NOTES TO FINANCIAL STATEMENTS
(Unaudited)
|
Note 1-
|
INTERIM RESULTS AND BASIS OF PRESENTATION:
|
The accompanying unaudited financial statements as of June
28, 2019 and for the three months then ended have been prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”) 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 28, 2019 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 28, 2019, are not necessarily indicative of the results to be expected for any subsequent quarter or the entire
fiscal year. The balance sheet at March 29, 2019 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 GAAP 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 and notes thereto of IEH Corporation for the fiscal year ended March
29, 2019 included in the Company’s Annual Report on Form 10-K as filed with the SEC and the attached Management’s Discussion
and Analysis of Financial Condition and Results of Operations.
|
Note 2-
|
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.
Our customers consist of OEM’s (Original Equipment
Manufacturers), companies manufacturing medical equipment and distributors who resell our products to OEMs. We sell our products
directly and through regional representatives and distributors located in all regions of the United States, Canada, Israel, India,
various Pacific Rim countries, South Korea and the European Union.
The customers we service are in the Government, Military,
Aerospace, Space, Medical, Automotive, Industrial, Test Equipment and Commercial Electronics markets. We appear 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. Our 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 productivity. During the fiscal
year ended March 29, 2019, the Company purchased several machines to increase the productivity of certain processes. This will
help the Company meet this goal.
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
|
Note 2-
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(continued)
|
Business New Product Development:
The Company 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. The Company will continue to support its customers to the best of its ability.
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 the Company 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 31. The year ended March 29, 2019 was comprised of
52 weeks. The current fiscal year, ending on March 27, 2020, will be 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.
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 designs, develops and manufactures printed circuit
board connectors and custom interconnects for high performance applications. All of our connectors utilize the HYPERBOLOID contact
design, a rugged, high-reliability contact system ideally suited for high-stress environments.
The customers we service are in the Military, Aerospace,
Space, Medical, Oil and Gas, Industrial, Test Equipment and Commercial Electronics markets.
Sales are recognized when revenue is realized or realizable
and has been earned. Revenue transactions represent sales of inventory. The Company has historically adopted shipping terms that
title to merchandise passes to the customer at the shipping point (FOB Shipping Point).
The Company’s disaggregated revenue,
as of June 28, 2019 and June 29, 2018, respectively, by geographical location is as follows:
|
|
|
Three Months Ended as of
|
|
Three Months ended as of
|
|
|
|
June 28, 2019
|
|
June 29, 2018
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
6,182,564
|
|
|
$
|
8,260,806
|
|
|
International
|
|
|
1,384,834
|
|
|
|
783,000
|
|
|
Total
|
|
$
|
7,567,398
|
|
|
$
|
9,043,806
|
|
The Company does not offer any discounts, credits or other
sales incentives. Historically, the Company has not had an issue with uncollectible accounts receivable.
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.
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
|
Note 2 -
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
:
|
Revenue Recognition:
(continued)
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 an average cost on a first-in,
first-out 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 $54,000 for the quarters ended June 28, 2019 and June 29, 2018, respectively, as a reduction of inventory
due to obsolescence.
Concentration of Credit Risk:
Financial instruments which potentially subject the Company
to concentrations of credit risk consist primarily of cash, 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 with each financial institution up to $250,000 in the aggregate. From time to time the Company does maintain cash
balances in excess of insured limits.
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
|
Note 2-
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(continued)
|
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 accounts. Any gain or loss thereon is either credited
or charged to operations.
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 June 28, 2019 and June 29, 2018, respectively, basic and diluted income
per share are calculated separately as follows:
|
|
|
Three months
ended
6/28/2019
|
|
|
Three months
ended
6/29/2018
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$
|
909,533
|
|
|
$
|
2,259,285
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC EARNINGS PER COMMON SHARE
|
|
$
|
.39
|
|
|
$
|
.98
|
|
|
|
|
|
|
|
|
|
|
|
|
FULLY DILUTED EARNINGS PER SHARE
|
|
$
|
.37
|
|
|
$
|
.95
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING-BASIC
|
|
|
2,323,468
|
|
|
|
2,314,897
|
|
|
DILUTIVE EFFECT OF OPTIONS GRANTED
|
|
|
116,210
|
|
|
|
67,539
|
|
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING-FULLY DILUTED
|
|
|
2,439,678
|
|
|
|
2,382,436
|
|
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
|
Note 2-
|
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
GAAP 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 three months ended June 28, 2019 and June 29, 2018, respectively, and currently all assets are being utilized.
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.
Leases
ASC 2016-02 Leases (Topic 842) – In February
2016, the FASB issued ASC 2016-02, which requires lessees to recognize 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 leases or finance leases. The classification is based on criteria that are largely similar to those applied in current
lease accounting, but without explicit bright lines. Accordingly, we have adopted ASC 2016-2 as of April 1, 2019.
On our balance sheet operating leases are reported as
operating lease right-of-use (“ROU”) assets and deferred lease liabilities. ROU assets represent our right to use
an underlying asset for the lease term and deferred lease liabilities represent its obligation to make lease payments over
time arising from the lease. Operating lease ROU assets and deferred lease liabilities are recognized at the commencement
date based on the present value of lease payments over the lease term. As our contracted leases do not provide an implicit
rate, we do use an incremental borrowing rate based on the information available at the transition date and commencement date
in determining the present value of lease payments. This is the rate that we would have to pay if borrowing on a
collateralized basis over a similar term to each lease. The operating lease ROU asset also includes any lease payments made
and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease
term.
The Company leases space for its corporate offices
and its manufacturing facility located at 140 58
th
Street, Suite E, Brooklyn New York. The lease commenced on
December 1, 2010 and expires on November 30, 2020. As of June 28, 2019, there remains 17 payments on this lease.
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Leases
(continued)
Presented below are the balances of ROU asset and the
corresponding deferred lease liability and resultant amortization as of April 1, 2019 and June 28, 2019. The present value
was calculated using an interest rate of six (6%) percent.
|
|
|
ROU
Asset
|
|
|
Deferred Lease
Liability
|
|
|
Amortization
|
|
|
April 1, 2019
|
|
$
|
301,957
|
|
|
$
|
301,957
|
|
|
|
—
|
|
|
June 28, 2019
|
|
|
234,249
|
|
|
|
255,127
|
|
|
|
47,708
|
|
Future lease commitments to be paid
by us as of June 28, 2019 were as follows:
|
|
|
Payments
|
|
|
|
|
|
Fiscal year
|
|
Operating Leases
|
|
Interest
|
|
Total
|
|
2020(a)
|
|
$
|
142,740
|
|
|
$
|
387
|
|
|
$
|
143,127
|
|
|
2021
|
|
|
128,480
|
|
|
|
(1,256
|
)
|
|
|
127,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total lease commitments
|
|
$
|
271,220
|
|
|
$
|
(869
|
)
|
|
$
|
270,351
|
|
(a) Represents the remainder
of fiscal year 2020 which excludes the three months ended June 29, 2019.
Inventories are stated at average 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 were comprised of the following:
|
|
|
June 28,
|
|
|
March 29,
|
|
|
|
|
2019
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
7,067,310
|
|
|
$
|
7,053,896
|
|
|
Work in progress
|
|
|
2,802,290
|
|
|
|
2,797,006
|
|
|
Finished goods
|
|
|
2,174,641
|
|
|
|
2,170,541
|
|
|
|
|
$
|
12,044,241
|
|
|
$
|
12,021,443
|
|
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
|
Note 4-
|
PREPAID EXPENSES AND OTHER CURRENT ASSETS:
|
Prepaid expenses and other current assets were comprised
of the following:
|
|
|
June 28,
|
|
|
March 29,
|
|
|
|
|
2019
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Prepaid insurance
|
|
$
|
61,497
|
|
|
$
|
106,801
|
|
|
Prepaid payroll liabilities
|
|
|
240,638
|
|
|
|
289,311
|
|
|
Other prepaid expenses
|
|
|
85,383
|
|
|
|
138,785
|
|
|
|
|
$
|
387,518
|
|
|
$
|
534,897
|
|
|
Note 5-
|
PROPERTY, PLANT AND EQUIPMENT:
|
Property, plant and equipment were comprised of the following:
|
|
|
June 28,
|
|
|
March 29,
|
|
|
|
|
2019
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Computers
|
|
$
|
502,723
|
|
|
$
|
502,723
|
|
|
Leasehold improvements
|
|
|
963,156
|
|
|
|
934,648
|
|
|
Machinery and equipment
|
|
|
6,805,067
|
|
|
|
6,657,875
|
|
|
Tools and dyes
|
|
|
4,084,244
|
|
|
|
3,999,705
|
|
|
Furniture and fixture
|
|
|
179,072
|
|
|
|
179,072
|
|
|
Website development cost
|
|
|
9,785
|
|
|
|
9,785
|
|
|
|
|
|
12,544,047
|
|
|
|
12,283,808
|
|
|
Less: accumulated depreciation and amortization
|
|
|
(9,959,821
|
)
|
|
|
(9,723,201
|
)
|
|
|
|
$
|
2,584,226
|
|
|
$
|
2,560,607
|
|
|
|
|
Depreciation expense for the three months ended June 28, 2019
and June 29, 2018 was $236,620 and $141,600, respectively.
|
Note 6-
|
ACCOUNTS RECEIVABLE FINANCING:
|
The Company entered into 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 the financing agreement) at an interest rate of 2.5% 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 will automatically renew for successive one-year terms, unless terminated by the Company or its lender upon receiving 60 days’
prior notice. Funds advanced by the Finance Company are secured by IEH’s accounts receivable and inventories.
As of June 28, 2019, the Company reported excess
payments to its Finance Company of $705,623. These excess payments are reported in the accompanying condensed Financial
Statements as of June 28, 2019 as “Excess payments to commercial finance company.” As of March 29, 2019, the
Company had reported a liability to its commercial finance company of $334,306.
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
|
Note 7-
|
OTHER CURRENT LIABILITIES:
|
Other current liabilities were comprised of the following:
|
|
|
June 28,
|
|
|
March 29,
|
|
|
|
|
2019
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Payroll and vacation accruals
|
|
$
|
865,971
|
|
|
$
|
831,187
|
|
|
Sales commissions
|
|
|
93,527
|
|
|
|
80,553
|
|
|
Other current liabilities
|
|
|
204,060
|
|
|
|
65,680
|
|
|
|
|
$
|
1,163,558
|
|
|
$
|
977,420
|
|
|
Note 8-
|
2011 EQUITY INCENTIVE PLAN:
|
Stock-based compensation expense:
The Company reported compensation expense of $2,798 during
the quarter ended June 28, 2019 and $2,798 during the quarter ended June 29, 2018 resulting from stock options granted on August
15, 2016.
The Company also reported compensation expense of $5,664
during the quarter ended June 28, 2019 resulting from stock options granted on October 26, 2018.
Unrecognized stock-based compensation expense
:
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. In the fiscal quarter
ended June 28, 2019, the Company recognized $8,462 in stock option compensation expense.
The following table shows the activity for the fiscal
years ended March 29, 2019 and March 30, 2018 and through June 28, 2019
|
|
|
|
|
|
|
Shares
|
|
|
Weighted Avg.
Exercise
Price
|
|
|
Remaining
Contractual
Term (Years)
|
|
|
Aggregate
Intrinsic Value
(in thousands)
|
|
|
Outstanding at the Beginning of the Quarter
|
|
|
3/29/2019
|
|
|
|
185,000
|
|
|
$
|
6.05
|
|
|
|
7.50
|
|
|
$
|
2,008
|
|
|
Granted
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or Expired
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at the End of the Quarter
|
|
|
6/28/2019
|
|
|
|
185,000
|
|
|
$
|
6.07
|
|
|
|
|
|
|
|
|
|
|
Fully Vested
|
|
|
|
|
|
|
181,000
|
|
|
$
|
5.87
|
|
|
|
|
|
|
|
|
|
Exercisable at the End of the Quarter
June 28, 2019
|
|
|
|
|
|
|
181,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
In 1987, the Company adopted a cash bonus plan (“Cash
Bonus Plan”) for non-union, management and administrative staff. Contributions to the Cash Bonus Plan are made by the Company
only when the Company is profitable for the fiscal year. The Company accrued a contribution provision of $81,000 for the three
months ended June 28, 2019. For the three months ended June 29, 2018, the Company’s contribution was $109,500.
|
Note 10-
|
COMMITMENTS AND CONTINGENCIES:
|
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 “1990 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.
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 $13,430 and $35,637 for the Quarter ended June 28, 2019 and June 29, 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.
The income tax provision for the fiscal quarters
ended June 28, 2019 and June 29, 2018 reflect the effective tax rate of 34.6% and 31.0%, respectively. The
Company’s effective tax rate for the quarter ended June 28, 2019 increased 3.6% on a comparable basis compared to the
quarter ended June 29, 2018.
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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Note 12-
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REVENUE FROM MAJOR CUSTOMERS:
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During the fiscal year ended March 29, 2019, two customers
accounted for $7,451,032 constituting 26% of the Company’s net sales. One of those customers accounted for 14% of the
Company’s net sales while the second customer accounted for 12% of the Company’s net sales. During the fiscal quarter
ended June 28, 2019, two customers accounted for 29% of the Company’s net sales. One of those
customers accounted for 16% of the Company’s net sales while the second customer accounted for 13% of the Company’s
net sales.
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Note 13-
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SUBSEQUENT EVENTS:
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The Company has evaluated all subsequent events through
August 19, 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.
On July 29, 2019, the Company entered into an employment agreement
with David Offerman, its Chief Executive Officer and President. The employment agreement with Mr. Offerman is effective as of July
29, 2019 and will expire on December 31, 2024. The following is a summary of the terms of the employment agreement with Mr. Offerman,
which summary is qualified in its entirety by reference to the full text of such agreement, which is filed as Exhibit 10.1 to the
Current Report on Form 8-K, dated July 29, 2019.
Mr. Offerman serves as the Chief Executive Officer and President
of the Company and as a member of its board of directors. Under the employment agreement, Mr. Offerman will receive a base salary
of $395,000 per annum and be eligible to receive an annual bonus of up to 100% of base salary for each fiscal year of employment
based on performance targets and other key objectives established by the Compensation Committee of the board of directors (the
“Committee”).
He will also be eligible to receive additional option grants to
the Company’s 2011 Equity Incentive Plan as follows: 225,000 additional options to purchase 225,000 shares of the Company’s
common stock at an exercise price of $20.00 per common share for the fiscal year ended March 29, 2019, provided that one-third
(75,000 shares) shall vest immediately, 75,000 shares will vest on July 29, 2020, and 75,000 shares will vest on July 29, 2021.
During the term of the agreement, he shall also be eligible to receive
equity or performance awards pursuant to any long-term incentive compensation plan adopted by the Committee or the board of directors.
IEH CORPORATION
PART I: FINANCIAL INFORMATION