SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 27, 2008
|_| 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 |_|
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer"
and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |_| Accelerated filer |_|
Non-accelerated filer |X| Smaller Reporting Company |_|
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES |_| NO |X|
2,303,468 shares of Common Shares, par value $.01 per share, were outstanding as
of June 27, 2008.
IEH CORPORATION
CONTENTS
Page
Number
------
Part I - FINANCIAL INFORMATION
ITEM 1- FINANCIAL STATEMENTS
Balance Sheets as of June 27, 2008 (Unaudited) and March 28, 2008 3
Statement of Operations (Unaudited) for the three months ended
June 27, 2008 and June 29, 2007. 5
Statement of Cash Flows (Unaudited) for the three months ended
June 27, 2008 and June 29, 2007. 6
Notes to Financial Statements (Unaudited) 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 18
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
ITEM 4 - CONTROLS AND PROCEDURES 24
PART II -OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS 25
ITEM 1A -RISK FACTORS
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 26
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES 26
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 27
ITEM 5 - OTHER INFORMATION 27
ITEM 6 - EXHIBITS 27
-1-
SIGNATURES 28
EXHIBITS
Exhibit 31.1 Certification Pursuant to Section 302 of the Sarbanes Oxley Act 29
Exhibit 31.2 Certification Pursuant to Section 302 of the Sarbanes Oxley Act 30
Exhibit 32.1 Certification Pursuant to Section 906 of the Sarbanes Oxley Act 31
Exhibit 32.2 Certification Pursuant to Section 906 of the Sarbanes Oxley Act 32
-2-
IEH CORPORATION
BALANCE SHEETS
As of June 27, 2008 and March 28, 2008
June 27, March 28,
2008 2008
---------- ----------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 232,539 $ 29,136
Accounts receivable, less allowances for doubtful accounts of
$11,562 at June 27, 2008 and March 28, 2008 1,325,642 1,180,220
Inventories (Note 3) 1,967,900 1,986,367
Prepaid expenses and other current assets (Note 4) 32,320 24,137
---------- ----------
Total Current Assets 3,558,401 3,219,860
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization of $6,802,058 at June 27, 2008 and
$6,756,178 at March 28, 2008 (Note 5) 1,169,884 1,172,379
---------- ----------
1,169,884 1,172,379
---------- ----------
OTHER ASSETS:
Other assets 24,784 24,784
---------- ----------
24,784 24,784
---------- ----------
Total Assets $4,753,069 $4,417,023
========== ==========
The accompanying notes and should be read in conjunction with the financial statements.
-3-
IEH CORPORATION
BALANCE SHEETS
As of June 27, 2008 and March 28, 2008
June 27, March 28,
2008 2008
---------- ----------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts receivable financing (Note 6) $ 458,631 $ 513,378
Loans payable- officers (Note 8) -- 17,000
Accrued corporate income taxes 37,619 22,103
Accounts payable 516,238 584,938
Other current liabilities (Note 7) 237,476 191,719
---------- ----------
Total Current Liabilities 1,249,964 1,329,138
---------- ----------
Total Liabilities 1,249,964 1,329,138
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 10,000,000 shares authorized;
2,303,468 shares issued and outstanding at June 27, 2008 and
March 28, 2008
23,035 23,035
Capital in excess of par value 2,744,573 2,744,573
Retained earnings (Note 10) 735,497 320,277
---------- ----------
Total Stockholders' Equity 3,503,105 3,087,885
---------- ----------
Total Liabilities and Stockholders' Equity $4,753,069 $4,417,023
========== ==========
The accompanying notes should be read in conjunction with the financial statements.
-4-
IEH CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended
--------------------------
June 27, June 29,
2008 2007
----------- -----------
REVENUE, net sales $ 2,577,473 $ 1,768,676
----------- -----------
COSTS AND EXPENSES
Cost of products sold 1,704,391 1,270,521
Selling, general and administrative 366,830 299,621
Interest expense 21,209 61,540
Depreciation 45,880 50,340
----------- -----------
2,138,310 1,682,022
----------- -----------
OPERATING INCOME 439,163 86,654
OTHER INCOME 57 27
----------- -----------
INCOME BEFORE INCOME TAXES 439,220 86,681
----------- -----------
PROVISION FOR INCOME TAXES (24,000) (14,200)
----------- -----------
NET INCOME $ 415,220 $ 72,481
=========== ===========
BASIC AND DILUTED EARNINGS PER SHARE $ .18 $ .03
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (in thousands) 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)
Three Months Ended
---------------------
June 27, June 29,
2008 2007
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 415,220 $ 72,481
--------- ---------
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation 45,880 50,340
Changes in assets and liabilities:
(Increase) in accounts receivable (145,422) (113,248)
(Increase) decrease in inventories 18,467 (83,268)
(Increase) in prepaid expenses and other current assets (8,183) (34,667)
Increase (decrease) in accounts payable (68,700) 137,925
Increase in other current liabilities 45,757 107,453
Increase in accrued corporate income taxes 15,516 10,656
(Decrease) in due to pension plan payable -- (12,000)
--------- ---------
Total adjustments (96,685) 63,191
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 318,535 135,672
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets (43,385) (53,694)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES $ (43,385) $ (53,694)
========= =========
The accompanying notes should be read in conjunction
with the financial statements.
-6-
IEH CORPORATION
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
(Unaudited)
Three Months Ended
----------------------
June 27, June 29,
2008 2007
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable $ -- $ (784)
(Payment) from accounts receivable financing (54,747) (73,761)
(Repayment) of loans payable - officers (17,000) (25,946)
--------- ---------
NET CASH (USED) BY FINANCING ACTIVITIES (71,747) (100,491)
--------- ---------
INCREASE (DECREASE) IN CASH 203,403 (18,513)
CASH, beginning of period 29,136 34,908
--------- ---------
CASH, end of period $ 232,539 $ 16,395
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the three months for:
Interest $ 14,656 $ 16,280
========= =========
Income Taxes $ 16,429 $ 3,544
========= =========
The accompanying 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 June 27, 2008 and
June 29, 2007 and for the three months then ended have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. 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
June 27, 2008 and June 29, 2007 and the results of operations and cash
flows for the three 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
three months ended June 27, 2008, are not necessarily indicative of the
results to be expected for any subsequent quarter or the entire fiscal
year. The balance sheet at March 28, 2008 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
rules and regulations of the Securities and Exchange Commission (the
"SEC"). 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 28, 2008 and notes thereto included in the
Company's report on Form 10-KSB as filed with the SEC.
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. The Company had $232,539
on deposit as of June 27, 2008 which exceeded the FDIC insured amount.
As of March 28, 2008 the Company had no uninsured balances.
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 three months
ended June 27, 2008 and June 29, 2007, 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 June 27, 2008.
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 three months ended June 27, 2008 and June 29, 2007,
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 three months ended June
27, 2008 and June 29, 2007, 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 three months ended June 27, 2008 and June 29,
2007, respectively. In addition the Company did not receive any
revenues related to customer sponsored research and development
activities during the three months ended June 27, 2008 and June 29,
2007.
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 three months ended June 27, 2008.
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:
June 27, March 28,
2008 2008
---------- ----------
Raw materials $ 919,149 $ 927,774
Work in progress 781,188 788,519
Finished goods 267,563 270,074
---------- ----------
$1,967,900 $1,986,367
========== ==========
-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:
June 27, March 28,
2008 2008
------- -------
Prepaid insurance $11,684 $16,348
Prepaid corporate taxes 15,622 7,681
Other current assets 5,014 108
------- -------
$32,320 $24,137
======= =======
Note 5 - PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are as follows:
June 27, March 28,
2008 2008
---------- ----------
Computers $ 212,321 $ 212,321
Leasehold improvements 585,831 585,831
Machinery and equipment 4,934,838 4,903,733
Tools and dies 2,075,467 2,063,187
Furniture and fixture 155,935 155,935
Website development cost 7,550 7,550
---------- ----------
7,971,942 7,928,557
Less: accumulated depreciation and
amortization 6,802,058 6,756,178
---------- ----------
$1,169,884 $1,172,379
========== ==========
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 5.0% at June 27, 2008.
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 June 27, 2008 was $458,631. The
balance due as of March 28, 2008 was $513,378.
-14-
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 7 - OTHER CURRENT LIABILITIES:
Other current liabilities are comprised of the following:
June 27, March 28,
2008 2008
-------- --------
Payroll and vacation accruals $199,518 $172,215
Sales commissions 23,936 16,504
Other 14,022 3,000
-------- --------
$237,476 $191,719
======== ========
Note 8 - RELATED PARTIES TRANSACTIONS:
One of the Company's officers has periodically loaned the Company money
on a non-interest bearing basis in order to finance working capital
requirements. As of March 28, 2008, the amount due to this officer was
$17,000. During the three months ended June 27, 2008 this officer was
fully repaid.
Note 9 - 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
-15-
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 9 - PENSION PLAN-SALARIED PERSONNEL: (continued)
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. As of August 31, 2007, the Company had satisfied its
obligation to the PBGC and the resultant lien was released.
Note 10- CHANGES IN STOCKHOLDERS' EQUITY:
Retained earnings increased by $415,220, which represents the net
income for the three months ended June 27, 2008.
Note 11- 2002 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 June 27, 2008 no options had been granted under this
Plan.
Note 12 - 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
$8,700 for the three months ended June 27, 2008. For the year ended
March 28, 2008, the contribution was $33,100.
-16-
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 13 - 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:
2009 $ 126,288
2010 168,384
2011 112,256
---------
$ 406,928
=========
The rental expense for the three months ended June 27, 2008 and June
29, 2007 was $36,267 and $36,267, respectively.
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 $21,087 and
$17,588 for the three months ended June 27, 2008 and June 29, 2007,
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.
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IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward Looking Statements
This report contains forward looking statements within the meaning of Section
21E of the Securities and Exchange Act of 1934, as amended (the "Act") and
Section 27A of the Securities Act of 1933 (the "1933 Act"). Statements contained
in this report which are not statements of 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.
Except as may be required by applicable law, we do not undertake or intend to
update or revise our forward-looking statements, and we assume no obligation to
update any forward-looking statements contained in this report as a result of
new information or future events or developments. Thus, you should not assume
that our silence over time means that actual events are bearing out as expressed
or implied in such forward-looking statements. You should carefully review and
consider the various disclosures we make in this report and our other reports
filed with the SEC that attempt to advise interested parties of the risks,
uncertainties and other factors that m ay affect our business. The following
discussion and analysis should be read in conjunction with the 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
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IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Critical Accounting Policies (continued)
actual amount realized from the sale of inventory.
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
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.
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.
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IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Results of Operations
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
June 27, June 29,
2008 2007
-------- --------
Operating Revenues (in thousands) $ 2,577 $ 1,769
-------- --------
Operating Expenses:
(as a percentage of Operating Revenues)
Costs of Products Sold 66.1% 71.8%
Selling, General and Administrative 14.2% 16.9%
Interest Expense .8% 3.5%
Depreciation and amortization 1.8% 2.9%
-------- --------
TOTAL COSTS AND EXPENSES 82.9% 95.1%
-------- --------
Operating Income (loss) 17.1% 4.9%
Other Income -- --
-------- --------
Income (loss) before Income Taxes 17.1% 4.9%
Income Taxes (.9%) (.8%)
-------- --------
Net Income (loss) 16.2% 4.1%
======== ========
Comparative Analysis-Three Months Ended June 27, 2008 and June 29, 2007
Operating revenues for the three months ended June 27, 2008 amounted to
$2,577,473 reflecting a 45.7% increase versus the three months ended June 29,
2007 revenues of $1,768,676. The sharp increase in revenues can be attributed to
a dramatic increase in commercial aerospace spending, new customers in the
medical device manufacturing sector as well as internal production efficiencies.
Cost of products sold amounted to $1,704,391 for the three months ended June 27,
2008, or 66.1% of operating revenues. This reflected a $433,870 or 34.1%
increase in the cost of products sold from $1,270,521 or 71.8% of operating
revenues for the three months ended June 29, 2007. The increase in cost of
product sold is due primarily to the increase in costs related to the increase
in revenues for the quarter ended June 27, 2008.
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IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Comparative Analysis-Three Months Ended June 27, 2008 and June 29, 2007
(continued)
Selling, general and administrative expenses were $366,830 or 14.2% of operating
revenues for the three months ended June 27, 2008 compared to $299,621 or 16.9%
of operating revenues for the three months ended June 29, 2007. This category of
expense increased by $67,209 or 22.4% from the prior year. The increase can be
attributed to an increase in salaries to sales personnel, commissions and travel
expenses.
Interest expense was $21,209 or the three months ended June 27, 2008 or .8% of
operating revenues. For the fiscal three months ended June 29, 2007, interest
expense was $61,540 or 3.5% of operating revenues. The decrease of $40,331 or
65.5% reflects primarily management's commitment to apply revenues to reduce the
Company's debt.
Depreciation and amortization of $45,880 or 1.8% of operating revenues was
reported for the three months ended June 27, 2008. This reflects a decrease of
$4,460 from the comparable three month period ended June 29, 2007 of $50,340 or
2.9% of operating revenues. The reduction in depreciation is the result of
assets being written off prior to the three months ended June 27, 2008.
The Company reported net income of $415,220 for the three months ended June 27,
2008 representing basic earnings of $.18 per share as compared to net income of
$72,481 or $.03 per share for the three months ended June 29, 2007. The increase
in net income for the current three month period can be attributed primarily to
the increased revenue recorded during the current quarter.
Liquidity and Capital Resources
The Company reported working capital of $2,308,437 as of June 27, 2008 compared
to a working capital of $1,890,722 as of March 28, 2008. The increase in working
capital of $417,715 was attributable to the following items:
Net income $415,220
Depreciation and amortization 45,880
Capital expenditures (43,325)
Other transactions (60)
As a result of the above, the current ratio (current assets to current
liabilities) was 2.85 to 1 at June 27, 2008 as compared to 2.42 to 1 at March
28, 2008. Current liabilities at June 27, 2008 were $1,249,964 compared to
$1,329,138 at March 28, 2008.
The Company reported $43,325 in capital expenditures for the three months ended
June 27, 2008 and reported depreciation of $45,880 for the same three-month
period.
The net income of $415,220 for the three months ended June 27, 2008 resulted in
an increase in stockholders' equity to $3,503,105 as compared to stockholders'
equity of $3,087,885 at March 28, 2008.
The Company has an accounts receivable financing agreement with a factor, which
bears interest at 2.5% above
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IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Liquidity and Capital Resources (continued)
prime. However, the agreement does stipulate that the minimum interest rate is
12% per annum. At June 27, 2008 the amount outstanding with the factor was
$458,631 as compared to $513,378 at March 28, 2008. 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.
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 reserve is
less than 2% of average gross accounts receivable and is considered to be
conservatively adequate.
One of the Company's officers has periodically loaned the Company money on a
non-interest bearing basis in order to finance working capital requirements. As
of March 28, 2008 the amount due to this officer was $17,000. During the three
months ended June 27, 2008 this officer was fully repaid.
The Company has the Multi-Employer Plan with the 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 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 $21,087 and
$17,588 for the three months ended June 27, 2008 and June 29, 2007,
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.
On June 30, 1995, the Company applied to the 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 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
-22-
IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Liquidity and Capital Resources (continued)
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.
As of August 31, 2007, the Company had satisfied its obligation to the PBGC and
the resultant lien was released.
On September 21, 2001, the Company's shareholders approved the adoption of the
Company's 2002 Employee Stock 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 2002 Employee Stock 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. 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 June 27, 2008, no options had been granted under the Plan.
In 1987, the Company adopted the 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
-23-
IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Liquidity and Capital Resources (continued)
profits. The Company accrued $8,700 for the three months ended June 27, 2008.
For the year ended March 28, 2008, the contribution was $33,100.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not believe that any of our financial instruments have significant risk
associated with market sensitivity. For more information on these investments
see Note 2 to our financial statements included in this Form 10-Q. We are not
exposed to significant financial market risks from changes in foreign currency
exchange rates and are only minimally impacted by changes in interest rates. We
have not used, and currently do not contemplate using, any derivative financial
instruments.
Interest Rate Risk
At any time, fluctuations in interest rates could affect interest earnings on
our cash and marketable securities. We believe that the effect, if any, of
reasonably possible near term changes in interest rates on our financial
position, results of operations, and cash flows would not be material.
Currently, we do not hedge these interest rate exposures. The primary objective
of our investment activities is to preserve capital. We have not used derivative
financial instruments in our investment portfolio.
As of June 27, 2008, our unrestricted cash was $232,539 of which $62,263 was in
an interest bearing money market account with and the balance of $170,276 was
maintained in non-interest bearing checking accounts used to pay operating
expenses.
ITEM 4. 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 June 27, 2008 that have been materially affected, or are
reasonably likely to materially affect our internal controls over financial
reporting.
-24-
IEH CORPORATION
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 1A. RISK FACTORS
Risks Related to Our Business
Failure to increase our revenue and keep our expenses consistent with revenues
could prevent us from achieving and maintaining profitability.
We have generated net income of $ 603,865, $200,693 and $ 1,137,622,
respectively, for the fiscal years ended March 28, 2008, March 30, 2007 and
March 31, 2006 and $415,220 for the quarter ended June 27, 2008. We have
expended, and will continue to be required to expend, substantial funds to
pursue product development projects, enhance our marketing and sales efforts and
to effectively maintain business operations. Therefore, we will need to generate
higher revenues to achieve and maintain profitability and cannot assure you that
we will be profitable in any future period.
Our capital requirements are significant and we have historically partially
funded our operations through the financing of our accounts receivable.
We have an existing accounts receivable financing agreement with a factor
whereby we can borrow up to eighty percent of our eligible receivables at an
interest rate of 2 1/2 % above JP Morgan Chase's publicly announced interest
rate. No assurances can be given that this financing agreement will continue
into the future. If we are unable to continue with this agreement, our cash flow
might adversely be affected.
Our success is dependent on the performance of our management and the
cooperation, performance and retention of our executive officers and key
employees.
Our business and operations are substantially dependent on the performance of
our senior management team and executive officers. If our management team is
unable to perform it may adversely impact our results of operations and
financial condition. We do not maintain "key person" life insurance on any of
our executive officers. The loss of one or several key employees could seriously
harm our business. Any reorganization or reduction in the size of our employee
base could harm our ability to attract and retain other valuable employees
critical to the success of our business.
If we lose key personnel or fail to integrate replacement personnel
successfully, our ability to manage our business could be impaired.
Our future success depends upon the continued service of our key management,
technical, sales, finance, and other critical personnel. We cannot assure you
that we will be able to retain them. Key personnel have left our Company in the
past and there likely will be additional departures of key personnel from time
to time in the future. The loss of any key employee could result in significant
disruptions to our operations, including adversely affecting the timeliness of
product releases, the successful implementation and completion of Company
initiatives, the effectiveness of our disclosure controls and procedures and our
internal control over financial reporting, and the results of our operations. In
addition, hiring, training, and successfully integrating replacement sales and
other personnel could be time consuming, may cause additional disruptions to our
operations, and may be unsuccessful, which could negatively impact future
revenues.
-25-
IEH CORPORATION
ITEM 1A. RISK FACTORS (continued)
Our reported financial results could be adversely affected by changes in
financial accounting standards or by the application of existing or future
accounting standards to our business as it evolves.
As a result of the enactment of the Sarbanes-Oxley Act and the review of
accounting policies by the SEC and national and international accounting
standards bodies, the frequency of accounting policy changes may accelerate.
Possible future changes to accounting standards, could adversely affect our
reported results of operations.
Risks Related to Our Common Stock
Our stock price is volatile and could decline.
The price of our common stock has been, and is likely to continue to be,
volatile. For example, our stock price during the fiscal year ended March 28,
2008 traded as low as $1.60 per share and as high as $2.90 per share. We cannot
assure you that your initial investment in our common stock will not fluctuate
significantly. The market price of our common stock may fluctuate significantly
in response to a number of factors, some of which are beyond our control,
including:
o quarterly variations in our operating results;
o announcements we make regarding significant contracts, acquisitions,
dispositions, strategic partnerships, or joint ventures;
o additions or departures of key personnel;
o the introduction of competitive offerings by existing or new
competitors;
o uncertainty about and customer confidence in the current economic
conditions and outlook;
o reduced demand for any of our products; and o sales of our common
stock.
In addition, the stock market in general, and companies whose stock is listed on
The NASDAQ Global Market, have experienced extreme price and volume fluctuations
that have often been disproportionate to the operating performance of these
companies. Broad market and industry factors may negatively affect the market
price of our common stock, regardless of our actual operating performance.
Since we have not paid dividends on our common stock, you may not receive income
from this investment.
We have not paid any dividends on our common stock since our inception and do
not contemplate or anticipate paying any dividends on our common stock in the
foreseeable future. Earnings, if any, will be used to finance the development
and expansion of our business
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS;
PURCHASES OF EQUITY SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
-26-
IEH CORPORATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER MATTERS.
None
ITEM 6. EXHIBITS.
(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
-27-
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)
August 11, 2008 /s/ Michael Offerman
--------------------
Michael Offerman
President (Principal Executive Officer)
August 11, 2008 /s/ Robert Knoth
----------------
Robert Knoth
Chief Financial Officer/Controller/Principal
Accounting Officer
-28-