NOTES TO FINANCIAL STATEMENTS
Note 1 -
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
|
Description of Business:
The Company designs, develops and manufactures printed circuit
connectors for high performance applications. We have also developed a high performance plastic circular connector line. All of
our connectors utilize the HYPERBOLOID contact design, a rugged, high-reliability contact system ideally suited for high-stress
environments. We believe we are the only independent producer of HYPERBOLOID printed circuit board connectors in the United States.
The Company’s customers consist of OEM’s (Original
Equipment Manufacturers), companies manufacturing medical equipment, and distributors who resell the Company’s products to
OEMs. The Company sells its products directly and through regional representatives located in all regions of the United States,
Canada, Israel, India, various Pacific Rim countries, South Korea and the European Union (EU).
The customers the Company services are in the Government,
Military, Aerospace, Medical, Automotive, Industrial, Test Equipment and Commercial Electronics markets. The Company appears on
the Military Qualified Product Listing “QPL” to MIL-DTL-55302 and supply customer requested modifications to this specification.
Sales to the commercial electronic (inclusive of aerospace, space, oil & gas, medical & miscellaneous) and military markets
were 49.9% and 50.1%, respectively, of the Company’s net sales for the year ended March 29, 2019 as compared to the comparable
sales of 35% and 45%, respectively, for the year ended March 30, 2018. The Company’s offering of “QPL” items
has recently been expanded to include additional products.
In order to remain competitive, the Company has an internal
program to upgrade, add and maintain machinery, review material costs and increase labor force productively. During the fiscal
year ended March 29, 2019, we purchased several machines to increase the productivity of certain processes. This should help us
meet this goal.
New Product Development:
The Company is sought after by many of its customers to
design and manufacture custom connectors. This has created many new products that are innovative designs and employ new technologies.
The Company continues to be successful because of its ability to assist its customers and create a new design, including engineering
drawing packages, in a relatively short period of time. We will continue to support our customers to the best of our ability.
A new product line featuring high density connectors has
been added to the Company’s product offering. The Company is beginning to recognize meaningful revenue from this product
line and we expect it to grow in the coming years.
The standard printed circuit board connectors we produce
are continually being expanded and utilized in many of the military programs being built today. We have recently received approval
for additional products that we can offer under the Military Qualified Product Listing “QPL.”
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. Each of the years ended March 29,
2019 and March 30, 2018 were comprised of 52 weeks.
Revenue Recognition:
In May 2014, the Financial Accounting Standards Board issued
ASC 606 “Revenue from Contracts with Customers” that, as amended on August 12, 2015, became effective for annual report
periods beginning after December 15, 2017.
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1 -
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
|
The core principle underlying ASC 606, is to recognize revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.” ASC 606-10-05-4 sets out the following steps for an entity
to follow when applying the core principle to its revenue -generating transactions:
|
·
|
Identify the contract with a customer
|
|
·
|
Identify the performance obligations in the contract
|
|
·
|
Determine the transaction price
|
|
·
|
Allocate the transaction price to the performance obligations
|
|
·
|
Recognize revenue when (or as) each performance obligation is satisfied
|
The Company has adopted the provisions of ASC 606 for the
quarter ended June 29, 2018. However, such adoption did not have any material effect on the way in which the Company recognizes,
records and reports revenues.
The Company does not offer any discounts, credits or other
sales incentives. Historically, the Company believes that it has no collection issues with its customer base. 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 products 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 cost of this warranty with respect to defective products is immaterial
at this time.
The Company provides engineering services as part of the
relationship with its customers in developing custom products. The Company is not obligated to provide such engineering service
to its customers. The Company does not invoice its customers separately for these services.
Inventories:
Inventories are stated at cost, on an average basis, which
does not exceed net realizable 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. The
Company recognized $399,979 and $208,257 for the years ended March 29, 2019 and March 30, 2018, respectively, as a reduction of
inventory due to obsolescence.
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1 -
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
|
Concentration of Credit Risk:
Financial instruments which potentially subject the Company
to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.
Under the provisions of the Dodd-Frank Wall Street Reform
and Consumer Protection Act, the Federal Deposit Insurance Corporation (FDIC) will permanently insure all accounts maintained in
each financial institution up to $250,000 in the aggregate.
As of March 29, 2019, the Company had funds on deposit in
the amount of $7,263,839 in one financial institution of which $7,013,839 exceeds FDIC coverage. The Company has not experienced
any losses in such accounts and believes its cash balances are not exposed to any significant risk.
Property, Plant and Equipment:
Property, plant and equipment are 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 account. Any gain or loss thereon is either credited
or charged to operations.
Income Taxes:
Deferred income taxes arise from temporary differences resulting
from different depreciation methods used for financial and income tax purposes. The Company has adopted the Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740.
Earnings Per Share:
The Company accounts for earnings per share pursuant
to ASC Topic 260, “Earnings per Share”, which requires disclosure on the Financial Statements of
“basic” and “diluted” earnings per share. Basic earnings per share are computed by dividing net
income by the weighted average number of common shares outstanding for the year. Diluted earnings per share is computed by
dividing net income by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive)
related to stock options for each year. As the Company reported net income for both the years ended March 29, 2019 and March
30, 2018, respectively, basic and diluted income per share are calculated separately as follows:
|
|
3/29/2019
|
|
3/30/2018
|
|
|
|
|
|
NET INCOME
|
|
$
|
5,160,776
|
|
|
$
|
2,565,559
|
|
|
|
|
|
|
|
|
|
|
BASIC EARNINGS PER COMMON SHARE
|
|
$
|
2.23
|
|
|
$
|
1.11
|
|
|
|
|
|
|
|
|
|
|
FULLY DILUTED EARNINGS PER SHARE
|
|
$
|
2.15
|
|
|
$
|
1.10
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING-BASIC
|
|
|
2,321,331
|
|
|
$
|
2,303,468
|
|
|
|
|
|
|
|
|
|
|
DILUTIVE EFFECT OF OPTIONS GRANTED
|
|
|
92,399
|
|
|
|
30,238
|
|
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING-FULLY DILUTED
|
|
|
2,413,730
|
|
|
|
2,333,706
|
|
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
|
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
of these instruments.
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:
The Company has adopted the provisions of ASC Topic 360,
“Property, Plant and Equipment-Impairment or Disposal of Long Lived Assets,” and 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. There were no long-lived asset impairments recognized by the Company for
the years ended
March 29, 2019 and March 30, 2018,
respectively.
Stock-Based Compensation Plan:
Compensation expense for stock options granted to directors,
officers and key employees is based on the fair value of the award on the measurement date, which is the date of the grant. The
expense is recognized ratably over the service period of the award. The fair value of stock options is estimated using a Black-Scholes
valuation model. The fair value of any other non-vested stock awards is generally the market price of the Company’s common
stock on the date of the grant.
Recent Accounting Pronouncements:
In December 2016, the FASB issued ASU 2016-20, Technical
Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The amendments in this update are of a similar
nature to the items typically addressed in the ASU 2016-19, Technical Corrections and Improvements. The FASB elected to issue a
separate update for technical corrections and improvements to Topic 606 as well as other Topics amended by ASU 2014-09 to increase
public awareness of the proposals and to expedite improvements to ASU-2014-9. The adoption of ASU 2016-20 is effective from the
periods beginning after December 31, 2017, including interim reporting periods within that reporting period. Early adoption is
permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that
reporting period.
Leases
FASB ASC 2016-02 Leases (Topic 842) – In
February 2016, the FASB issued ASC 2016-02, which requires lessees to recognize almost all leases on their balance sheet as a
right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to
be classified as either operating or finance. Classification will be based on criteria that are largely similar to those
applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model,
but has been updated to align with certain changes to the lessee model and the new revenue recognition standard. ASC 2016-02
is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We have
adopted ASC 2016-02 as of April 1, 2019, and do expect guidance to have an impact on the financial statements for the
forthcoming fiscal year.
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Inventories are stated at cost, on the average basis that
does not exceed net realizable value.
Inventories are comprised of the following:
|
|
March 29,
|
|
|
March 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
7,053,896
|
|
|
$
|
6,644,437
|
|
Work in progress
|
|
|
2,797,006
|
|
|
|
2,288,115
|
|
Finished goods
|
|
|
2,170,541
|
|
|
|
1,818,946
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,021,443
|
|
|
$
|
10,751,498
|
|
Note 3
|
PREPAID EXPENSES AND OTHER CURRENT ASSETS:
|
Prepaid expenses and other current assets are comprised
of the following:
|
|
March 29,
|
|
|
March 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Prepaid insurance
|
|
$
|
106,801
|
|
|
$
|
16,256
|
|
Prepaid corporate taxes
|
|
|
—
|
|
|
|
467,606
|
|
Prepaid payroll taxes
|
|
|
289,311
|
|
|
|
—
|
|
Prepaid other
|
|
|
138,785
|
|
|
|
5,732
|
|
|
|
$
|
534,897
|
|
|
$
|
489,594
|
|
Note 4
|
PROPERTY, PLANT AND EQUIPMENT:
|
Property, plant and equipment are as follows:
|
|
March 29,
|
|
|
March 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Computers
|
|
$
|
502,723
|
|
|
$
|
496,489
|
|
Leasehold improvements
|
|
|
934,648
|
|
|
|
888,488
|
|
Machinery and equipment
|
|
|
6,657,876
|
|
|
|
6,189,340
|
|
Tools and dies
|
|
|
3,999,705
|
|
|
|
3,681,077
|
|
Furniture and fixture
|
|
|
179,072
|
|
|
|
179,072
|
|
Website development cost
|
|
|
9,784
|
|
|
|
9,050
|
|
|
|
|
12,283,808
|
|
|
|
11,443,516
|
|
|
|
|
|
|
|
|
|
|
Less: accumulated depreciation and amortization
|
|
|
(9,723,201
|
)
|
|
|
(9,377,361
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,560,607
|
|
|
$
|
2,066,155
|
|
Depreciation and amortization expense
|
|
$
|
345,840
|
|
|
$
|
330,037
|
|
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 5
|
ACCOUNTS RECEIVABLE FINANCING:
|
The Company has an accounts receivable financing agreement
with a non-bank lending institution (“Financing Company”) whereby it can borrow up to 80 percent of its eligible receivables
(as defined in such financing agreement) at an interest rate of 2 ½% above JP Morgan Chase’s publicly announced rate
with a minimum rate of 6% per annum.
The financing agreement has an initial term of one year
and automatically renews for successive one-year terms, unless terminated by the Company or its lender upon receiving 60 days prior
notice. Funds advanced by the Financing Company are secured by the Company’s accounts receivable and inventories. As of March
29, 2019, the Company reported in the accompanying Financial Statements, a liability to the Financing Company of $334,306 compared
to March 30, 2018, when the Company had reported excess payments to the Financing Company of $154,960. These excess payments are
reported in the accompanying Financial Statements as “Excess payments to accounts receivable financing company.”
Note 6
|
OTHER CURRENT LIABILITIES:
|
Other current liabilities are comprised of the following:
|
|
March 29,
|
|
|
March 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Payroll and vacation accruals
|
|
$
|
831,187
|
|
|
$
|
569,043
|
|
Sales commissions
|
|
|
80,553
|
|
|
|
104,791
|
|
Insurance
|
|
|
—
|
|
|
|
52,648
|
|
Other
|
|
|
65,680
|
|
|
|
41,887
|
|
|
|
$
|
977,420
|
|
|
$
|
768,369
|
|
The Company accounts for income taxes under the
provisions of ASC Topic 740, “Income Taxes.” Under ASC Topic 740, deferred income tax assets or liabilities are
computed based upon the temporary differences between the Financial Statement and income tax bases of assets and liabilities
using the currently enacted marginal income tax rates. Deferred income tax expense or credits are based on the changes in the
deferred income tax assets or liabilities from period to period.
The provision for income taxes consists of the following:
|
|
March 29,
|
|
|
March 30,
|
|
|
|
2019
|
|
|
2018
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
828,728
|
|
|
$
|
449,123
|
|
State and local
|
|
|
1,166,106
|
|
|
|
222,982
|
|
Total current tax provision
|
|
|
1,994,834
|
|
|
|
672,105
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
|
408,174
|
|
|
|
561,920
|
|
State and local
|
|
|
222,217
|
|
|
|
556,453
|
|
Total deferred tax expense
|
|
|
630,391
|
|
|
|
1,118,373
|
|
|
|
|
|
|
|
|
|
|
Total provision
|
|
$
|
2,625,225
|
|
|
$
|
1,790,478
|
|
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
With the enactment of the Tax Cuts and Jobs Act (TCJA) in
December 2017, Federal corporate income tax rates were reduced from 35 percent to 21 percent. As the Company reported on a fiscal
year ending in March, the federal income tax rate for the year ended March 30, 2018 was a blended rate.
The foregoing amounts are management’s estimates and
the actual results could differ from those estimates. Future profitability in this competitive industry depends on continually
obtaining and fulfilling net profitable contracts or the failure of the Company’s engineering development efforts could reduce
estimates of future profitability, which could affect the Company’s ability to realize the deferred tax assets.
A reconciliation of the income tax benefit at the statutory
Federal tax rate to the income tax benefit recognized in the financial statements is as follows:
|
|
March 29,
|
|
|
March 30,
|
|
|
|
2019
|
|
|
2018
|
|
Income tax expense (benefit) – twelve months
|
|
21%
|
|
|
—
|
|
Income tax expense (benefit) – nine months
|
|
|
—
|
|
|
|
26%
|
|
Income tax expense (benefit) – three months
|
|
|
—
|
|
|
|
5%
|
|
Income tax expense (benefit)
|
|
|
—
|
|
|
|
—
|
|
Income tax expenses – state and local, net of federal benefit
|
|
|
11%
|
|
|
|
10%
|
|
During the year ended March 29, 2019, the Company
received a remittance of $460,442 from the Internal Revenue Service. The remittance did not indicate the basis for the
payment. The Company has reported this payment as a current liability in the accompanying financial statements until such
time that the basis for this remittance can be determined.
Note 8
|
2011 EQUITY INCENTIVE PLAN:
|
On August 31, 2011, the Company’s shareholders approved
the adoption of the Company’s 2011 Equity Incentive Plan (“2011 Plan”) to provide for the grant of stock options
and restricted stock awards to purchase up to 750,000 shares of the Company’s common stock to all employees, consultants
and other eligible participants including senior management and members of the Board of Directors of the Company.
Options granted to employees under the 2011 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 qualify (non-qualified stock options).
Under the 2011 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%) or greater shareholder,
such exercise price shall be at least 110 percent (110%) of the fair market value of the Company’s common stock and the option
must not be exercisable after the expiration of ten years from the day of the grant. The 2011 Plan also provides that holders of
options that wish to pay for the exercise price of their options with shares of the Company’s common stock must have beneficially
owned such stock for at least six months prior to the exercise date.
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.
Effective August 15, 2016, the Board of Directors also approved
the granting of stock options to purchase shares of the Company’s common stock under the 2011 Plan to each of Dr. Marciano
and Mr. Hugel as follows: Each of the new non-management directors received a grant of options totaling 5,000 shares each subject
to the following vesting schedule: (i) 1,000 shares vested immediately (August 15, 2016); (ii) 2,000 shares vested on August 15,
2017; and (iii) 2,000 shares will vest on August 15, 2018. The stock options (i) have a ten-year term; and (ii) have an exercise
price equal to the fair market value of the Company’s common stock as determined under the 2011 Plan, as reported in the
OTCBB, on the date of grant ($5.30). In the event of the termination of each recipient’s association with the Company, the
options will remain exercisable in accordance with the terms of the 2011 Plan.
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 8 -
|
2011 EQUITY INCENTIVE PLAN (continued):
|
On September 7, 2018, the Board of Directors elected Michael
E. Rosenfeld to the Board of Directors to fill the vacancy of a Class I Director of the Company created by the death of the Company’s
then President and Chief Executive Officer, Michael Offerman. Such appointment became effective on October 26, 2018.
At the same time, the Board of Directors also approved the
granting of stock options to purchase shares of the Company’s common stock under the 2011 Plan to Mr. Rosenfeld as follows:
He received a grant of options totalling 5,000 shares each subject to the following vesting schedule: (i) 1,000 shares vested on
October 26, 2018; (ii) 2,000 shares will vest on October 26, 2019; and (iii) 2,000 shares will vest on October 26, 2020. The stock
options: (i) have a ten-year term; and (ii) have an exercise price equal to the value of the Company’s common stock on the
date of grant. In the event of the termination of each recipient’s association with the Company, the options will remain
exercisable in accordance with the terms of the 2011 Plan.
The table below summarizes the option awards for the
named executive officers and non-management directors:
Name
|
Stock
Option Grants
|
David Offerman
|
|
|
50,000
|
|
Robert Knoth
|
|
|
50,000
|
|
Allen Gottlieb
|
|
|
5,000
|
|
Gerald Chafetz
|
|
|
5,000
|
|
Sonia Marciano
|
|
|
5,000
|
|
Eric Hugel
|
|
|
5,000
|
|
Michael E. Rosenfeld
|
|
|
5,000
|
*
|
*Options for 1,000 shares vested on October 26, 2018.
Options for 2,000 shares shall vest on October 26, 2019 and options for 2,000 shares shall vest on October 26, 2020.
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 8
|
2011 EQUITY INCENTIVE PLAN (continued):
|
The following table shows the option activity for the
fiscal years ended March 29, 2019 and March 30, 2018.
Stock-based compensation expense
Stock-based compensation expense, shown in the table
below, is recorded in general and administrative expenses included in our statement of operations:
|
|
|
|
Year ended
|
|
Year ended
|
|
|
|
|
March 29, 2019
|
|
March 30, 2018
|
|
|
Ref
|
|
(in thousands)
|
|
(in thousands)
|
IEH employees
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-employee directors
|
|
|
|
|
|
|
35
|
|
|
|
28
|
|
Total stock option expense
|
|
|
(a)
|
|
|
$
|
35
|
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a):
|
The Company reported compensation expense of $27,980 during
the year ended March 30, 2018.
The Company reported compensation expense of $35,264 during
the year ended March 29, 2019.
|
Unrecognized stock-based compensation expense
|
|
|
|
Year ended
|
|
Year ended
|
|
|
|
|
March
29, 2019
|
|
March 30, 2018
|
|
|
Ref
|
|
(in thousands)
|
|
(in thousands)
|
Unrecognized expense for IEH employees
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Unrecognized expense for Non-employee directors
|
|
|
|
|
|
|
42
|
|
|
|
14
|
|
Total unrecognized expense
|
|
|
(b)
|
|
|
$
|
42
|
|
|
$
|
14
|
|
|
(b):
|
Unrecognized stock-based compensation expense related to prior
years’ equity grants of stock options to non-employee directors, that had not vested as of the end of the applicable fiscal
year.
The Company expects to recognize $25,454 in stock option compensation
expense for the fiscal year ended March 2020 and $16,992 for the fiscal year ended March 2021.
|
Note: Stock option grants to IEH officers,
directors and key employees in the fiscal years ended March 29, 2019 and March 30, 2018 were valued using a Black-Scholes
model, under the following criteria:
|
|
March 29, 2019
|
|
March 30, 2018
|
Risk free interest rate
|
|
|
2.40
|
%
|
|
|
2.09
|
%
|
Contractual term
|
|
|
10 years
|
|
|
|
10 years
|
|
Dividend yield
|
|
|
—
|
|
|
|
—
|
|
Expected lives
|
|
|
10 years
|
|
|
|
10 years
|
|
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 8
|
2011 EQUITY INCENTIVE PLAN (continued):
|
The following table shows the activity for the fiscal years
ended March 29, 2019 and March 30, 2018.
|
|
|
|
|
|
|
|
Weighted Avg.
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic Value
|
|
|
|
|
|
Shares
|
|
|
Price
|
|
|
Term (Years)
|
|
|
(in thousands)
|
Outstanding at the Beginning of the Year
|
|
|
3/31/2017
|
|
|
|
255,000
|
|
|
$
|
6.15
|
|
|
|
8.82
|
|
|
$
|
125
|
Granted
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or Expired
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at the End of the Year
|
|
|
3/30/2018
|
|
|
|
255,000
|
|
|
$
|
6.15
|
|
|
|
8.07
|
|
|
$
|
3,852
|
Fully Vested
|
|
|
|
|
|
|
251,000
|
|
|
$
|
6.02
|
|
|
|
|
|
|
|
Exercisable at the End of the Year
|
|
|
|
|
|
|
251,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at the Beginning of the Year
|
|
|
3/30/2018
|
|
|
|
255,000
|
|
|
$
|
6.15
|
|
|
|
8.07
|
|
|
$
|
702
|
Granted
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
(75,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or Expired
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at the End of the Quarter
|
|
|
3/29/2019
|
|
|
|
185,000
|
|
|
$
|
6.05
|
|
|
|
7.75
|
|
|
$
|
1,832
|
Fully Vested
|
|
|
|
|
|
|
181,000
|
|
|
$
|
5.88
|
|
|
|
|
|
|
|
|
Exercisable at the End of the Year
March 29, 2019
|
|
|
|
|
|
|
181,000
|
|
|
|
|
|
|
|
|
|
|
|
|
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 8
|
2011 EQUITY INCENTIVE PLAN (continued):
|
The aggregate intrinsic value in the table above represents
the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day
of the period and the exercise price, times the number of shares) that would have been received by the option holders had all option
holders exercised their in-the-money options on those dates. This amount will change based on the fair market value of the Company’s
common stock.
In 1987, the Company adopted a cash bonus plan (the “Cash
Bonus Plan”) for non-union, management and administration staff. Contributions to the Cash Bonus Plan are made by the Company
only when the Company is profitable for the fiscal year. Accordingly, the Company has accrued a contribution provision of $324,000
for the fiscal years ended March 29, 2019 and March 30, 2018, respectively.
Note 10
|
COMMITMENTS AND CONTINGENCIES:
|
The Company leases space for its corporate offices and its
manufacturing facility located at 140 58th Street, Suite E, Brooklyn, New York, runs from December 1, 2010 through November
30, 2020. The basic minimum annual rentals are as follows:
Fiscal year ending March:
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
189,200
|
|
2021
|
|
|
128,640
|
|
|
|
$
|
317,840
|
|
The rental expense for the years ended March 29, 2019 and
March 30, 2018, was $183,720 and $178,360, respectively.
The Company has a collective bargaining multi-employer pension
plan (“Multi-Employer Plan”) with the United Auto Workers of America, Local 259 (ID No. 136115077). 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 Amendments Act of 1990 (the “1990 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 Multi-Employer Plan.
Based upon such Plan’s information and data as of
December 31, 2018 furnished to the Company (including, without limitation, unfunded vested benefits, accumulated benefits and net
assets), such Plan is fully funded. Based thereupon, the Company’s proportional share of the liability through December 31,
2018 is fully funded. The total contributions charged to operations under the provisions of the Multi-Employer Plan were $65,075
and $151,314 for the fiscal years ended March 29, 2019 and March 30, 2018, respectively. 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.
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 11
|
REVENUES FROM MAJOR CUSTOMERS:
|
During the fiscal year ended March 29, 2019, two customers
accounted for $7,451,032 constituting 26.2% of the Company’s net sales. One of those customers accounted for 13.7% of the
Company’s net sales while the second customer accounted for 12.5% of the Company’s net sales.
During the fiscal year ended March 30, 2018, one customer
accounted for $2,685,250 constituting 11.4% of the Company’s net sales.
Note 12
|
SUBSEQUENT EVENTS:
|
The Company has evaluated all other subsequent events through
July 12, 2019, the date the financial statements were available to be issued. Based on this evaluation, except as set forth below,
the Company has determined that no subsequent events have occurred which require disclosure through the date that these Financial
Statements were available to be issued.
IEH CORPORATION