-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QIkWrjkYNlPH4PnYDOBOl877SuLo55+AMz6SWn4t+dyRqXF9kgKK6fD4Ri3DFCzh veMLvmS/9eftICpms2jgDg== 0000914317-02-000736.txt : 20020729 0000914317-02-000736.hdr.sgml : 20020729 20020729151451 ACCESSION NUMBER: 0000914317-02-000736 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020329 FILED AS OF DATE: 20020729 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IEH CORPORATION CENTRAL INDEX KEY: 0000050292 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC CONNECTORS [3678] IRS NUMBER: 135549345 STATE OF INCORPORATION: NY FISCAL YEAR END: 0330 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-05278 FILM NUMBER: 02713153 BUSINESS ADDRESS: STREET 1: 140 58TH ST BLDG B UNIT 8E CITY: BROOKLYN STATE: NY ZIP: 11220 BUSINESS PHONE: 7184924440 MAIL ADDRESS: STREET 1: 369 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: INDUSTRIAL HEAT TREATING CO INC DATE OF NAME CHANGE: 19670926 FORMER COMPANY: FORMER CONFORMED NAME: INDUSTRIAL ELECTRONIC HARDWARE CORP DATE OF NAME CHANGE: 19890123 10KSB/A 1 form10ksba-46187_72502.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB/A (Amendment No. 1) (Mark One) [ X ] Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended March 29, 2002 [ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to__________ Commission file number 0-5278 ------ IEH CORPORATION ---------------------------------------------------------- (Name of Small Business Issuer in Its Charter) New York 13-5549348 - -------------------------------- ------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 140 58th Street, Suite 8E, Brooklyn, New York 11220 - ---------------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) (718) 492-9673 ----------------------------------------------- (Issuer's Telephone Number, Including Area Code) Securities registered under Section 12(b) of the Exchange Act: Title of each Class Name of Each Exchange on Which Registered None None Securities registered under Section 12(g) of the Exchange Act: Common Stock, $.01 Par Value ---------------------- (Title of Class) 1 Indicated by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports),and (2) has been subject to such filing requirements for past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S- B is not contained in this form, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. Yes [ X ] No [ ] The Registrant's revenues for its most recent fiscal year ended March 29, 2002 were $4,338,012. On June 26, 2002, the aggregate market value of the voting stock of Registrant held by non- affiliates of Registrant (consisting of Common Stock, $.01 par value) computed by reference to the closing price at which the stock was sold on June 17, 2002 (the date of the last reported transaction) ($0.10) was approximately $103,418. On June 26, 2002, there were 2,303,468 shares of Common Stock, $.01 par value, issued and outstanding. 2 Item 7. Financial Statements See Index to Financial Statements attached hereto. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 for 10KSB to be signed on its behalf by the undersigned, thereunto duly authorized. IEH CORPORATION By: /s/ Michael Offerman --------------------------- Michael Offerman, President Dated: July 1, 2002 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Michael Offerman July 25, 2002 - ---------------------------------- Michael Offerman, Chairman of the Board and President /s/ Robert Knoth July 25, 2002 - ---------------------------------- Robert Knoth, Secretary and Treasurer /s/ Murray Sennet July 25, 2002 - ---------------------------------- Murray Sennet, Director /s/ Robert Pittman July 25, 2002 - ---------------------------------- Robert Pittman, Director July 25, 2002 - ---------------------------------- Alan Gottlieb, Director 31 IEH CORPORATION FINANCIAL STATEMENTS EXHIBIT (ITEM 7) Contents March 29, 2002 and March 30, 2001 Page Number ------ Report of Independent Certified Public Accountant Financial Statements: Balance Sheets as of March 29, 2002 and March 30, 2001 Statement of Operations for the twelve months ended March 29, 2002 and March 30, 2001 Statement of Stockholders' Equity as of March 29, 2002 and March 30, 2001 Statement of Cash Flows for the years ended March 29, 2002 and March 30, 2001 Notes to Financial Statements 32 Report of Independent Certified Public Accountant ------------------------------------------------- Board of Directors IEH Corporation 140 58th Street Brooklyn, New York 11220 We have audited the accompanying balance sheets of IEH Corporation as of March 29, 2002 and March 30, 2001 and the related statements of operations, stockholders' equity, and cash flows for each of the two years in the period ended March 29, 2002 and March 30, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based upon our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IEH Corporation as of March 29, 2002 and March 30, 2001 and the results of its operations and its cash flows for each of the two years ended March 29, 2002 and March 30, 2001 in conformity with generally accepted accounting principles. /s/ Jerome Rosenberg ------------------------------- Jerome Rosenberg, CPA, P.C. Melville, New York June 17, 2002 33 IEH CORPORATION BALANCE SHEETS As of March 29, 2002 and March 30, 2001
March 29, March 30, 2002 2001 ---------- ---------- ASSETS CURRENT ASSETS: Cash $ 2,875 $ 11,833 Accounts receivable, less allowances for doubtful accounts of $10,062 at March 29, 2002 and March 30, 2001 770,884 732,150 Inventories (Note 2) 1,015,539 990,420 Prepaid expenses and other current assets (Note 3) 38,845 30,585 ---------- ---------- Total current assets 1,828,143 1,764,988 ---------- ---------- PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation and amortization of $5,584,695 at March 29, 2002 and $5,351,591 at March 30, 2001 (Note 4) 1,100,731 1,191,915 ---------- ---------- OTHER ASSETS: Other assets 44,819 47,075 ---------- ---------- 44,819 47,075 ---------- ---------- Total assets $2,973,693 $3,003,978 ========== ==========
See accompanying notes to financial statements 34 IEH CORPORATION BALANCE SHEETS As of March 29, 2002 and March 30, 2001
March 29, March 30, 2002 2001 ----------- ----------- (Note 1) LIABILITIES AND STOCKHOLDERS' EQUITY Restated (Note 8) CURRENT LIABILITIES: Accounts receivable financing (Note 5) $ 676,181 $ 759,937 Notes payable, equipment, current portion (Note 8) 25,332 25,355 Notes payable, current portion (Note 7) -- 5,750 Loans payable, current portion (Note 9) 25,289 83,130 Accrued corporate income taxes -- 4,912 Union health & welfare, current portion (Note 14) 30,000 96,000 Accounts payable 950,503 719,309 Other current liabilities (Note 6) 144,430 141,423 ----------- ----------- Total current liabilities 1,851,735 1,835,816 ----------- ----------- LONG-TERM LIABILITIES: Pension Plan payable (Note 11) 244,000 244,000 Notes payable, equipment, less current portion (Note 8) 24,773 50,107 Union health & welfare, less current portion (Note 14) 43,828 6,689 ----------- ----------- Total long-term liabilities 312,601 300,796 ----------- ----------- Total liabilities 2,164,336 2,136,612 ----------- ----------- STOCKHOLDERS' EQUITY: Common stock, $.01 par value; 10,000,000 shares authorized; 2,303,468 shares issued and outstanding at March 29, 2002 Common stock, $.50 par value; 10,000,000 shares authorized; 2,303,468 shares issued and outstanding at March 30, 2001 23,035 1,151,734 Capital in excess of par value 2,744,573 1,615,874 Retained earnings (Deficit) (1,958,251) (1,900,242) ----------- ----------- Total stockholders' equity 809,357 867,366 ----------- ----------- Total liabilities and stockholders' equity $ 2,973,693 $ 3,003,978 =========== ===========
See accompanying notes to financial statements 35 IEH CORPORATION STATEMENT OF OPERATIONS For the Years ended March 29, 2002 and March 30, 2001
March 29, March 30, 2002 2001 ----------- ----------- REVENUE, net sales (Note 15) $ 4,338,012 $ 4,593,840 ----------- ----------- COSTS AND EXPENSES: Cost of products sold 3,207,645 3,261,193 Selling, general and administrative 808,935 871,844 Interest expense 143,909 154,874 Depreciation and amortization 244,350 275,737 ----------- ----------- 4,404,839 4,563,648 ----------- ----------- OPERATING INCOME (LOSS) (66,827) 30,192 OTHER INCOME 10,372 734 ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES (56,455) 30,926 PROVISION FOR INCOME TAXES (1,554) (4,100) ----------- ----------- NET INCOME (LOSS) $ (58,009) $ 26,826 =========== =========== Basic and Diluted Earnings per common share (Note 1) $ (.03) $ .012 =========== =========== Weighted average number of common shares outstanding (in thousands) 2,303 2,303 =========== ===========
See accompanying notes to financial statements 36 IEH CORPORATION STATEMENT OF STOCKHOLDERS' EQUITY For the Years Ended March 29, 2002 and March 30, 2001
Capital in Retained Excess of Earnings Common Stock Par Value (Deficit) ------------------------------ ----------- ----------- Shares Amount ----------- ----------- Balances, March 31, 2000 2,303,468 $ 1,151,734 $ 1,615,874 $(2,221,574) Gain on pension plan settlements 294,506 ----------- ----------- ----------- ----------- Adjusted balances at March 31, 2000 2,303,468 1,151,734 1,615,874 (1,927,068) Net Income: Year ended March 30, 2001 26,826 ----------- ----------- ----------- ----------- Balances, March 30, 2001 2,303,468 1,151,734 1,615,874 (1,900,242) Reduction in par value of common stock (1,128,699) 1,128,699 -- Net income: year ended March 29, 2002 (58,009) ----------- ----------- ----------- ----------- Balances, March 29, 2002 2,303,468 $ 23,035 $ 2,744,573 $(1,958,251)
See accompanying notes to financial statements 37 IEH CORPORATION STATEMENT OF CASH FLOWS Increase (Decrease) in Cash For the Years Ended March 29, 2002 and March 30, 2001
Years Ended March 29, March 30, 2002 2001 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (58,009) $ 26,826 --------- --------- Adjustments to reconcile net income to net cash used in operating activities Depreciation and amortization 244,350 275,737 Changes in assets and liabilities: (Increase) decrease in accounts receivable (38,734) 40,484 (Increase) decrease inventories (25,119) (14,251) (Increase) decrease in prepaid expenses and other current assets (8,260) (14,373) (Increase) decrease in other assets 2,256 (697) (Decrease) increase in accounts payable 231,194 (60,377) (Decrease) increase in other current liabilities 3,007 47,770 Increase in accrued corporate income taxes (4,912) (11,108) (Decrease) in due to union pension & health & welfare (28,861) (30,000) --------- --------- Total adjustments 374,921 233,185 --------- --------- NET CASH PROVIDED BY (USED) FOR OPERATING ACTIVITIES 316,912 260,011 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property, plant and equipment (153,166) (209,499) --------- --------- NET CASH USED IN INVESTING ACTIVITIES $(153,166) $(209,499) --------- ---------
See accompanying notes to financial statements 38 IEH CORPORATION STATEMENT OF CASH FLOWS Increase (Decrease) in Cash For the Years Ended March 29, 2002 and March 30, 2001
March 29, March 30, 2002 2001 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on notes payable $ (31,107) $ (60,960) Proceeds from accounts receivable financing (83,756) 70,162 Principal payments on loan payable (57,841) (51,926) --------- --------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (172,704) (42,724) --------- --------- INCREASE (DECREASE) IN CASH (8,958) 7,788 CASH, beginning of period 11,833 4,045 --------- --------- CASH, end of period $ 2,875 $ 11,833 ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION, cash paid during the year for: Interest $ 134,740 $ 149,273 ========= ========= Income Taxes $ 4,175 $ 4,100 ========= =========
See accompanying notes to financial statements 39 IEH CORPORATION NOTES TO FINANCIAL STATEMENTS Note 1 - 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. Accounting Period: The Company maintains an accounting period based upon a 52-53 week year which ends on the nearest Friday in business days to March 31st. The year ended March 29, 2002 was comprised of 52 weeks and the year ended March 30, 2001 was comprised of 53 weeks. Revenue Recognition: Revenues are recognized at the shipping date of the Company's products. 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 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. 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. 40 IEH CORPORATION NOTES TO FINANCIAL STATEMENTS Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): Concentration of Credit Risk: The Company maintains cash balances at one bank. Amounts on deposit are insured by the Federal Deposit Insurance Corporation up to $100,000 in aggregate. There were no uninsured balances at either March 29, 2002 or March 30, 2001. 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 Modified Accelerated Cost Recovery System (MACRS) 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 account. 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 years ended March 29, 2002 and March 30, 2001, 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: The carrying value of the Company's financial instruments, consisting of accounts receivable, accounts payable, and borrowings, approximate their fair value due to the relatively short maturity (three months) of these instruments. 41 IEH CORPORATION NOTES TO FINANCIAL STATEMENTS Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 121, "Accounting For The Impairment of Long-Lived Assets To Be Disposed Of", 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. 121. There were no long-lived asset impairments recognized by the Company for the years ended March 29, 2002 and March 30, 2001. 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 financial position. There were no material items of comprehensive income to report for the years ended March 29, 2002 and March 30, 2001. 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. Effect of New Accounting Pronouncements: In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 ("SAB No. 101"), Revenue Recognition in Financial Statements, which summarizes certain of the staff's views on revenue recognition. The Company's revenue recognition policies are in accordance with SAB No. 101. 42 IEH CORPORATION NOTES TO FINANCIAL STATEMENTS Note 2 - INVENTORIES: Inventories are comprised of the following: March 29, March 30, 2002 2001 ---------- ---------- Raw materials $ 675,446 $ 714,634 Work in progress 228,912 159,741 Finished goods 111,181 116,045 ---------- ---------- $1,015,539 $ 990,420 ========== ========== Note 3 - PREPAID EXPENSES AND OTHER CURRENT ASSETS: Prepaid expenses and other current assets are comprised of the following: March 29, March 30, 2002 2001 ------- ------- Prepaid insurance $32,574 $18,571 Prepaid corporate taxes 3,925 3,640 Other current assets 2,346 8,374 ------- ------- $38,845 $30,585 ======= ======= Note 4 - PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are as follows: March 29, March 30, 2002 2001 ---------- ---------- Computers $ 189,288 $ 187,248 Leasehold improvements 585,831 585,831 Machinery and equipment 4,175,282 4,050,066 Tools and dies 1,580,217 1,554,307 Furniture and fixture 154,808 154,808 Transportation equipment -- 11,246 ---------- ---------- 6,685,426 6,543,506 Less: accumulated depreciation and amortization 5,584,695 5,351,591 ---------- ---------- $1,100,731 $1,191,915 ========== ========== 43 Note 5 - 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 The Chase Manhattan Bank's publicly announced rate 4.75% at March 29, 2002, with a maximum of 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. Note 6 - OTHER CURRENT LIABILITIES: Other current liabilities are comprised of the following: March 29, March 30, 2002 2001 -------- -------- Payroll and vacation accruals $ 67,920 $ 66,448 Sales commissions 14,339 10,611 Other 62,171 64,364 -------- -------- $144,430 $141,423 ======== ======== Note 7 - NOTES PAYABLE: The Company was in arrears in the amount of $236,000 to the Apple Industrial Development Corp. formerly New York City Economic Development Corporation ("NYCEDC") for rent due for its offices and manufacturing facilities. In May 1997, the Company and the NYCEDC negotiated an agreement for the Company to pay off its indebtedness over a 48 month period, by the Company issuing notes payable to NYCEDC. The note bore interest at the rate of 8.25% per annum. The Company had repaid this note in full in April, 2001. 44 IEH CORPORATION NOTES TO FINANCIAL STATEMENTS Note 8 - NOTES PAYABLE EQUIPMENT: The Company financed the acquisition of new computer equipment and software with notes payable. The notes are payable over a sixty month period. The balance remaining at March 29, 2002 amounted to $50,105. Aggregate future principal payments are as follows: Fiscal Year Ending March: 2003 $ 25,332 2004 16,978 2005 6,745 2006 1,050 ---- ---------- $ 50,105 ========== Note 9 - LOAN PAYABLE: On July 22, 1992, the Company obtained a loan of $435,000 from the New York State Urban Development Corporation ("UDC"), collateralized by machinery and equipment. The loan is payable over ten years, with interest rates progressively increasing from 4% to 8% per annum. The balance remaining at March 29, 2002 was $25,289. Aggregate future principal payments are as follows: Fiscal Year Ending March 31 2003: $ 25,289 ========== In April 1997, the Company was informed by the UDC that the loan was sold and conveyed to WAMCO XXIV, Ltd. All the terms and conditions of the loan remained in effect. As of March 29, 2002, the Company had failed to meet one of the financial covenants of the loan agreement; namely that the "Company shall be obligated to maintain a tangible net worth of not less than $1,300,000 and the Company shall be obligated to maintain a ratio of current assets to current liabilities of 1.1 to 1.0. The Company reported tangible net worth of $809,357. The ratio of current assets to current liabilities was .99 to 1.0. The Company has applied for additional waivers of this covenant. Neither the UDC or WAMCO XXIV has acted on these requests. There are no assurances that the Company will receive any additional waivers of this covenant. Should the Company not receive any additional waivers, then it will be deemed to be in default of this loan obligation and the loan plus interest will become due and payable, accordingly the entire balance has been classified as a current liability in the accompanying balance sheet. 45 IEH CORPORATION NOTES TO FINANCIAL STATEMENTS Note 10 - INCOME TAXES: The components of the deferred tax assets and liabilities are as follows:
March 29, March 30, 2002 2001 ----------- ----------- Deferred tax assets: Net operating loss carryforwards $ 2,085,929 $ 2,112,755 ----------- ----------- Gross deferred assets tax assets 2,085,929 2,112,755 Deferred tax liabilities: State income taxes (82,397) (83,557) ----------- ----------- Net deferred tax assets before valuation allowance 2,003,532 2,029,198 Valuation allowance (2,003,532) (2,029,198) ----------- ----------- Net deferred tax assets $ 0 $ 0 =========== ===========
At March 31, 2000 , the Company established a 100% valuation allowance for the net deferred tax assets, as management could not determine that it was more likely than not that the deferred tax assets could be realized. The change in valuation allowance amounted to $25,666 for the year ended March 29, 2002. As of March 29, 2002, the Company has available Federal net operating loss carryforwards (NOL's) totaling approximately $2,085,929 which expire at various times through March 31, 2010, for State and Local purposes, the company has available NOL's approximating $2,019,544 which expire at various times through March 31, 2010. Utilization of the NOL's may be limited pursuant to Internal Revenue Code Section 382 should significant changes to the existing ownership of the Company occur. 46 IEH CORPORATION NOTES TO FINANCIAL STATEMENTS Note 10 - INCOME TAXES: (continued) A reconciliation of income taxes computed at the Federal statutory rate as compared to income tax expense at the effective income tax is as follows: March 29, March 30, 2002 2001 ---------- ---------- Federal statutory income tax (benefit) rate (34.0)% (34.0) % State tax benefit, net of Federal liability (12.2)% (12.2) % Net change in valuation allowance 46.2% 46.2 % Effective income tax (benefit) rate ( - )% ( - ) % Note 11 - 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 In addition, to the above referenced monthly payments, the Company will make balloon payments of $25,000 each on the following dates: January 1, 2004 May 1, 2004 May 1, 2005 January 1, 2006 47 The Company will also grant the PBGC a lien on the Company's machinery and equipment, subject to the pre- existing liens in favor of the UDC. IEH CORPORATION NOTES TO FINANCIAL STATEMENTS Note 11 - PENSION PLAN-SALARIED PERSONNEL (continued) As a result of this agreement the amount due the PBGC has been restated to $244,000 and is reported as a long term liability. The resultant gain of $294,506 was reclassified and accounted for as a charge to opening retained earnings as follows: Opening retained earnings-March 31, 2000 $(2,221,574) Gain on pension plan settlement 294,506 ----------- Adjusted opening retained earnings March 31, 2000 (1,927,068) Net income for the year ended March 30, 2001 26,826 ----------- Adjusted retained earnings balance at March 30, 2001 (1,900,242) Net loss for the Year ended March 29, 2002 (58,009) ----------- Balance at March 29, 2002 (1,958,251) =========== Note 12 - CHANGES IN STOCKHOLDERS' EQUITY: Retained earnings (deficit) increased by $58,009, which represents the loss for the year. The Company's shareholders voted on September 21, 2001 to change the par value of the Company's common stock from $.50 par value per share to $.01 par value per share. As a result of the above change the Company reduced the book value of it's common stock and increased capital in excess of par as follows: Par Value Par Value $.50 Change $.01 ----------- ----------- ----------- Common Stock $ 1,151,734 $(1,128,699) $ 23,035 Capital in excess of par 1,615,874 1,128,699 2,744,573 ----------- ----------- ----------- Total equity $ 2,767,608 $ 0 $ 2,767,608 =========== =========== =========== Note 13- 2001 EMPLOYEE STOCK OPTION PLAN: 48 On September 21, 2001 the Company's shareholders approved the adoption of the Company's 2001 Employees 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. Options granted to employees under this plan may be designated as options which qualify for incentive stock option treatment under Section 422A of the Internal Revenue Code, or options which do not so qualify. IEH CORPORATION NOTES TO FINANCIAL STATEMENTS Note 13- 2001 EMPLOYEE STOCK OPTION PLAN (continued) 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 March 29, 2002 no options had been granted under the plan. Note 14 - COMMITMENTS: The Company exercised its option to renew its lease on the premises for 10 years. The original lease ran through August 23, 2001. The Company is obligated under this renewal through August 23, 2011, at minimum annual rentals as follows: Fiscal year ending March: 2003 $111,600 2004 111,600 2005 111,600 2006 111,600 2007 111,600 2008 111,600 2009 111,600 2010 111,600 2011 74,400 -------- $967,200 ======== 49 The rental expense for the year ended March 29, 2002 for this lease was $111,482. The terms of the renewal are presently being negotiated by the Company and its landlord, Apple Industrial Development, Corp. (See Note 7 - Notes Payable relating to rent arrears agreement) The Company has a collective bargaining multi-employer pension plan with the United Auto Workers of America, Local 259. Contributions are made 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 50 IEH CORPORATION NOTES TO FINANCIAL STATEMENTS Note 14 - COMMITMENTS (continued) Amendments Act of 1990 (The "Act"), the Company may become subject to liabilities in excess of contributions made under the collective bargaining agreement. Generally, these liabilities are contingent upon the termination, withdrawal, or partial withdrawal from the Plan. The Company has not taken any action to terminate, withdraw or partially withdraw from the 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 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 this pension plan were $38,384 for the year ended March 29, 2002 and $35,707 for the year ended March 30, 2001. As of March 29, 2002, the Company reported arrears with respect to its contributions to the Union's health and welfare plan. The amount due the health and welfare plan was $73,828. The total amount due of $73,828 is reported on the accompanying balance sheet as follows: $30,000 as a current liability and $43,828 as a long term liability. In December 1993, the Company and Local 259 entered into a verbal agreement whereby the Company would satisfy this debt by the following payment schedule: The sum of $2,500 will be paid by the Company each month in satisfaction of the current arrears until this total debt has been paid. Under this agreement, the projected payment schedule for arrears will satisfy the total debt in 30 months. Note 15 - REVENUES FROM MAJOR CUSTOMERS: In the fiscal year ended March 29, 2002, approximately 17% of the Company's total revenues were earned from one customer. Total sales to this customer were approximately $730,000. No other customer accounted for over 10% of the Company's sales. Accounts receivable as of March 29, 2002, included a receivable from one customer which amounted to 10% or more of the total accounts receivable. 51 -----END PRIVACY-ENHANCED MESSAGE-----