SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 28, 2007
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to _______________
Commission File No. 0-5278
IEH CORPORATION
(Exact name of registrant as specified in its charter)
New York 13-5549348
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
140 58th Street, Suite 8E, Brooklyn, New York 11220
(Address of principal executive office)
Registrant's telephone number, including area code: (718) 492-4440
-----------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
Check whether the Issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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
2,303,468 shares of Common Shares, par value $.01 per share, were outstanding as
of December 28, 2007.
IEH CORPORATION
CONTENTS
Page
Number
------
Part I - FINANCIAL INFORMATION
ITEM 1- FINANICAL STATEMENTS
Balance Sheets as of December 28, 2007 (Unaudited) and
March 30, 2007 3
Statement of Operations (Unaudited) for the three and nine
months ended December 28, 2007 and December 29, 2006 5
Statement of Cash Flows (Unaudited) for the nine months ended
December 28, 2007 and December 29, 2006 6
Notes to Financial Statements (Unaudited) 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 19
ITEM 3 - CONTROLS AND PROCEDURES 27
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings 28
ITEM 2 - Unregistered Sales of Equity Securities and Use of Proceeds 28
ITEM 3 - Defaults Upon Senior Securities 28
ITEM 4 - Submission of Matters to a Vote of Security Holders 28
ITEM 5 - Other Information 28
ITEM 6 - Exhibits and Reports on Form 8-K 28
- 1 -
SIGNATURES 29
EXHIBITS
Exhibit 31.1 Certification Pursuant to Section 302 of the
Sarbanes Oxley Act 30
Exhibit 31.2 Certification Pursuant to Section 302 of the
Sarbanes Oxley Act 31
Exhibit 32.1 Certification Pursuant to Section 906 of the
Sarbanes Oxley Act 32
Exhibit 32.2 Certification Pursuant to Section 906 of the
Sarbanes Oxley Act 33
- 2 -
IEH CORPORATION
BALANCE SHEETS
As of December 28, 2007 and March 30, 2007
December 28, March 30,
2007 2007
------------ ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 14,772 $ 34,908
Accounts receivable, less allowances for doubtful accounts of
$11,562 at December 28, 2007 and March 30, 2007 1,118,021 981,571
Inventories (Note 3) 1,827,500 1,573,632
Prepaid expenses and other current assets (Note 4) 72,305 11,380
------------ ------------
Total current assets 3,032,598 2,601,491
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization of $6,708,938 at December 28, 2007
and $6,558,278 at March 30, 2007 (Note 5) 1,190,014 1,192,256
------------ ------------
1,190,014 1,192,256
------------ ------------
OTHER ASSETS:
Other assets 25,413 25,098
------------ ------------
25,413 25,098
------------ ------------
Total assets $ 4,248,025 $ 3,818,845
============ ============
The accompanying notes and should be read in conjunction with the financial statements.
- 3 -
IEH CORPORATION
BALANCE SHEETS
As of December 28, 2007 and March 30, 2007
December 28, March 30,
2007 2007
------------- -------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts receivable financing (Note 6) $ 697,493 $ 477,387
Notes payable, equipment, current portion (Note 8) 1,307 3,136
Loans payable- officer (Note 9) 47,000 91,000
Accrued corporate income taxes 35,206 5,800
Accounts payable 508,223 588,804
Pension plan payable, current portion (Note 10) -- 20,000
Other current liabilities (Note 7) 225,199 148,175
------------- -------------
Total current liabilities 1,514,428 1,334,302
------------- -------------
LONG-TERM LIABILITIES:
Notes payable, equipment, less current portion (Note 8) -- 523
------------- -------------
Total long-term liabilities -- 523
------------- -------------
Total liabilities 1,514,428 1,334,825
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 10,000,000 shares authorized;
2,303,468 shares issued and outstanding at December 28, 2007
and March 30, 2007 23,035 23,035
Capital in excess of par value 2,744,573 2,744,573
Retained earnings (Deficit) (Note 11) (34,011) (283,588)
------------- -------------
Total stockholders' equity 2,733,597 2,484,020
------------- -------------
Total liabilities and stockholders' equity $ 4,248,025 $ 3,818,845
============= =============
The accompanying notes should be read in conjunction with the financial statements.
- 4 -
IEH CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
Nine Months Ended Three Months Ended
----------------- ------------------
Dec. 28, Dec. 29, Dec. 28, Dec. 29,
2007 2006 2007 2006
---------- ---------- ---------- ----------
REVENUE, net sales $5,511,577 $4,575,509 $1,935,092 $1,532,584
---------- ---------- ---------- ----------
COSTS AND EXPENSES
Cost of products sold 4,009,085 3,405,727 1,371,164 1,146,868
Selling, general and administrative 920,290 829,941 318,592 280,283
Interest expense 151,541 50,866 36,397 18,698
Depreciation and amortization 150,660 149,113 49,980 49,704
---------- ---------- ---------- ----------
5,231,576 4,435,647 1,776,133 1,495,553
---------- ---------- ---------- ----------
OPERATING INCOME 280,001 139,862 158,959 37,301
OTHER INCOME 383 918 231 132
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 280,384 140,780 159,190 37,163
PROVISION FOR INCOME TAXES 30,807 19,600 9,600 3,600
---------- ---------- ---------- ----------
NET INCOME $ 249,577 $ 121,180 $ 149,590 $ 33,563
========== ========== ========== ==========
BASIC AND DILUTED EARNINGS PER SHARE $ .11 $ .05 $ .06 $ .01
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES
OUTSTANDING (in thousands) 2,303 2,303 2,303 2,303
========== ========== ========== ==========
The accompanying notes should be read in conjunction with the financial statements.
- 5 -
IEH CORPORATION
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
(Unaudited)
Nine Months Ended
----------------------
Dec. 28, Dec. 29,
2007 2006
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 249,577 $ 121,180
--------- ---------
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 150,660 149,113
Changes in assets and liabilities:
(Increase) in accounts receivable (136,450) (68,601)
(Increase) decrease in inventories (253,868) 84,223
(Increase) in prepaid expenses and other current assets (60,925) (31,581)
(Increase) in other assets (314) (1,712)
(Decrease) in accounts payable (80,582) (60,487)
Increase (decrease) in other current liabilities 77,024 (6,333)
Increase (decrease) in accrued corporate income taxes 29,406 (33,697)
(Decrease) in due to pension plan payable (20,000) (31,000)
--------- ---------
Total adjustments (295,049) (75)
--------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (45,472) 121,105
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets (148,418) (128,743)
--------- ---------
NET CASH (USED) BY INVESTING ACTIVITIES $(148,418) $(128,743)
========= =========
The accompanying notes should be read in conjunction with the financial statements.
- 6 -
IEH CORPORATION
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
(Unaudited)
Nine Months Ended
----------------------
Dec. 28, Dec. 29,
2007 2006
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable $ (2,352) $ (2,352)
Proceeds from accounts receivable financing 220,106 33,516
(Repayment) of loans payable - officer (44,000) (28,000)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 173,754 3,164
--------- ---------
(DECREASE) IN CASH (20,136) (4,474)
CASH, beginning of period 34,908 8,742
--------- ---------
CASH, end of period $ 14,772 $ 4,268
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the three months for:
Interest $ 66,488 $ 45,405
========= =========
Income Taxes $ 11,812 $ 5,621
========= =========
The accompanying notes should be read in conjunction with the
financial statements.
- 7 -
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1- INTERIM RESULTS AND BASIS OF PRESENTATION:
The accompanying unaudited financial statements as of December 28, 2007
and December 29, 2006 and for the nine months then ended have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-QSB and Items 303 and 310 of Regulation S-B. In the opinion of
management, the unaudited financial statements have been prepared on
the same basis as the annual financial statements and reflect all
adjustments, which include only normal recurring adjustments, necessary
to present fairly the financial position as of December 28, 2007 and
December 29, 2006 and the results of operations and cash flows for the
nine months then ended. The financial data and other information
disclosed in these notes to the interim financial statements related to
these periods are unaudited. The results for the nine months ended
December 28, 2007, are not necessarily indicative of the results to be
expected for any subsequent quarter or the entire fiscal year. The
balance sheet at March 30, 2007 has been derived from the audited
financial statements at that date.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the
Securities and Exchange Commission's rules and regulations. The Company
believes, however, that the disclosures in this report are adequate to
make the information presented not misleading in any material respect.
The accompanying financial statements should be read in conjunction
with the audited financial statements of IEH Corporation as of March
30, 2007 and notes thereto included in the Company's report on Form
10-KSB as filed with the Securities and Exchange Commission.
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business:
The Company is engaged in the design, development, manufacture and
distribution of high performance electronic printed circuit connectors
and specialized interconnection devices. Electronic connectors and
interconnection devices are used in providing electrical connections
between electronic component assemblies. The Company develops and
manufactures connectors, which are designed for a variety of high
technology and high performance applications, and are primarily
utilized by those users who require highly efficient and dense (the
space between connection pins with the connector) electrical
connections.
The Company is continuously redesigning and adapting its connectors to
meet and keep pace with developments in the electronics industry and
has, for example, developed connectors for use with flex-circuits now
being used in aerospace programs, computers, air-borne communications
systems, testing systems and other areas. The Company also services its
connectors to meet specified product requirements.
- 8 -
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
Revenue Recognition:
Revenues are recognized at the shipping date of the Company's products.
The Company has historically adopted the shipping terms that title to
merchandise passes to the customer at the shipping point (FOB Shipping
Point). At this juncture, title has passed, the Company has recognized
the sale, inventory has been relieved, and the customer has been
invoiced. The Company does not offer any discounts, credits or other
sales incentives.
The Company's policy with respect to customer returns and allowances as
well as product warranty is as follows:
The Company will accept a return of defective product within one year
from shipment for repair or replacement at the Company's option. If the
product is repairable, the Company at its own cost, will repair and
return it to the customer. If unrepairable, the Company will either
offer an allowance against payment or will reimburse the customer for
the total cost of product. The Company's experience has been that a
loss from returns is extremely remote. Accordingly, the Company's
management does not believe that an allowance for loss from returns is
necessary.
Most of the Company's products are custom ordered by customers for a
specific use. The Company provides engineering services as part of the
relationship with its customers in developing the custom product. The
Company is not obligated to provide such engineering service to its
customers. The Company does not charge separately for these services.
Inventories:
Inventories are stated at cost, on a first-in, first-out basis, which
does not exceed market value.
The Company manufactures products pursuant to specific technical and
contractual requirements. The Company historically purchases material
in excess of its requirements to avail itself of favorable pricing as
well as the possibility of receiving additional orders from customers.
This excess may result in material not being used in subsequent
periods, which may result in this material being deemed obsolete.
The Company annually reviews its purchase and usage activity of its
inventory of parts as well as work in process and finished goods to
determine which items of inventory have become obsolete within the
framework of current and anticipated orders. The Company based upon
historical experience has determined that if a part has not been used
and purchased or an item of finished goods has not been sold in three
years, it is deemed to be obsolete. The Company estimates which
materials may be obsolete and which products in work in process or
finished goods may be sold at less than cost. A periodic adjustment,
based upon historical experience is made to inventory in recognition of
this impairment.
- 9 -
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
Concentration of Credit Risk:
The Company maintains cash balances at one financial institution.
Amounts on deposit are insured by the Federal Deposit Insurance
Corporation up to $100,000 in the aggregate. There were no uninsured
balances at either December 28, 2007 or March 30, 2007.
Property, Plant and Equipment:
Property, plant and equipment is stated at cost less accumulated
depreciation and amortization. The Company provides for depreciation
and amortization using the Double Declining Balance method over the
estimated useful lives (5-7 years) of the related assets.
Maintenance and repair expenditures are charged to operations, and
renewals and betterments are capitalized. Items of property, plant and
equipment, which are sold, retired or otherwise disposed of, are
removed from the asset and accumulated depreciation or amortization
accounts. Any gain or loss thereon is either credited or charged to
operations.
Income Taxes:
The Company follows the policy of treating investment tax credits as a
reduction in the provision for federal income tax in the year in which
the credit arises or may be utilized. Deferred income taxes arise from
temporary differences resulting from different depreciation methods
used for financial and income tax purposes. The Company has adopted
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting
for Income Taxes".
Net Income Per Share:
The Company has adopted the provisions of SFAS No. 128, "Earnings Per
Share", which requires the disclosure of "basic" and "diluted" earnings
(loss) per share. Basic earnings per share is computed by dividing net
income by the weighted average number of common shares outstanding
during each period. Diluted earnings per share is similar to basic
earnings per share except that the weighted average number of common
shares outstanding is increased to reflect the dilutive effect of
potential common shares, such as those issuable upon the exercise of
stock or warrants, as if they had been issued. For the nine months
ended December 28, 2007 and December 29, 2006, there were no items of
potential dilution that would impact on the computation of diluted
earnings or loss per share.
Fair Value of Financial Instruments:
SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities," requires that an entity recognize all derivatives as
either assets or liabilities in the statements of financial position
and measure those instruments at fair value.
- 10 -
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
Fair Value of Financial Instruments: (continued)
The respective carrying value of certain on-balance-sheet financial
instruments approximates their fair values. These financial instruments
include cash, accounts receivable, accounts payable and borrowings.
Fair values were assumed to approximate carrying values for these
financial instruments since they are short-term in nature and their
carrying amounts approximate fair value or they were receivable or
payable on December 28, 2007.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, revenues and expenses, and disclosure of contingent assets
and liabilities at the date of the financial statements. Actual amounts
could differ from those estimates.
Impairment of Long-Lived Assets:
SFAS No. 144, "Accounting for The Impairment or Disposal of Long-Lived
Assets," requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The Company has adopted SFAS
No. 144. There were no long-lived asset impairments recognized by the
Company for the nine months ended December 28, 2007 and December 29,
2006 respectively.
Reporting Comprehensive Income:
The Company has adopted the provisions of SFAS No. 130, "Reporting
Comprehensive Income". This Statement established standards for
reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in an entity's financial
statements. This Statement requires an entity to classify items of
other comprehensive income by their nature in a financial statement and
display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the
equity section of a statement of balance sheet. There were no material
items of comprehensive income to report for the nine months ended
December 28, 2007 and December 29, 2006 respectively.
Segment Information:
The Company has adopted the provisions of SFAS No. 131, "Disclosures
About Segment of An Enterprise and Related Information." This Statement
requires public enterprises to report financial and descriptive
information about its reportable operating segments and establishes
standards for related disclosures about product and services,
geographic areas, and major customers. The adoption of SFAS No. 131 did
not affect the Company's presentation of its results of operations or
financial position.
- 11 -
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
Research and Development:
The Company provides personalized engineering services to its customers
by designing connectors for specific customer applications. The
employment of electromechanical engineers is the anticipated
cornerstone of the Company's future growth. The Company maintains a
testing laboratory where its engineers experiment with new connector
designs based on changes in technology and in an attempt to create
innovative, more efficient connector designs.
The Company did not expend any funds on customer sponsored research and
development during the nine months ended December 28, 2007 and December
29, 2006. In addition, the Company did not receive any revenues related
to customer sponsored research and development activities during the
nine months ended December 28, 2007 and December 29, 2006.
Effect of New Accounting Pronouncements:
Effective April 1, 2007, the Company adopted the provisions of
Financial Accounting Standards Board Interpretation No. 48 ("FIN 48"),
"Accounting for Uncertainty in Income Taxes- an interpretation of FASB
Statement No. 109", which clarifies the accounting for uncertainty in
income taxes recognized in an entity's financial statements in
accordance with FASB Statement No.109, "Accounting for Income Taxes".
FIN 48 prescribes a recognition threshold and measurement attribute for
the financial statement disclosures of tax positions taken or expected
to be taken in an income tax filing. The evaluation of a tax position
is a two step process. The first step requires an entity to determine
whether it is more likely than not that a tax position will be
sustained upon examination based upon the technical merits of the
position. The second step requires an entity to recognize in the
financial statements each tax position that meets the more likely than
not criteria, measured at the largest amount of benefit that has a
greater than fifty percent likelihood of being recognized. FIN 48 also
provides guidance on de-recognition, classification, interest and
penalties, accounting for interim periods, disclosure and transition.
The Company believes that with its adoption of FIN 48, that the income
tax positions taken by it did not have a material effect on the
financial statements for the nine months ended December 28, 2007.
In December 2006, the FASB issued SFAS No. 157, "Fair Value
Measurements", which enhances existing guidance for measuring assets
and liabilities using fair value. This Standard provides a single
definition of fair value, together with a framework for measuring it,
and requires additional disclosure about the use of fair value to
measure assets and liabilities. SFAS No. 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. The Company does not
believe that SFAS No. 157 will have a material impact on its financial
statements.
- 12 -
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
Effect of New Accounting Pronouncements: (continued)
In February 2007, the FASB issued SFAS No. 159 ("SFAS 159") "The Fair
Value Option for Financial Assets and Financial Liabilities", providing
companies with an option to report selected financial assets and
liabilities at fair value. The Standard's objective is to reduce both
complexity in accounting for financial instruments and the volatility
in earnings caused by measuring related assets and liabilities
differently. It also requires entities to display the fair value of
those assets and liabilities for which the Company has chosen to use
fair value on the face of the balance sheet. SFAS 159 is effective for
fiscal years beginning after November 15, 2007. The Company does not
believe that SFAS No. 159 will have a material impact on its financial
statements.
Note 3 - INVENTORIES:
Inventories are stated at cost, on a first-in, first-out basis, which
does not exceed market value.
The Company manufactures products pursuant to specific technical and
contractual requirements. The Company historically purchases material
in excess of its requirements to avail itself of favorable pricing as
well as the possibility of receiving additional orders from customers.
This excess may result in material not being used in subsequent
periods, which may result in this material being deemed obsolete.
The Company annually reviews its purchase and usage activity of its
inventory of parts as well as work in process and finished goods to
determine which items of inventory have become obsolete within the
framework of current and anticipated orders. The Company based upon
historical experience has determined that if a part has not been used
and purchased or an item of finished goods has not been sold in three
years, it is deemed to be obsolete. The Company estimates which
materials may be obsolete and which products in work in process or
finished goods may be sold at less than cost. A periodic adjustment,
based upon historical experience is made to inventory in recognition of
this impairment.
Inventories are comprised of the following:
Dec. 28, March 30,
2007 2007
---------- ----------
Raw materials $1,014,994 $ 873,958
Work in progress 428,183 368,675
Finished goods 384,323 330,999
---------- ----------
$1,827,500 $1,573,632
========== ==========
- 13 -
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 4 - PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets are comprised of the
following:
Dec. 28, March 30,
2007 2007
---------- ----------
Prepaid insurance $ 18,197 $ 1,636
Prepaid corporate taxes 7,681 9,744
Other current assets 46,427 --
---------- ----------
$ 72,305 $ 11,380
========== ==========
Note 5 - PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are as follows:
Dec. 28, March 30,
2007 2007
---------- ----------
Computers $ 212,321 $ 210,321
Leasehold improvements 585,831 585,831
Machinery and equipment 4,898,392 4,810,708
Tools and dies 2,038,923 1,980,189
Furniture and fixture 155,935 155,935
Website development cost 7,550 7,550
---------- ----------
7,898,952 7,750,534
Less: accumulated depreciation and
amortization 6,708,938 6,558,278
---------- ----------
$1,190,014 $1,192,256
========== ==========
Note 6 - ACCOUNTS RECEIVABLE FINANCING:
The Company entered into an accounts receivable financing agreement
whereby it can borrow up to eighty percent of its eligible receivables
(as defined in the agreement) at an interest rate of 2 1/2 % above JP
Morgan Chase's publicly announced rate of 7.25% at December 28, 2007.
However, the agreement does stipulate that the minimum interest rate is
12% per annum. The agreement has an initial term of one year and will
automatically renew for successive one-year terms, unless terminated by
the Company or Lender upon receiving sixty days prior notice. The loan
is secured by the Company's accounts receivable and inventories. The
balance due under this agreement as of December 28, 2007 was $697,493.
The balance due as of March 30, 2007 was $477,387.
- 14 -
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 7 - OTHER CURRENT LIABILITIES:
Other current liabilities are comprised of the following:
Dec. 28, March 30,
2007 2007
---------- ----------
Payroll and vacation accruals $ 196,109 $ 124,044
Sales commissions 15,412 21,381
Other 13,678 2,750
---------- ----------
$ 225,199 $ 148,175
========== ==========
Note 8 - NOTES PAYABLE EQUIPMENT:
The Company financed the acquisition of new equipment by issuing notes
payable. The notes were payable over a sixty month period. The balance
remaining at December 28, 2007 amounted to $1,307. The interest rate on
the remaining note is 22%.
Aggregate future principal payments are as follows:
Fiscal Year Ending March:
2008 $ 784
2009 523
--------
$ 1,307
========
Note 9 - RELATED PARTIES TRANSACTIONS:
During the year ended March 26, 2004, two of the Company's officers
loaned the Company a total of $52,000 on a non-interest bearing basis.
The Company used these funds as a source of additional working capital.
During the year ended March 25, 2005, one of these officers loaned the
Company an additional $135,744 on a non-interest bearing basis as well.
These funds were also used by the Company for working capital
requirements. Through the period ended March 31, 2006, the Company had
repaid $108,744 of the total funds loaned to it. During the year ended
March 30, 2007, one of the officers loaned the company an additional
$88,000 on a non-interest bearing basis. During the same period the
Company repaid $76,000 of the loans made to it. The balance, due to the
one officer at March 30, 2007 was $91,000.
During the nine months ended December 28, 2007, the Company repaid
$44,000 of the loans made to it. As of December 28, 2007 the balance
due to one of these officers was $47,000.
- 15 -
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 10 - PENSION PLAN-SALARIED PERSONNEL:
On June 30, 1995, the Company applied to the Pension Benefit Guaranty
Corporation ("PBGC") to have the PBGC assume all of the Company's
responsibilities and liabilities under its Salaried Pension Plan. On
April 26, 1996, the PBGC determined that the Salaried Pension Plan did
not have sufficient assets available to pay benefits, which were and
are currently due under the terms of the Plan.
The PBGC further determined that pursuant to the provisions of the
Employment Retirement Income Security Act of 1974, as amended
("ERISA"), that the Plan must be terminated in order to protect the
interests of the Plan's participants. Accordingly, the PBGC proceeded
pursuant to ERISA to have the Plan terminated and the PBGC appointed as
statutory trustee, and to have July 31, 1995 established as the Plan's
termination date.
The Company and the PBGC negotiated a settlement on the entire matter
and on July 2, 2001, an agreement was reached whereby the Company's
liability to the PBGC was reduced to $244,000. The Company will make
monthly payments to the PBGC as follows:
September 1, 2003 to August 1, 2004 $2,000 per month
September 1, 2004 to August 1, 2006 $3,000 per month
September 1, 2006 to August 1, 2007 $4,000 per month
Additionally, the Company had made balloon payments of $25,000 each on
January 1, 2004, May 1, 2004, May 1, 2005 and January 1, 2006.
The Company also granted the PBGC a lien on the Company's machinery and
equipment.
As a result of this agreement the amount due the PBGC was restated to
$244,000. The balance due the PBGC was satisfied on September 1, 2007.
Note 11- CHANGES IN STOCKHOLDERS' EQUITY:
The accumulated deficit decreased by $249,577, which represents the net
income for the nine months ended December 28, 2007.
- 16 -
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 12- 2001 EMPLOYEE STOCK OPTION PLAN:
Under this Plan, the exercise price of an option designated as an
Incentive Stock Option shall not be less than the fair market value of
the Company's common stock on the day the option is granted. In the
event an option designated as an incentive stock option is granted to a
ten percent (10%) shareholder, such exercise price shall be at least
110 Percent (110%) of the fair market value or the Company's common
stock and the option must not be exercisable after the expiration of
five years from the day of the grant.
Exercise prices of non-incentive stock options may be less than the
fair market value of the Company's common stock.
The aggregate fair market value of shares subject to options granted to
a participant(s), which are designated as incentive stock options, and
which become exercisable in any calendar year, shall not exceed
$100,000. As of December 28, 2007 no options had been granted under
this Plan.
Note 13 - CASH BONUS PLAN:
In 1987, the Company adopted a cash bonus plan ("Cash Bonus Plan") for
Executive Officers. Contributions to the Cash Bonus Plan are made by
the Company only after pre-tax operating profits exceed $150,000 for a
fiscal year, and then to the extent of 10% of the excess of the greater
of $150,000 or 25% of pre-tax operating profits. The Company accrued
$40,000 for the nine months ended December 28, 2007. For the year ended
March 30, 2007, the contribution was $20,000.
Note 14 - COMMITMENTS:
The Company leases its facility under a renewed tenure lease agreement,
which expires on August 23, 2011. The Company is obligated under this
lease at minimum annual rentals as follows:
Fiscal year ending March:
2008 $ 42,096
2009 168,384
2010 168,384
2011 112,256
-------------
$ 491,120
=============
The rental expense for the nine months ended December 28, 2007 and
December 29, 2006 was $108,801 and $106,102, respectively.
- 17 -
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 14 - COMMITMENTS: (continued)
The Company has a collective bargaining multi-employer pension plan
("Multi-Employer Plan") with the United Auto Workers of America, Local
259 ("UAW"). Contributions are made by the Company in accordance with a
negotiated labor contract and are based on the number of covered
employees employed per month. With the passage of the Multi-Employer
Pension Plan Amendment Act of 1990 (the "Act"), the Company may become
subject to liabilities in excess of contributions made under the
collective bargaining agreement. Generally, these are contingent upon
termination, withdrawal, or partial withdrawal from the Multi-Employer
Plan. The Company has not taken any action to terminate, withdraw or
partially withdraw from the Multi-Employer Plan, nor does it intend to
do so in the future. Under the Act, liabilities would be based upon the
Company's proportional share of the Multi-Employer Plan's unfunded
vested benefits which is currently not available. The amount of
accumulated benefits and net assets of such Plan also is not currently
available to the Company. The total contributions charged to operations
under the provisions of the Multi-Employer Plan were $59,127 and
$49,301 for the nine months ended December 28, 2007 and December 29,
2006, respectively.
In 1992, the Company had been in arrears with respect to its
contributions to the Multi-Employer Plan in the amount of $186,467. The
Company and the UAW entered into a verbal agreement whereby the Company
would continue making current contributions as well as making periodic
payments to satisfy the outstanding arrears obligation to the
Multi-Employer Plan. The outstanding obligation was satisfied by the
Company on July 12th, 2007. Under the terms of this verbal agreement,
the Company was not obligated to pay interest until the arrears was
satisfied.
The UAW and the Company agreed in October 2007 that the total amount of
interest due would be $85,000. The Company paid the $85,000 to the UAW
in October 2007 and satisfied its indebtedness.
- 18 -
IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Statements contained in this report which are not historical facts may be
considered forward-looking information with respect to plans, projections, or
future performance of the Company as defined under the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are subject to
risks and uncertainties which could cause actual results to differ materially
from those projected. The words "anticipate", "believe", "estimate", "expect",
"objective", and "think" or similar expressions used herein are intended to
identify forward-looking statements. The forward-looking statements are based on
the Company's current views and assumptions and involve risks and uncertainties
that include, among other things, the effects of the Company's business, actions
of competitors, changes in laws and regulations, including accounting standards,
employee relations, customer demand, prices of purchased raw material and parts,
domestic economic conditions, including housing starts and changes in consumer
disposable income, and foreign economic conditions, including currency rate
fluctuations. Some or all of the facts are beyond the Company's control.
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and related footnotes which provide additional
information concerning the Company's financial activities and condition.
Critical Accounting Policies
The Financial Statements have been prepared in accordance with accounting
principles generally accepted in the United States of America, which require the
Company to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the Financial Statements, and revenues and
expenses during the periods reported. Actual results could differ from those
estimates. The Company believes the following are the critical accounting
policies, which could have the most significant effect on the Company's reported
results and require the most difficult, subjective or complex judgments by
management.
o Impairment of Long-Lived Assets:
The Company reviews its long-lived assets for impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. If the sum of the expected cash flows, undiscounted and without
interest, is less than the carrying amount of the asset, an impairment loss
is recognized as the amount by which the carrying amount of the asset exceeds
its fair value. The Company makes estimates of its future cash flows related
to assets subject to impairment review.
o Inventory Valuation:
Raw materials and supplies are valued at the lower of first-in, first-out
cost or market. Finished goods and work in process are valued at the lower of
actual cost, determined on a specific identification basis, or market. The
Company estimates which materials may be obsolete and which products in work
in process or finished goods may be sold at less than cost, and adjusts their
inventory value accordingly. Future periods could include either income or
expense items if estimates change and for differences between the estimated
and actual amount realized from the sale of inventory.
- 19 -
IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Critical Accounting Policies (continued)
o Income Taxes:
The Company records a liability for potential tax assessments based on its
estimate of the potential exposure. Due to the subjectivity and complex
nature of the underlying issues, actual payments or assessments may differ
from estimates. Income tax expense in future periods could be adjusted for
the difference between actual payments and the Company's recorded liability
based on its assessments and estimates.
o Revenue Recognition:
Revenues are recognized at the shipping date of the Company's products. The
Company has historically adopted the shipping terms that title to merchandise
passes to the customer at the shipping point (FOB Shipping Point). At this
juncture, title has passed, the Company has recognized the sale, inventory
has been relieved, and the customer has been invoiced. The Company does not
offer any discounts, credits or other sales incentives.
The Company's policy with respect to customer returns and allowances as well
as product warranty is as follows:
The Company will accept a return of defective product within one year from
shipment for repair or replacement at the Company's option. If the product is
repairable, the Company at its own cost will repair and return it to the
customer. If unrepairable, the Company will either offer an allowance against
payment or will reimburse the customer for the total cost of the product. The
Company's experience has been that a loss from returns is extremely remote,
accordingly the Company's management does not believe that an allowance for
loss from returns is necessary.
Most of the Company's products are custom ordered by customers for a specific
use. The Company provides engineering services as part of the relationship
with its customers in developing the custom product. The Company is not
obligated to provide such engineering service to its customers. The Company
does not charge separately for these services.
o Research & Development:
The Company provides personalized engineering services to its customers by
designing connectors for specific customer applications. The employment of
electromechanical engineers is the anticipated cornerstone of the Company's
future growth. The Company maintains a testing laboratory where its engineers
experiment with new connector designs based on changes in technology and in
an attempt to create innovative, more efficient connector designs.
- 20 -
IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Results of Operations
Comparative Analysis-Nine Months Ended December 28, 2007 and December 29, 2006
The following table sets forth for the periods indicated, percentages for
certain items reflected in the financial data as such items bear to the revenues
of the Company:
Relationship to Total Revenues
Dec. 28, Dec. 29,
2007 2006
---------- ----------
Operating Revenues (in thousands) $ 5,512 $ 4,576
---------- ----------
Operating Expenses:
(as a percentage of Operating Revenues)
Costs of Products Sold 72.74% 74.43%
Selling, General and Administrative 16.70% 18.14%
Interest Expense 2.75% 1.11%
Depreciation and amortization 2.73% 3.26%
---------- ----------
TOTAL COSTS AND EXPENSES 94.92% 96.94%
---------- ----------
Operating Income (loss) 5.08% 3.06%
Other Income .01% .02%
---------- ----------
Income (loss) before Income Taxes 5.09% 3.08%
Income Taxes .56% .43%
---------- ----------
Net Income (loss) 4.53% 2.65%
========== ==========
Operating revenues for the nine months ended December 28, 2007 amounted to
$5,511,577 reflecting a 20.45% increase versus the nine months ended December
29, 2006 revenues of $4,575,509. The increase in revenues is reflective of the
following: during the nine months ended December 28, 2007, the Company began
shipping components for medical related equipment. Revenues from this source
accounted for approximately 10% of the increase. Additionally the Company
started selling higher end connectors to a major customer which accounted for
approximately 5% of the increase in revenues over the same nine month period in
2006. Additionally, increases in international sales accounted for approximately
3% of the increase over 2006.
- 21 -
IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Comparative Analysis-Nine Months Ended December 28, 2007 and December 29, 2006
(continued)
Cost of products sold amounted to $4,009,085 for the nine months ended December
28, 2007, or 72.74% of operating revenues. This reflected a $603,358 or 17.72%
increase in the cost of products sold from $3,405,727 or 74.43% of operating
revenues for the nine months ended December 29, 2006. The increase in cost of
product sold is due primarily to the increase in costs related to the increase
in revenues for the nine months ended December 28, 2007.
Selling, general and administrative expenses were $920,290 or 16.70% of
operating revenues for the nine months ended December 28, 2007 compared to
$829,941 or 18.40% of operating revenues for the nine months ended December 29,
2006. This category of expenses increased by $90,349, or 10.89% from the prior
year. The increase can be attributed to an increase in sales salaries,
commissions and travel.
Interest expense was $151,541 for the nine months ended December 28, 2007 or
2.75% of operating revenues. For the fiscal nine months ended December 29, 2006,
interest expense was $50,866 or 1.11% of operating revenues. The increase of
$100,675 or 197.92% reflects primarily payment or interest on union pension
arrears during the nine months ended December 28, 2007, the amount of interest
paid was $85,000.
Depreciation and amortization of $150,660 or 2.73% of operating revenues was
reported for the nine months ended December 28, 2007. This reflects an increase
of $1,547 from the prior nine months ended December 29, 2006 of $149,113 or
3.26% of operating revenues.
The Company reported net income of $249,577 for the nine months ended December
28, 2007 representing basic earnings of $.11 per share as compared to net income
of $121,180 or $.05 per share for the nine months ended December 29, 2006. The
increase in net income for the current nine month period can be attributed
primarily to the new revenues in medical related equipment, higher end
connectors to a major customer being sold and the increase in international
orders shipped during the nine months ended December 28, 2007.
- 22 -
IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Comparative Analysis-Three Months Ended December 28, 2007 and December 29, 2006
The following table sets forth for the periods indicated, percentages for
certain items reflected in the financial data as such items bear to the revenues
of the Company:
Relationship to Total Revenues
Dec. 28, Dec. 29,
2007 2006
---------- ----------
Operating Revenues (in thousands) $ 1,935 $ 1,533
---------- ----------
Operating Expenses:
(as a percentage of Operating Revenues)
Costs of Products Sold 70.86% 74.83%
Selling, General and Administrative 16.46% 18.29%
Interest Expense 1.88% 1.22%
Depreciation and amortization 2.58% 3.24%
---------- ----------
TOTAL COSTS AND EXPENSES 91.78% 97.58%
---------- ----------
Operating Income (loss) 8.22% 2.42%
Other Income -- --
---------- ----------
Income (loss) before Income Taxes 8.22% 2.42%
Income Taxes .50% .23%
---------- ----------
Net Income (loss) 7.72% 2.19%
========== ==========
Operating revenues for the three months ended December 28, 2007 amounted to
$1,935,092 reflecting a 26.26% increase versus the three months ended December
29, 2006 revenues of $1,532,584. The increase in revenues is due to the Company
shipping components for medical related equipment, higher end connectors to a
major customer and an increase in international sales.
Cost of products sold amounted to $1,371,164 for the three months ended December
28, 2007, or 70.86% of operating revenues. This reflected a $224,296 or 19.56%
increase in the cost of products sold from $1,146,868 or 74.83% of operating
revenues for the three months ended December 29, 2006. The increase in cost of
product sold is due primarily to the increase in costs related to the increase
in revenues for the three months ended December 28, 2007.
- 23 -
IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Comparative Analysis-Three Months Ended December 28, 2007 and December 29, 2006
(continued)
Selling, general and administrative expenses were $318,592 or 16.46% of
operating revenues for the three months ended December 28, 2007 compared to
$280,283 or 18.29% of operating revenues for the three months ended December 29,
2006. This category of expenses increased by $38,309 or 13.67% from the prior
year. The increase can be attributed to an increase in sales salaries,
commissions and travel.
Interest expense was $36,397 for the three months ended December 28, 2007 or
1.88% of operating revenues. For the fiscal three months ended December 29,
2006, interest expense was $18,698 or 1.22% of operating revenues. The increase
of $17,699 or 94.66% reflects primarily an accrual for interest on union pension
arrears during the three months ended December 28, 2007 prior to the
satisfaction of the interest during the quarter.
Depreciation and amortization of $49,980 or 2.58% of operating revenues was
reported for the three months ended December 28, 2007. This reflects an increase
of $276 or 1.0% from the prior three months ended December 29, 2006 of $49,704
or 3.24% of operating revenues.
The Company reported net income of $149,590 for the three months ended December
28, 2007 representing basic earnings of $.06 per share as compared to net income
of $33,563 or $.01 per share for the three months ended December 29, 2006. The
increase in net income for the current three month period can be attributed
primarily to the increase in international orders, components for medical
related equipment and higher end connectors to a major customer shipped in the
current quarter.
Liquidity and Capital Resources
The Company reported working capital of $1,518,170 as of December 28, 2007
compared to a working capital of $1,267,189 as of March 30, 2007. The increase
in working capital of $250,981 was attributable to the following items:
Net income $249,577
Depreciation and amortization 150,660
Capital expenditures (148,418)
Other transactions (838)
As a result of the above, the current ratio (current assets to current
liabilities) was 2.0 to 1 at December 28, 2007 as compared to 1.95 to 1 at March
30, 2007. Current liabilities at December 28, 2007 were $1,514,428 compared to
$1,334,302 at March 30, 2007.
The Company reported $148,418 in capital expenditures for the nine months ended
December 28, 2007 and reported depreciation of $150,660 for the same nine-month
period.
The net income of $249,577 for the nine months ended December 28, 2007 resulted
in an increase in stockholders' equity to $2,733,597 as compared to
stockholders' equity of $2,484,020 at March 30, 2007.
The Company has an accounts receivable financing agreement with a factor, which
bears interest at 2.5% above prime. However, the agreement does stipulate that
the minimum interest rate is 12% per annum. At December 28, 2007 the amount
outstanding with the factor was $697,493 as compared to $477,387 at March 30,
2007. The loan is secured by the Company's accounts receivables and inventories.
The factor provides discounted funds based upon the Company's accounts
receivables, these funds provide the primary source of working capital for
operations.
- 24 -
IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Liquidity and Capital Resources (continued)
In the past two fiscal years, management has been reviewing its collection
practices and policies for outstanding receivables and has revised its
collection procedures to a more aggressive collection policy. As a consequence
of this new policy the Company's experience is that its customers have been
remitting payments on a more consistent and timely basis. The Company reviews
the collectability of all accounts receivable on a monthly basis. The allowance
for doubtful accounts is less than 2% of average gross accounts receivable and
is considered to be conservatively adequate.
During the year ended March 26, 2004, two of the Company's officers loaned the
Company a total of $52,000 on a non-interest bearing basis. The Company used
these funds as a source of additional working capital.
During the year ended March 25, 2005, one of these officers loaned the Company
an additional $135,744 on a non-interest bearing basis as well. These funds were
also used by the Company for working capital requirements. Through the period
ended March 31, 2006, the Company has repaid $108,744 of the total funds loaned
to it. During the year ended March 30, 2007, one of the officers loaned the
Company an additional $88,000 on a non-interest bearing basis. During the same
period the Company repaid $76,000 of the loans made to it. The balance due to
the one officer at March 30, 2007 was $91,000.
During the nine months ended December 28, 2007, the Company repaid $44,000 of
the loans made to it. As of December 28, 2007 the balance due to one of these
officers was $47,000.
The Company has a collective bargaining multi-employer pension plan with the
United Auto Workers of America, Local 259 ("UAW"). Contributions are made by the
Company in accordance with a negotiated labor contract and are based on the
number of covered employees employed per month. With the passage of the
Multi-Employer Pension Plan Amendment Act of 1990 (the "Act"), the Company may
become subject to liabilities in excess of contributions made under the
collective bargaining agreement. Generally, these are contingent upon
termination, withdrawal, or partial withdrawal from the Multi-Employer Plan. The
Company has not taken any action to terminate, withdraw or partially withdraw
from the Multi-Employer Plan, nor does it intend to do so in the future. Under
the Act, liabilities would be based upon the Company's proportional share of the
Multi-Employer Plan's unfunded vested benefits which is currently not available.
The amount of accumulated benefits and net assets of such Plan also is not
currently available to the Company. The total contributions charged to
operations under the provisions of the Multi-Employer Plan were $59,127 and
$49,301 for the nine months ended December 28, 2007 and December 29, 2006,
respectively.
In 1992, the Company had been in arrears with respect to its contributions to
the Multi-Employer Plan in the amount of $186,467. The Company and the UAW
entered into a verbal agreement whereby the Company would continue making
current contributions as well as making periodic payments to satisfy the
outstanding arrears obligation to the Multi-Employer Plan. The outstanding
obligation was satisfied by the Company on July 12th, 2007. Under the terms of
this verbal agreement, the Company was not obligated to pay interest until the
arrears was satisfied.
The UAW and the Company agreed to a settlement on the interest for $85,000. That
amount was paid to the UAW in October of 2007.
- 25 -
IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Liquidity and Capital Resources (continued)
On June 30, 1995, the Company applied to the Pension Benefit Guaranty
Corporation ("PBGC") to have the PBGC assume all of the Company's
responsibilities and liabilities under its Salaried Pension Plan. On April 26,
1996, the PBGC determined that the Salaried Pension Plan did not have sufficient
assets available to pay benefits, which were and are currently due under the
terms of such Plan.
The PBGC further determined that pursuant to the provisions of the Employment
Retirement Income Security Act of 1974, as amended ("ERISA") that the Salaried
Pension Plan must be terminated in order to protect the interests of such Plan's
participants. Accordingly, the PBGC proceeded pursuant to ERISA to have the
Salaried Pension Plan terminated and the PBGC appointed as statutory trustee,
and to have July 31, 1995 established as the Salaried Pension Plan's termination
date.
The Company and the PBGC agreed to the terms of a settlement of the matter. The
agreement is effective July 2, 2001. Under the agreement, the Company and the
PBGC agreed on a total sum of $244,000. The Company has agreed to make payments
as follows:
September 1, 2003 to August 1, 2004 $2,000 per month
September 1, 2004 to August 1, 2006 $3,000 per month
September 1, 2006 to August 1, 2007 $4,000 per month
Additionally, the Company had made balloon payments of $25,000 each on January
1, 2004, May 1, 2004, May 1, 2005 and January 1, 2006.
The Company granted the PBGC a lien on the Company's machinery and equipment.
As a result of this agreement the amount due the PBGC was restated to $244,000.
This liability was satisfied on September 1, 2007.
On September 21, 2001 the Company's shareholders approved the adoption of the
Company's 2001 Employees Stock Option Plan ("Employee Option Plan") to provide
for the grant of options to purchase up to 750,000 shares of the Company's
common stock to all employees, including senior management. No options have been
granted under the Employee Option Plan to date.
Options granted to employees under the Employee Option Plan may be designated as
options which qualify for incentive stock option treatment under Section 422A of
the Internal Revenue Code, or option which do not so qualify. Under this Plan,
the exercise price of an option designated as an Incentive Stock Option shall
not be less than the fair market value of the Company's common stock on the day
the option is granted.
- 26 -
IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Liquidity and Capital Resources (continued)
In the event an option designated as an incentive stock option is granted to a
ten percent (10%) share holder, such exercise price shall be at least 110
Percent (110%) of the fair market value or the Company's common stock and the
option must not be exercisable after the expiration of five years from the day
of the grant. Exercise prices of non-incentive stock options may be less than
the fair market value of the Company's common stock. The aggregate fair market
value of shares subject to options granted to its participants, which are
designated as incentive stock options, and which become exercisable in any
calendar year, shall not exceed $100,000. As of December 28, 2007 no options had
been granted under the Employee Stock Option Plan.
In 1987, the Company adopted a cash bonus plan ("Cash Bonus Plan") for Executive
Officers. Contributions to the Cash Bonus Plan are made by the Company only
after pre-tax operating profits exceed $150,000 for a fiscal year, and then to
the extent of 10% of the excess of the greater of $150,000 or 25% of pre-tax
operating profits. The Company accrued $40,000 for the Cash Bonus Plan for the
fiscal nine months ended December 28, 2007. For the year ended March 30, 2007
the contribution was $20,000.
ITEM 3. CONTROLS AND PROCEDURES
Based on an evaluation of the effectiveness of the Company's "disclosure
controls and procedures" (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended, (the "Exchange Act"), the Company's
Chief Executive Officer and Chief Financial Officer (who is also our controller
and principal accounting officer) concluded that, as of the end of the period
covered by this Report on Form 10-QSB, the Company's disclosure controls and
procedures are effective to ensure that all information required to be disclosed
by the Company in this Report that it files or submits under the Exchange Act
is, recorded, processed, and reported within the time periods specified within
the Securities and Exchange Commission's rules and forms. There have been no
changes in our internal control over financial reporting during the quarter
ended December 28, 2007 that have been materially affected, or are reasonably
likely to materially affect our internal controls over financial reporting.
- 27 -
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings which may have a material
effect upon the Company, its financial condition or operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS;
PURCHASES OF EQUITY SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER MATTERS.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 31.1 Certification Pursuant to Section 302 of the Sarbanes Oxley Act
Exhibit 31.2 Certification Pursuant to Section 302 of the Sarbanes Oxley Act
Exhibit 32.1 Certification Pursuant to Section 906 of the Sarbanes Oxley Act
Exhibit 32.2 Certification Pursuant to Section 906 of the Sarbanes Oxley Act
(b) Reports on Form 8-K during Quarter
None
- 28 -
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has duly caused this Report on Form 10-QSB to be signed on its behalf by the
undersigned, thereunto duly authorized.
IEH CORPORATION
(Registrant)
February 8, 2008 /s/ Michael Offerman
--------------------
Michael Offerman
President (Principal Executive Officer)
February 8, 2008 /s/ Robert Knoth
----------------
Robert Knoth
Chief Financial Officer/Controller/
Principal Accounting Officer
- 29 -