Deferred income taxes 69,000 69,000
Goodwill and other intangibles, net 43,387 63,108
Other 11,950 11,950
----------- -----------
124,337 144,058
----------- -----------
$ 4,420,863 $ 4,165,153
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 556,800 $ 378,034
Accrued expenses 1,077,549 1,040,705
Income taxes 71,084 62,000
Current portion of long-term obligations 103,674 107,458
----------- -----------
Total current liabilities 1,809,107 1,588,197
Long-term obligations 93,965 117,668
Commitments
Shareholders' equity:
Common stock, $.01 par value:
Authorized 5,984,375 shares
Issued 1,559,968 and 1,533,301
shares, respectively 15,600 15,333
Capital in excess of par value 4,831,038 4,806,955
Accumulated deficit (2,290,203) (2,324,356)
Less treasury stock, at cost:
35,000 shares (38,644) (38,644)
----------- -----------
Total shareholders' equity 2,517,791 2,459,288
----------- -----------
$ 4,420,863 $ 4,165,153
=========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
-2-
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
---------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Three months ended
------------------------------
Nov. 30, 1999 Nov. 30, 1998
-------------- --------------
<S> <C> <C>
Net sales $2,714,929 $2,131,113
Cost of sales 1,476,187 1,098,303
---------- ----------
Gross profit 1,238,742 1,032,810
Research and development costs 272,744 144,122
Selling, general and
administrative expenses 924,017 797,200
---------- ----------
Income from operations 41,981 91,488
Interest expense (5,275) (4,089)
Other income 16,447 15,629
---------- ----------
Income before taxes 53,153 103,028
Provision for income taxes:
Current 9,000 24,000
Deferred 10,000 -
---------- ----------
19,000 24,000
---------- ----------
Net income $ 34,153 $ 79,028
========== ==========
Net income per share:
Basic $ .02 $ .05
Diluted .02 .05
========== ==========
Shares used in computing
net income per share:
Basic 1,522,111 1,493,301
Diluted 1,653,006 1,558,242
========== ==========
</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, 1999 1,533,301 $15,333 $4,806,955 ($2,324,356) 35,000 ($38,644) $2,459,288
Exercise of
stock warrants
and options 26,667 267 24,083 - - - 24,350
Net income - - - 34,153 - - 34,153
--------- ------- ---------- ----------- ------- -------- ----------
Balances,
November 30, 1999 1,559,968 $15,600 $4,831,038 ($2,290,203) 35,000 ($38,644) $2,517,791
========= ======= ========== =========== ======= ======== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
-4-
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
---------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Three months ended
--------------------------------
Nov. 30, 1999 Nov. 30, 1998
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 34,153 $ 79,028
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 79,221 64,938
Stock warrants issued for professional
services - 471
Deferred income taxes 10,000 -
Changes in operating assets and liabilities:
Accounts receivable (149,325) 140,437
Inventories (20,349) (252,786)
Other current assets (3,411) (2,511)
Income taxes 9,084 20,232
Accounts payable and accrued
expenses 215,610 264,156
---------- ----------
Net cash provided by
operating activities 174,983 313,965
CASH FLOWS FROM INVESTING ACTIVITIES
AND OTHER:
Net purchase of equipment,
furniture and improvements (42,765) (41,875)
---------- ----------
Net cash used in investing
activities and other (42,765) (41,875)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 24,350 -
Reduction of notes payable and debt
obligations (27,487) (15,683)
---------- ----------
Net cash used in financing activities (3,137) (15,683)
CASH AND EQUIVALENTS:
Net increase during period 129,081 256,407
Balances, beginning of period 1,327,032 895,876
---------- ----------
Balances, end of period $1,456,113 $1,152,283
========== ==========
</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
November 30, 1999 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, 1999.
B. Principles of Consolidation:
----------------------------
The accompanying condensed consolidated financial statements include the
accounts of the Company, its majority owned subsidiary, Ecco Industries, Inc.
and its wholly owned subsidiary, International Electronics Europe Limited.
All material intercompany transactions, balances and profits have been
eliminated.
C. 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.
D. Significant Estimates and Assumptions:
-------------------------------------
The preparation of consolidated 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 and disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
-6-
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
-------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(continued)
(unaudited)
E. Net Income per Share:
---------------------
Basic net income per share is computed by dividing net income by the weighted
average common shares outstanding during the periods. Diluted net income per
share is computed by dividing net income by the weighted average number of
common and dilutive option and warrant shares outstanding based on the
average market price of the Company's common stock (under the treasury stock
method).
The following table sets forth the computation of basic and diluted
net income per share:
<TABLE>
<CAPTION>
Three months ended
------------------
Nov. 30, 1999 Nov. 30, 1998
------------- -------------
<S> <C> <C>
Net income $ 34,153 $ 79,028
========== ==========
Shares used in computation:
Weighted average
shares outstanding for
basic net income per share 1,522,111 1,493,301
Effect of dilutive option
and warrant shares 130,895 64,941
---------- ----------
Total shares for diluted net
income per share 1,653,006 1,558,242
========== ==========
Net income per share:
Basic $ .02 $ .05
Diluted .02 .05
========== ==========
</TABLE>
The calculations for diluted net income per share did not include an
aggregate out of the money options and warrants of 39,871 and 156,304 for the
three months ended November 30, 1999 and 1998, respectively.
-7-
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
-------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(continued)
(unaudited)
F. Long-term Obligations:
----------------------
Long-term obligations are summarized as follows:
<TABLE>
<CAPTION>
Nov. 30, 1999 Aug. 31, 1999
-------------- --------------
<S> <C> <C>
7-18% capitalized lease obligations,
due through April, 2001 (Note H) $ 13,658 $ 17,188
Equipment line of credit, 7.75%-8.5% (Note G) 171,976 194,562
8% equipment loan, collateralized
by equipment, final payment due
Nov., 2001 12,005 13,376
--------- ---------
197,639 225,126
Less current portion (103,674) (107,458)
--------- ---------
$ 93,965 $ 117,668
========= =========
</TABLE>
The aggregate principal payments on long-term obligations, excluding
capital leases are $94,084 (2000), $65,716 (2001) and $24,181 (2002).
G. Bank Arrangements:
-----------------
As of November 30, 1999, the Company had a bank demand line of credit
that provided for borrowings up to $1,000,000 and an available $170,000
equipment line of credit. Both lines of credit are at the bank's prime
rate of interest and all of the Company's assets are collateralized under
these arrangements. The credit agreements contain certain restrictive
covenants including covenants limiting the payment of dividends, a
required minimum debt to tangible net worth ratio and net income. As of
November 30, 1999, no borrowings have been made under the demand line of
credit, and the Company has $171,976 outstanding under the equipment line
of credit, payable in monthly installments through July 2002.
-8-
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
-------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(continued)
(unaudited)
H. 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 non-cancelable lease terms in
excess of one year at November 30, 1999 are as follows:
<TABLE>
<S> <C>
2000 $10,585
2001 4,229
-------
Total minimum lease payments 14,814
Less interest (1,156)
-------
Net minimum lease payments 13,658
Less current portion (9,590)
-------
Long-term portion $ 4,068
=======
</TABLE>
-9-
<PAGE>
Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
Liquidity and Capital Resources
As of November 30, 1999, the Company had working capital of $2,009,691 compared
to $1,938,435 at August 31, 1999. The ratio of current assets to current
liabilities was 2.1 at November 30, 1999 and 2.2 at August 31, 1999. The debt
to equity ratio was .8 at November 30, 1999 and .7 at August 31, 1999. The
increase in working capital is primarily the result of the Company's operating
cash flow, offset in part by the purchase of fixed assets for the first quarter
of fiscal 2000. The decrease in current ratio and increase in debt to equity
ratio is primarily the result of an increase in accounts payable and accrued
expenses.
Net capital expenditures were $42,765 and $41,875 for the three months ended
November 30, 1999 and 1998, respectively. The Company has no current
commitments for any material capital expenditures, but the Company anticipates
up to $400,000 in capital expenditures for the purchase of office and
manufacturing equipment, regulatory testing and tooling costs over the next
twelve months.
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
additional external funding. There is no assurance that profits will be
generated, or that additional external funding will be obtainable, if such a
need should arise.
Year 2000 Compliance
There were issues associated with the programming code in existing computer
systems as the year 2000 approached. The "year 2000 problem" was and continues
to be pervasive and complex, as virtually every computer operation was affected
in some way by the rollover of the two-digit year value to 00. The issue is
whether computer systems will properly recognize date sensitive information
after the year changed to 2000. Systems that do not properly recognize such
information could generate erroneous data or cause a system to fail. The
Company considers its products to be Year 2000 compliant. The Company's
products do not perform any date calculations requiring the year digits, nor do
they have any report generating software that would present a problem with the
Year 2000.
The Company has addressed the Year 2000 problem regarding its internal systems
which include the manufacturing and inventory control system, internal reporting
and the Company's existing manufacturing equipment. The Company relies on
commercially distributed software and has installed and tested upgrades to these
systems to comply with any Year 2000 requirements. Based on its review of these
systems, the Company does not believe there will be any Year 2000 issues related
to its manufacturing systems or equipment, or other non-information technology
systems which would have a material impact on the Company's results of
operations.
-10-
<PAGE>
During the year, the Company surveyed its largest vendors to determine their
state of readiness regarding this issue and to estimate the impact, if any, on
the Company's financial position or results of operations if any of its vendors
should fail due to their noncompliance with Year 2000 requirements. Based upon
the results of this survey, the Company is not aware of any significant vendor
issue that would materially impact the Company's results of operations or
financial position.
The Company believes that the greatest potential risk is the failure of its
external business partners to achieve Year 2000 compliance in a timely manner.
Any Year 2000 compliance problem of either the Company or its users, customers,
vendors or advertisers could have a material, adverse effect on the Company's
business, results of operations and financial condition. In addition, the
Company could be affected by the failure of any global infrastructure including
national banking systems, communications and governmental activities.
Results of Operations
Net sales for the first quarter of fiscal 2000 increased 27% as compared to the
first quarter of fiscal 1999. The increase in sales for the first quarter of
fiscal 2000 reflects increases in access control and keypad sales, partially
offset by a decrease in glassbreak detector sales.
The ratios of gross profit to sales for the three months ended November 30, 1999
and 1998 were 46% and 48%, respectively. The decrease in gross profit
percentage is primarily the result of product mix.
Research and development expenses were $272,744 and $144,122 for the three
months ended November 30, 1999 and 1998, respectively. The increase in these
discretionary costs is primarily due to the hiring of additional personnel and
outside consultants.
As a percentage of net sales, selling, general and administrative expenses were
34% and 37% for the three months ended November 30, 1999 and 1998, respectively.
The decrease in costs as a percentage of net sales is the result of increased
sales productivity.
The provision for income taxes for the first quarter of fiscal 2000 represents a
charge for deferred taxes and current charges for foreign, federal alternative
minimum taxes and state income tax expenses. The Company's effective income tax
rate for the three months ended November 30, 1999 of 36% was less than the
combined federal and state statutory income tax rates, primarily as a result of
the utilization of available net operating loss carryforwards.
New Accounting Pronouncement
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" will be effective in fiscal year 2001. The
Company has not completed its evaluation of the impact of this standard on its
consolidated financial statements.
-11-
<PAGE>
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 that 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
years ended August 31, 1997, 1998 and 1999, and the three months ended November
30, 1999, the Company had net income of approximately $70,000, $530,000,
$555,000 and $34,000, respectively. 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 use of the bank lines of credit
and/or additional financing. There can be no assurance that profits will
continue or that additional 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.
Failure to Complete New Products. 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. The Company is in the process of working on a number of
new development projects. 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
-12-
<PAGE>
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. 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 affect the Company's operating results, or such price pressure over an
extended period could adversely affect 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 40% of the Company's
total net sales for the fiscal year ended August 31, 1999. 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.
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.
-13-
<PAGE>
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, 1999, the Company's foreign
sales represented approximately 10% 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.
Year 2000 Compliance. There were issues associated with the programming code in
existing computer systems as the year 2000 approached. The "year 2000 problem"
was and continues to be pervasive and complex, as virtually every computer
operation was affected in some way by the rollover of the two-digit year value
to 00. The issue is whether computer systems will properly recognize date
sensitive information after the year changed to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail. The Company considers its products to be Year 2000 compliant.
The Company's products do not perform any date calculations requiring the year
digits, nor do they have any report generating software that would present a
problem with the Year 2000.
The Company has addressed the Year 2000 problem regarding its internal systems
which include the manufacturing and inventory control system, internal reporting
and the Company's existing manufacturing equipment. The Company relies on
commercially distributed software and has installed and tested upgrades to these
systems to comply with any Year 2000 requirements. Based on its review of these
systems, the Company does not believe there will be any Year 2000 issues related
to its manufacturing systems or equipment, or other non-information technology
systems which would have a material impact on the Company's results of
operations.
During the year, the Company surveyed its largest vendors to determine their
state of readiness regarding this issue and to estimate the impact, if any, on
the Company's financial position or results of operations if any of its vendors
should fail due to their noncompliance with Year 2000 requirements. Based upon
the results of this survey, the Company is not aware of any significant vendor
issue that would materially impact the Company's results of operations or
financial position.
-14-
<PAGE>
The Company believes that the greatest potential risk is the failure of its
external business partners to achieve Year 2000 compliance in a timely manner.
Any Year 2000 compliance problem of either the Company or its users, customers,
vendors or advertisers could have a material, adverse effect on the Company's
business, results of operations and financial condition. In addition, the
Company could be affected by the failure of any global infrastructure including
national banking systems, communications and governmental activities.
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 February 1998, the National Association of
Securities Dealers adopted new more stringent standards for a company to
maintain its stock listing on NASDAQ. The Company believes that it is in
compliance with all NASDAQ SmallCap listing requirements. However, there can be
no assurance that the Company will continue to meet the NASDAQ standards to
maintain its listing on NASDAQ. If the Company is unable to maintain its
listing on NASDAQ, holders of the Company's common stock may have difficulty
selling their shares 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.
-15-
<PAGE>
Part II. Other Information
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
(27) Financial Data Schedule
(b) There were no reports on Form 8-K filed for the
three months ended November 30, 1999.
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: 1/13/00 /s/ John Waldstein
-------- --------------------
John Waldstein, President,
Treasurer and Chief Financial and Accounting
Officer and duly authorized to sign.
-16-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENT OF FINANCIAL CONDITION AT NOVEMBER 30, 1999
(UNAUDITED) AND THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED NOVEMBER
30, 1999 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 1,456,113
<SECURITIES> 0
<RECEIVABLES> 1,079,587
<ALLOWANCES> 205,930
<INVENTORY> 1,053,446
<CURRENT-ASSETS> 3,818,798
<PP&E> 1,910,264
<DEPRECIATION> (1,432,536)
<TOTAL-ASSETS> 4,420,863
<CURRENT-LIABILITIES> 1,809,107
<BONDS> 93,965
0
0
<COMMON> 15,600
<OTHER-SE> 2,502,191
<TOTAL-LIABILITY-AND-EQUITY> 4,420,863
<SALES> 2,714,929
<TOTAL-REVENUES> 2,731,376
<CGS> 1,476,187
<TOTAL-COSTS> 1,476,187
<OTHER-EXPENSES> 272,744
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,275
<INCOME-PRETAX> 53,153
<INCOME-TAX> 19,000
<INCOME-CONTINUING> 34,153
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,153
<EPS-BASIC> .02
<EPS-DILUTED> .02
</TABLE>
