<PAGE>

                    U.S. SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C. 20549

                                  FORM 10-KSB

               Annual Report Pursuant to Section 13 or 15(d) of
                      the Securities Exchange Act of 1934

                     For fiscal year ended August 31, 2001
                       Commission File Number: 2-91218-B

                        International Electronics, Inc.
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                (Name of small business issuer in its charter)

Massachusetts                                                    04-2654231
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(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                              Identification No.)

427 Turnpike Street
Canton, Massachusetts                                               02021
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(Address of principal executive office)                          (Zip code)

Issuer's telephone number: (781) 821-5566

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock, $0.01 par value
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                               (Title of class)

     Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.  Yes X    No___
                                       ---

     Indicate by check mark if disclosure of delinquent filers pursuant 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.  (  )

     State issuer's revenues for its most recent fiscal year:  $10,584,081

     As of November 2, 2001, 1,360,174 shares of the registrant's voting stock
was held by non-affiliates of the registrant. In arriving at this number,
registrant has considered officers and directors to be affiliates. Based on a
price of $2.20 per share, (the average of the closing bid and asked price on
November 2, 2001) the aggregate market value of the non-affiliate shares so held
was approximately $2,990,000. As of November 2, 2001, 1,568,314 shares of the
registrant's common stock were outstanding.

     Documents incorporated by reference: None

                                       1
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                                     PART I

Item 1.                              Business

     International Electronics, Inc. (the "Company") was formed in 1977 as a
Massachusetts corporation. The Company designs, manufactures, markets and sells
electronic products for the security industry and other commercial applications.

     The Company manufactures and markets a line of access control and digital
keypad products sold under the trade names Door-Gard(TM) and Secured Series(TM).
The Company also manufactures and markets electronic glassbreak detectors sold
under the trade names Tri-Gard(TM) and Viper. The Company's subsidiary, Ecco
Industries, Inc. ("Ecco"), owns voice verification technology.

     The Company's products are sold principally in the United States to many of
the leading distributors and installation companies servicing the security
industry. The financial information relating to the Company is set forth in Item
7.

Products

Access Control and Digital Keypad Products and Technology

     The Company manufactures and markets a line of access control and digital
keypad products sold under the trade names Secured Series(TM) and Door-Gard(TM).
These products are sold in a variety of configurations including indoor and
outdoor models, with magnetic card readers, proximity readers and keypads. They
are also sold with several different hardware and software configurations. The
Company also sells to OEM customers private label products containing its access
control and keypad based technology.

     The command and control software can be used to add programmability by user
and time, and controls up to four separate outputs. This software allows for up
to 120 different users, each with his/her own unique code and can be used to
control machinery, lights, closed circuit TV or doors.

     The access control version of the Door-Gard(TM) software includes features,
which apply specifically to electronic door access control. These features
include request to exit input, door ajar and door position monitoring. The
Company also sells a version of its Door-Gard(TM) under the trade name
prox.pad(TM). The prox.pad(TM) incorporates the use of both keypad and proximity
technology. The prox.pad(TM) has been jointly developed by the Company and HID
Corporation, a subsidiary of ASSA ABLOY AB of Sweden.

     The Company also markets and sells its Secured Series(TM) access control
product line. This line of products includes magnetic card readers and proximity
readers as well as digital keypads. Systems features in the Secured Series(TM)
product line include: 500 users, transaction buffer for event recording, hard
copy printing of events, holiday schedules and time zone limitations (which
allow users access depending upon time of day or day of week) as well as the
ability to tie up to 32 doors together. Approximate prices paid by installing
dealers for the digital keypads range from $50 to $300 and for the Secured
Series(TM) product line from $150 to $400.

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     The Company also markets a line of industrial access control products sold
under the trade name PowerKey(TM). These products can control access to mobile
assets such as forklifts or the AC version of the product which controls access
to industrial machinery.

Glassbreak Detector Products

     A detector is the component in an alarm system that is activated by an
intrusion or entry into protected premises.  When activated, it sends a signal
to a central control panel, the portion of the system that triggers the alarm.
The Company's glassbreak products serve only the detection function, but are
compatible with systems made and sold by most major manufacturers of central
control panels, and can be incorporated into both hard wired and certain
wireless systems.  These products are used in a system in conjunction with other
forms of detectors such as those which detect the opening of a door or window.
The Company markets an audio glassbreak detector under the trade name Tri-
Gard(TM) and a vibration sensor glassbreak detector under the trade name Viper.

  Tri-Gard(TM)

     Since 1987, the Company has marketed an audio glassbreak detector under the
trade name Tri-Gard(TM). Audio detectors work much like the human ear. All
noises are heard by the detector and then compared to a certain set of criteria.
If the sound made meets certain criteria, then the unit determines the sound is
breaking glass and activates an alarm. Because of the wide variety of noise in
the background, which can easily confuse an audio detector, stability is a major
factor if the unit is to be successful. Audio detectors are used in residential,
commercial and industrial applications. The cost of these units to the
installing dealers is approximately $22 to $40 per unit. The Tri-Gard(TM)
models: 550, 552, 510 and 511 have received Underwriters Laboratories listing.

  Viper Vibration Detector

     A vibration sensor is used to detect vibrations of a set magnitude in
certain materials such as glass, wood, plastic, concrete or metal. The Viper has
a custom integrated circuit that does internal signal processing so that it can
be adjusted for different materials and shock values. The cost of these units to
the installing dealers is approximately $25 to $35 per unit.

     In 1992 the Company signed an agreement with Weyrad Electronics, Ltd. of
Weymouth, England to act as a distributor for their Viper vibration detector in
North, South and Central America. In 1999 the Viper product line was sold to
Chloride Safety Systems Limited ("Chloride"). In May 2000 the Company signed a
Mutual Distribution Agreement whereby the Company would resell certain Chloride
products in the United States and Chloride would resell certain of the Company's
products in Europe.

Voice Verification Products and Technology

     In June 1990, the Company acquired substantially all of the outstanding
common, and all preferred stock of Ecco in exchange for 379,699 unregistered
shares of the Company's common stock. Ecco has been engaged in designing,
manufacturing, and selling voice verification systems.

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Ecco, which was founded in 1983, financed its operations and development efforts
through private sales of securities resulting in net proceeds of approximately
$5,500,000. The acquisition was accounted for under the purchase method of
accounting.

     During fiscal 1994, Ecco signed a contract for its voice verification
technology with BI, Inc. ("BI") of Boulder, Colorado for use in conjunction with
substance abuse in the home incarceration market. The agreement provided for a
one-time license fee, ongoing royalty payments and an order for the manufacture
of voice verification boards. In October 1998, BI informed the Company that it
was working to develop its own voice verification technology. BI has not
purchased voice verification products from the Company since February 1999.

Sales and Marketing

     The principal market for the Company is the United States, where it sells
its products through a network of security equipment distributors and
installation companies. The Company also sells and markets its products in North
and South America, Europe, Asia, South Africa, the Middle East and Australia/New
Zealand.

     The Company presently employs fourteen people in sales and marketing. The
Company's Vice President of Sales and Marketing coordinates the activities of
the outside sales representatives and inside sales personnel. The outside sales
personnel contact dealers and distributors to provide ongoing sales and
technical support for the Company's products. The inside sales personnel are
responsible for incoming sales calls and telemarketing. The Company also
utilizes manufacturer's representatives for certain territories.

     The Company sells its products primarily to installers and distributors of
alarm security equipment. The Company's customers include: ADI, Clark Security
Products, Sargent Lock Company and Security Lock. Sales to the Company's two
largest customers accounted for approximately 35% and 11% of the Company's total
net sales for the fiscal year ended August 31, 2001.

     While the Company's relationship with large customers provides it with a
substantial market for its products, the dependence on large volume sales to
such large customers creates a vulnerability. The loss of any such large
customer could have a serious adverse effect on the Company's sales.

     The Company is also aware that manufacturers in Europe, Asia and elsewhere
fabricate products similar to the Company's products. Some of these
manufacturers may produce their units at a lower cost than the Company's cost.
The introduction of such a product to the United States market could have a
substantial adverse effect on the Company's sales.

     The Company provides sales support through national advertising, periodic
mailings and by participation at national and regional industry trade shows. The
Company presently attends several national trade shows per year, and complements
these shows by displaying its products at regional alarm shows. In fiscal 1997,
the Company established a wholly owned subsidiary, International Electronics
Europe Limited, located in the United Kingdom to market and sell the Company's
products. The office was closed as of August 31, 1999, and the Company currently
has no employees at its European subsidiary. The Company generally sells into
overseas

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markets through distributors in certain countries. The Company also participates
with some of its distributors in cooperative advertising programs.

Overseas Components and Production

     The Company is currently having some of its finished products manufactured
in Asia. The Company sources a significant amount of components and maintains
certain molds for its products in Asia. The Company believes that such sourcing
reduces its cost of sales through lower parts, labor and tooling costs. There
can be no guarantee that the Asian political or economic environments will
remain sufficiently stable to allow reliable and consistent delivery of product.

Product Sources of Revenue

     The Company's various products have provided revenues during the last three
fiscal years as follows:
                                              Voice
        Access Control      Glassbreak        Verification
        and Keypad          Detectors         & Other              Total
        ------------        ---------         -------              -----
2001     $ 9,992,730        $591,351          $     0        $10,584,081
2000      10,716,817         735,461                0         11,452,278
1999       8,464,419         898,157           62,993          9,425,569


Domestic and Foreign Sales

     The percentages of domestic and foreign sales for the Company's products
for the last three fiscal years are as follows:

                           Domestic       Foreign
                           --------       -------
               2001           90%           10%
               2000           92             8
               1999           90            10


Manufacturing and Raw Materials

     The Company performs in-house manufacturing for its Access Control, Keypad
and Tri-Gard(TM) product lines. The Company is dependent upon sole source
suppliers for a number of key components and parts used in the Company's
products. Some of the Company's largest principal suppliers include HID
Corporation and Future Electronics, Inc. There can be no assurance that these
suppliers will be able to meet the Company's future requirements for such
components or that the components will be available to the Company at favorable
prices. Any extended interruption in the supply of any such components could
have a material adverse effect on the Company's operating results in any given
period.

Backlog

     The Company's backlog of firm scheduled orders as of August 31, 2001, was
approximately $885,000. Its backlog as of August 31, 2000 was approximately
$315,000. The increase in 2001 from 2000 is primarily due to an increase in OEM
orders partially offset by

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decreases in access control and keypad orders. The Company believes that the
majority of its backlog will be shipped during fiscal 2002.

Competition

     Other companies in the security and related industries offer products in
competition with those of the Company. Many of the companies with which the
Company competes are substantially larger, have greater resources, and market a
larger line of products. Although the Company has obtained some patent and
copyright protection for certain of its products and software, management
believes that competitors are able to market certain products similar to those
sold by the Company.

     There are numerous manufacturers of audio detectors and shock sensors
selling in the United States market. Competitors selling audio detectors
include: Sentrol, Inc., Visonic Ltd., Litton Security Products, Inc. ("Litton"),
Detection Systems, Inc., Intellisense, Inc., Ademco Manufacturing, Inc.
("Ademco"), DSC and Caddx-Caddi Controls, Inc. There are several competitors
selling vibration detectors including: Ultrak, Inc., Sentrol, Inc., Ademco,
United Security Products, Inc. ("USP") and Litton.

     There are many manufacturers of access control equipment including
Westinghouse, Casi Rusco Electronics Systems, Inc., Northern Computers, Inc.,
Cardkey, Inc., Software House, Inc., Continental Instruments, Inc., American
Magnetics Corporation, Keri Systems, Kantech, Radionics, Ademco and Corby, Inc.
Competition for the industrial access control product line includes I.D.
Systems, Inc. and Remote Equipment Systems, Inc.

     There are numerous manufacturers of keypads selling in the United States
market including the following competitors: Corby, Inc., Visonic Ltd., USP,
Inc., Crow Electronics Engineering, Inc., Securitron Magnalock Corp., Locknetics
Security Engineering, Security Door Controls, Alarm Lock, Inc., Ilco Unican
Engineering, Inc., Essex Electronics, Inc., and Sentrol, Inc.

     To the best of the Company's knowledge, the Company's voice verification
product line has competition from: Voice Strategies, Inc., T-Netix, Inc.,
Keyware Technologies, Q Voice, ITT, VeriVoice, Inc., Princeton Voice Radar,
Veritel Corporation of America, Electronic Warfare Assoc., Inc. and Technologia
Systems Limited in the United States, and Zetetic International Limited in the
United Kingdom and ABS, Inc. in Germany.

     The Company also faces competition in the positive identification access
control market from other biometric systems. Some of these other biometric
systems, and some of the companies that produce them include: fingerprint,
(Bioscript, Inc., Identix, Inc., American Biometric Company, Sony, Saflink
Corporation, Precise Biometrics and Thompson-CFS), hand geometry (Recognition
Systems), palm print, optical systems (Iridian Technologies and Eye Dentify
Systems), signature (Pen Op, Communication Intelligence and AEA) and facial
recognition (Visionics and Viisage).

Working Capital

     During fiscal 2001, the Company depended on its existing cash balances to
provide working capital. As of August 31, 2001, the Company had a demand bank
line of credit

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available for borrowings of up to $1,000,000 which could be used for working
capital purposes and an additional line of credit available for $132,000 for
equipment purchases. The Company expects its working capital requirements for
fiscal 2002 to be provided from its cash reserves and its line of credit plus
anticipated cash from operations. As of August 31, 2001, there were no
borrowings outstanding under the demand line of credit and approximately
$418,000 in borrowings outstanding as equipment debt. See "Item 6-Management's
Discussion and Analysis of Financial Condition and Results of Operations".

Research and Development

     The Company presently employs eight people in research and development. The
Company also utilizes certain consultants and subcontractors on an as-needed
basis with the Company's employees supervising such work. Research and
development expenditures were approximately $1,045,000, $1,202,000 and $731,000
during fiscal 2001, 2000 and 1999, respectively. The Company's net sales include
research and development revenues from customers of approximately $173,000,
$100,000 and $35,000 during fiscal 2001, 2000 and 1999, respectively.

Employees

     As of November 1, 2001, the Company had 64 employees, of which 59 were
full-time employees. Of these 64 employees, 14 were engaged in sales and
marketing, 8 were involved in product development, 27 in manufacturing, 6 in
customer service and 9 employees were providing management and administrative
services.

Seasonality

     The Company is subject to normal business slowdowns during the summertime
and around the Christmas holiday season. In addition, overseas sales,
specifically to Europe, slow down in the summer because some European companies
take substantial vacation time in July and August.

Governmental Controls/Environmental Compliance

     None of the Company's business is subject to renegotiation of profits or
termination of contracts at the election of the government.  The Company has not
been materially affected by compliance with any governmental regulation relating
to protection of the environment, and no material capital expenditures are
expected by the Company for environmental control facilities.

Item 2.                           Properties

     The Company's administrative and manufacturing operations are located at
427 Turnpike Street, Canton, Massachusetts, and currently consist of
approximately 20,740 square feet of space. The Company occupies this facility
under a lease expiring April 30, 2004, at an annual rent of $145,000 plus
utilities, maintenance and certain real estate taxes. The property used by the
Company is in good condition.

Item 3.                        Legal Proceedings

                                     None

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Item 4.                 Submission of Matters to a Vote
                              of Security Holders

     No matters were submitted to a vote of security holders during the fourth
quarter of 2001.

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                                    PART II

Item 5.              Market for Registrant's Common Equity
                        and Related Stockholder Matters

     The Company's securities have been traded in the over-the-counter market
since July 5, 1983. Since October 30, 1987, the Company's common stock has been
quoted by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"). The Company's common stock currently trades on the NASDAQ
SmallCap Market.

     The NASD standards for a company's stock to maintain its listing on NASDAQ
include maintaining a minimum bid price of $1.00 per share and stockholders'
equity of $2,500,000 or alternatively net income of $500,000 for the last fiscal
year or in two of the three most recently completed fiscal years. In fiscal
2001, the Company met the $2,500,000 stockholders' equity standard.

     There can be no assurance that the Company will continue to meet the NASDAQ
standards to maintain its listing on NASDAQ. If the Company is unable to
maintain its listing on NASDAQ, holders of the Company's common stock may have
additional difficulty selling their shares at a favorable price, or at all.

     The prices set forth below are based on information provided to the Company
by NASDAQ. These sales prices reflect interdealer prices, without retail mark-
ups, markdowns or commissions.

                                                  Sales Prices
                                               ------------------
                                               High           Low
                                               ----           ---

     Fiscal Year 2001:
          First Quarter                       $2.50         $2.00
          Second Quarter                       2.53          1.75
          Third Quarter                        2.44          1.40
          Fourth Quarter                       1.75          1.30

     Fiscal Year 2000:
          First Quarter                        3.13          1.63
          Second Quarter                       3.72          1.75
          Third Quarter                        3.25          2.00
          Fourth Quarter                       3.00          2.00


     As of November 2, 2001, there were approximately 450 shareholders of
record of the Company's common stock. The Company believes that a substantial
number of shares of the Company's common stock are held by nominees and
estimates that there are approximately 1,700 beneficial owners of the Company's
shares. The Company has never paid dividends to its shareholders. The Company's
credit agreements contain certain restrictive covenants including restricting
the payment of dividends.

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Item 6.             Management's Discussion and Analysis of
                 Financial Condition and Results of Operations

Liquidity and Capital Resources

     As of August 31, 2001, the Company had $2,613,067 in working capital as
compared to $2,456,956 at August 31, 2000. The ratio of current assets to
current liabilities as of August 31, 2001 was 2.7, as compared to 2.4 in 2000
and 2.2 in 1999. The debt to equity ratio was 0.6 at August 31, 2001 and 0.7 at
both August 31, 2000 and 1999. The increases in working capital and current
ratio and decrease in debt to equity ratio in 2001 from 2000 are primarily due
to the Company's operating income and a reduction in current liabilities. The
increase in the current ratio in 2000 from 1999 is primarily the result of the
Company's operating income and the deferred income tax assets for fiscal 2000.

     Net capital expenditures were $299,382, $291,221 and $346,679 in fiscal
years ending August 31, 2001, 2000 and 1999, respectively. The Company
anticipates having up to $740,000 in total capital expenditures primarily for
the purchase of leasehold improvements, production and other equipment, and
tooling costs during fiscal 2002.

     As of August 31, 2001, the Company has available a $132,000 equipment line
of credit expiring February 28, 2002 and a bank demand line of credit available
of up to $1,000,000. See Notes 5 and 6 to the Consolidated Financial Statements.
As of August 31, 2001, the Company had no outstanding borrowings under the
demand line of credit and had approximately $418,000 in borrowings outstanding
under equipment lines of credit.

     Management believes that its current cash position, together with
internally generated funds at present sales levels and its available bank
financing, will provide adequate cash reserves to satisfy its cash requirements
for the next twelve months. Depending upon whether or not sufficient revenue and
working capital is generated from profitable operations, the Company may require
additional external funding. There is no assurance that profits will be
generated, or that additional external funding will be obtainable, if such a
need should arise.

Results of Operations

Fiscal years ended August 31, 2001, 2000 and 1999

     Net sales in 2001 decreased 8% from 2000 while 2000 sales increased 22%
from 1999. The reduction in sales for 2001 is due to decreases in access
control, accessory, glassbreak, and OEM product lines, partially offset by
increases in the keypad and vertical market product lines. The increase in sales
for 2000 is due to an increase in access control, keypad and OEM sales,
partially offset by decreases in glassbreak and vertical market product line
sales.

     The ratios of gross profit to sales were 44% in 2001, 45% in 2000 and 47%
in 1999. The decreases in gross profit ratios are due to product mix and
additional manufacturing costs.

     Research and development expenses were $1,045,389 in 2001, as compared to
$1,201,859 in 2000 and $731,302 in 1999. The reduction in costs in 2001 from
2000 is primarily due to decreases in personnel and related expenses and
consultants. The increase in costs in 2000 from 1999 is primarily due to an
increase in personnel and related expenses and consultants.

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     As a percentage of net sales, selling, general and administrative expenses
were both 33% in 2001 and 2000, and 36% in 1999.  The decrease in expenses as a
percentage of net sales in 2000 from the 1999 level is primarily due to
decreases in bad debt, sales samples, amortization expense, and the closing of
the Company's European sales office, partially offset by increased depreciation
expense and renovation costs, combined with improved sales efficiencies.

     Other income decreased approximately $5,000 in 2001 from 2000 primarily due
to a decrease in interest income because of lower rates on invested balances.
Other income increased approximately $44,000 in 2000 from 1999 primarily due to
an increase in interest income because of higher invested balances.

     The Company's effective income tax rate which includes current and deferred
taxes is 21% for 2001, (29%) for 2000, and (89)% for 1999.  The difference
between the effective tax rate and the federal statutory rate for fiscal 2001 is
primarily the result of utilization of net operating loss carryforwards.  The
Company's effective tax rate in 2000 and 1999 differs from the federal statutory
rate because of the deferred tax asset recorded during the fiscal years and
utilization of federal net operating loss carryforwards.

Impact of Inflation and Changing Prices

     The Company does not believe that inflation or changing prices have had a
significant impact on its operations.

Recent Accounting Pronouncements

     During 1999, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities."  In June 2000, the FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133 - an amendment of FASB
Statement No. 133."  SFAS No. 133 is effective in fiscal year 2001.  The
implementation of this statement did not have a material impact on the Company's
consolidated financial statements because the Company did not have any
derivative instruments.

     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements."  This bulletin established guidelines for revenue recognition.
The implementation of this SAB in fiscal year 2001 did not have a material
impact on the Company's consolidated financial statements.

     In June 2001, the FASB issued SFAS No. 141, "Business Combinations", and
SFAS No. 142, "Goodwill and Other Intangible Assets".  SFAS No. 141 requires
that all business combinations initiated after June 30, 2001, be accounted for
using the purchase method of accounting and prohibits the use of the pooling-of-
interests method.  SFAS No. 142 eliminates the amortization of goodwill and
certain other intangibles and instead subjects these assets to periodic
impairment assessments.  SFAS No. 142 is effective immediately for all goodwill
and certain other intangible assets acquired after June 30, 2001.  The Company
does not expect that the implementation of SFAS No's. 141 and 142 will have a
material impact on its consolidated financial statements.

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     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets".  SFAS No. 144 supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," and the accounting and reporting provisions of
Accounting Principles Bulletin Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions".
SFAS No. 144 specifies accounting for long-lived assets to be disposed of by
sale and broadens the presentation of discontinued operations to include more
disposal transactions than were included under the previous standards.  The
Company is required to implement SFAS No. 144 on September 1, 2002, and it has
not determined the impact, if any, that this statement will have on its
consolidated financial position or results of operations.

Factors that May Affect Future Results

     Information provided by the Company in writing and orally, from time to
time may contain certain "forward-looking" information as this term is defined
by:  (1) the Private Securities Litigation Reform Act of 1995 (the "Act") and
(2) in releases made by the Securities and Exchange Commission.  These
Cautionary Statements are being made pursuant to the provisions of the Act and
with the intention of obtaining the benefits of the "safe harbor" provisions of
the Act.  The Company cautions investors that any forward-looking statements
made by the Company involve risks and uncertainties, which could cause actual
results to differ materially from those projected.

     The Company has identified certain risks and uncertainties as factors,
which may impact on its operating results which are detailed below.  All of
these factors are difficult for the Company to forecast, and these or other
factors can materially adversely affect the Company's business and operating
results for one quarter or a series of quarters.

     Limited Financial Resources.  The Company has limited financial resources.
It is therefore subject to all the risks generally associated with a small
business having limited financial resources.  For the years ended August 31,
2001, 2000 and 1999 the Company had net income of approximately $136,000,
$355,000 and $555,000, respectively.  There can be no assurance that the Company
will continue profitable operations.  Continued operations after the expenditure
of the Company's existing cash reserves may require additional working capital
to be generated by profitable operations or use of the bank lines of credit
and/or additional financing.  There can be no assurance that profits will
continue or that additional external funding will be obtainable, if such a need
should arise.

     Dependence on Key Employees.  The business of the Company is dependent upon
the efforts of John Waldstein and certain other key management and technical
employees.  The loss or prolonged disability of such personnel could have a
significant adverse effect on the business of the Company.  The Company
presently maintains a key man life insurance policy of $1,000,000 on John
Waldstein, President and Chief Executive Officer and Treasurer.

     Limited Design Engineering Staff.  The Company is engaged in an industry,
which, as a result of extensive research and development, introduces new
products on a regular basis.  Current competitors or new market entrants may
develop new products with features that could adversely effect the competitive
position of the Company's products.  There can be no assurance

                                       12
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that the Company will be successful in selecting, developing, manufacturing and
marketing new products or enhancing its existing products or that the Company
will be able to respond effectively to technological changes or product
announcements by competitors. Any failure or delay in these goals could have a
material adverse affect on the Company.

     Fluctuations in Sales and Operating Results.  Operating results may
fluctuate due to factors such as the timing of new product announcements and
introductions by the Company, its major customers and its competitors, market
acceptance of new or enhanced versions of the Company's products, changes in the
product mix of sales, changes in the relative proportions of sales among
distribution channels or among customers within each distribution channel,
changes in manufacturing costs, competitive pricing pressures, the gain or loss
of significant customers, increased research and development expenses associated
with new product introductions and general economic conditions.  A limited
number of customers have accounted for a significant portion of sales in any
particular quarter.  In addition, the Company typically operates with a
relatively small backlog.  As a result, quarterly sales and operating results
generally depend on the volume, timing of, and ability to fulfill orders
received within the quarter which are difficult to forecast.  In this regard,
the Company may recognize a substantial portion of its sales in a given quarter
from sales booked and shipped in the last weeks of that quarter.  A delay in
customer orders, resulting in a shift of product shipment from one quarter to
another, could have a significant effect on the Company's operating results in a
quarter.  In addition, competitive pressure on pricing in a given quarter could
adversely affect the Company's operating results, or such price pressure over an
extended period could adversely affect the Company's long-term profitability.

     The Company establishes its expenditure levels for sales and marketing and
other expenses based, in large part, on its expected future results.  As a
result, if sales fall below expectations, there would likely be a material
adverse effect on operating results because only a small portion of the
Company's expenses vary with its sales in the short-term.

     Concentration of Customers.  The Company has a substantial number of
customers but sells a large majority of its products to a small number of large
customers.  This concentration of customers may cause net sales and operating
results to fluctuate from quarter to quarter based on major customers'
requirements and the timing of their orders and shipments.  Sales to the
Company's two largest customers accounted for approximately 46% of the Company's
total net sales for the fiscal year ended August 31, 2001.  The Company's
industry has recently experienced significant consolidation, which may further
increase the Company's concentration among its major customers.  There can be no
assurance that the Company's major customers will place additional orders, or
that the Company will obtain orders of similar magnitude from other customers.
The Company's operating results could be materially and adversely effected if
any present or future major customer were to choose to reduce its level of
orders, were to experience financial, operational or other difficulties that
resulted in such a reduction in orders to the Company or were to delay paying or
fail to pay the Company's receivables from such customer.

     General Economic Conditions.  Our business is subject to the effects of
general economic conditions in the United States and globally.  If the economic
conditions in the United States and globally do not improve, or if we experience
a worsening in the global economic slowdown, we may experience adverse impacts
on our business, operating results and financial condition.

                                       13
<PAGE>

     Competition.  Other companies in the industry offer products in competition
with those of the Company.  Many of the companies with which the Company
competes are substantially larger, have greater resources and market a larger
line of products.  The Company expects competition to increase significantly in
the future from existing competitors and new companies that may enter the
Company's existing or future markets.  Increased competition could adversely
affect the Company's sales and profitability.  There can be no assurance that
the Company will be able to continue to compete successfully with its existing
competitors or with new competitors.

     Lack of Patent Protection.  Although the Company has obtained some patent
and copyright protection for certain of its products and software, management
believes that competitors may be able to market certain products similar to
those sold by the Company.

     Offshore Production. The Company is currently having some of its finished
products manufactured in Asia. The Company presently maintains certain
manufacturing molds in Asia and has a significant amount of components for some
products manufactured in Asia.  There can be no assurance that the Asian
political or economic environment will remain sufficiently stable or that other
factors will allow for reliable and consistent delivery of product.

     Dependence on Single Source of Supply.  The Company is dependent upon sole
source suppliers for a number of key components and parts used in the Company's
products.  There can be no assurance that these suppliers will be able to meet
the Company's future requirements for such components or that the components
will be available to the Company at favorable prices, or at all.  Any extended
interruption in the supply or significant increase in price of any such
components could have a material adverse effect on the Company's operating
results in any given period.

     Foreign Sales.  During the year ended August 31, 2001, the Company's
foreign sales represented approximately 10% of net sales.  There may be a
reduction in the Company's foreign sales from the 2001 level in the event of
significant changes in foreign exchange rates or political and economic
instability in foreign countries.

     Limited Market for Common Stock.  There is a limited market for the
Company's common stock and there can be no assurance that even this limited
market will be sustained.  Holders of the Company's common stock may have
difficulty selling their shares or may have difficulty selling them at a
favorable price.

     Maintain Listing on NASDAQ.  There can be no assurance that the Company
will continue to meet the NASDAQ SmallCap standards to maintain its listing on
NASDAQ.  If the Company is unable to maintain its listing on NASDAQ, holders of
the Company's common stock may have difficulty selling their shares at a
favorable price.  See Item 5-"Market for Registrant's Common Equity and Related
Stockholder Matters."

     Volatility of Stock Price.  The Company's stock price is subject to
significant volatility.  If revenues or earnings in any quarter fail to meet the
investment community's expectations, announcements of new products by the
Company or its competitors and other events or factors could have an immediate
impact on the Company's stock price.  The stock price may also be affected by
broader market trends unrelated to the Company's performance.

                                       14
<PAGE>

Item 7.           Financial Statements and Supplementary Data

     The consolidated financial statements of International Electronics, Inc.
and subsidiaries filed as a part of this Annual Report on Form 10-KSB begin on
page F-1.

Item 8.                Changes in and Disagreements with
              Accountants on Accounting and Financial Disclosure

                                Not Applicable

                                       15
<PAGE>

                                   PART III

Item 9.       Directors and Executive Officers of the Registrant

<TABLE>
<CAPTION>
                                             First Elected
Name                            Age          Director         Position
----                            ---          --------         --------
<S>                             <C>          <C>              <C>
John Waldstein                   48          1982             President, Chief Executive Officer,
                                                              Treasurer, Chief Financial Officer,
                                                              and Chairman of the Board
James C. Brierley, Jr.           50            -              Vice President of Sales and
                                                              Marketing
Christopher Hentschel            57            -              Vice President of Engineering
Heath Paley                      53          1990             Director
Diane Balcom                     59          1989             Director
Kenneth Moyes                    45          1998             Director
</TABLE>



     The Company anticipates that an annual meeting of shareholders will be held
in April 2002. The term of office of each director expires as follows:

          John Waldstein     At the annual meeting of shareholders anticipated
                             to occur in April 2003
          Heath Paley        At the annual meeting of shareholders anticipated
                             to occur in April 2004
          Diane Balcom       At the annual meeting of shareholders anticipated
                             to occur in April 2002
          Kenneth Moyes      At the annual meeting of shareholders anticipated
                             to occur in April 2002

     John Waldstein has been employed by the Company since 1978, has been
Treasurer since March 1982, was Vice President between January 1983 and May
1988, Chief Financial Officer since February 1988, Chief Operating Officer from
February 1988 to May 1988, President and Chief Executive Officer since May 1988,
and Chairman of the Board since November 1990. Mr. Waldstein is a graduate of
Harvard College. See "Item 10-Executive Compensation."

     James C. Brierley, Jr. has been employed by the Company since October 1995.
Initially engaged as a consultant to develop a business strategy for the
Company's line of industrial access control products, he was appointed Director
of Sales and Marketing in October 1997 and was appointed Vice President of Sales
and Marketing in April 1998.  Prior to joining the Company, from September 1994
to September 1995, he was the Vice President of Product Marketing for The
Shareholders Services Group, a division of First Data Corporation.  From 1981 to
June 1994, he was employed by Digital Equipment Corporation where he became
Director of Product Management specializing in distributed database client
server products.  Prior to that, Mr. Brierley was a Certified Public Accountant
with Coopers & Lybrand.  See "Item 10-Executive Compensation."

                                       16
<PAGE>

     Christopher Hentschel was appointed the Company's Vice President of
Engineering in March 1995 and had previously been Chief Engineer since 1989.
Before joining the Company, Mr. Hentschel was a founder and Vice President of
Engineering of Guard Aware, Inc.  Mr. Hentschel is a graduate of Wentworth
Institute.  See "Item 10-Executive Compensation."

     Heath Paley became a member of the Board of Directors in 1990.  Since May
1996, Mr. Paley has been a self-employed computer consultant.  He had been the
Company's Director of Management Information Systems from September 1994 until
May 1996 and was the Company's Chief Operating Officer and Executive Vice
President from June 1990 to August 1994.  From 1983 to June 1990, Mr. Paley was
President and a founder of Ecco Industries, Inc.  From 1980 to 1983, he was
President of the Maine Woods Shoe Division of Bennett Industries.  Heath Paley
is the son of Warren Paley.  See "Item 11-Security Ownership of Certain
Beneficial Owners and Management."

     Diane Balcom became a member of the Board of Directors in July 1989.  Since
February 2001, Ms. Balcom has served as an independent consultant to a variety
of non-profit organizations in southwestern Pennsylvania.  From October 1998 to
February 2001, Ms. Balcom served as the Executive Director of the Pittsburgh
Mercy Foundation.  From September 1997 to September 1998, she held the position
of Director of Development for Children's Hospital of Pittsburgh.  From August
1994 to August 1997, Ms. Balcom was the Chapter Director of the Juvenile
Diabetes Foundation of Western Pennsylvania.  She has been an adviser to the
Company on corporate and financial matters since 1985.  From January 1989 to
August 1994, Ms. Balcom operated a consulting practice, which provided services
related to private and public financing for small and medium-sized companies.
From March 1987 to January 1989, she served as Vice President and Chief
Financial Officer for Environmental Diagnostics, Inc., a publicly held company.
Prior to that, Ms. Balcom held various senior management positions in Corporate
Finance and Research for 13 years with brokerage firms on the West Coast.

     Kenneth Moyes was appointed to the Board of Directors in October 1998.
Since August 1994, Mr. Moyes has been the President and founder of EH
Publishing, Inc., an information provider for the home systems industry.  From
January 1990 to May 1994, Mr. Moyes served as President and Chief Executive
Officer of Arius, Inc., an international distributor of security products.
During May 1995, Arius filed for bankruptcy.  Prior to that, Mr. Moyes was
employed by Geneva Merchant Bankers as a junior partner, founded Moyes and
Company, a management consulting firm, and was a Certified Public Accountant
with Peat, Marwick, Mitchell and Company.

Other Matters

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors, and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
with the Securities and Exchange Commission ("SEC") and NASD.  Executive
officers, directors, and greater than ten-percent stockholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.

     The Company believes that all filing requirements applicable under Section
16(a) to its executive officers, directors and 10% stockholders were complied
with for fiscal 2001.

                                       17
<PAGE>

Item 10.                    Executive Compensation

     The following table sets forth information concerning the compensation for
each of the last three fiscal years ended August 31, 2001, of the Company's
President and Chief Executive Officer, and two other executive officers of the
Company who received at least $100,000 of compensation during any of these years
(the "Named Executive Officers"):

                          Summary Compensation Table
<TABLE>
<CAPTION>

                                                                          Long-Term
                                                                        Compensation
                                    Annual Compensation(2)              ------------
                              -----------------------------------          Options             All Other
Name                          Year    Salary       Commission/Bonus(3)    (Shares)          Compensation(1)
----                          ----    -------      -------------------    --------         ----------------
<S>                           <C>    <C>           <C>                  <C>                <C>
John Waldstein                2001   $155,536            $ 9,091            7,000              $15,656
President and                 2000    145,217             50,000           12,500               16,234
Chief Executive Officer       1999    141,014              7,000           29,500               16,233

James Brierley, Jr.           2001    124,885               -                -                    -
Vice President of             2000    120,065              9,500            5,000                 -
Sales and Marketing           1999     99,959             16,000             -                    -

Christopher Hentschel         2001    116,550               -                -                    -
Vice President of             2000    105,196              6,000            5,000                 -
Engineering                   1999     96,972              8,000            3,333                 -
</TABLE>

(1)  Represents the cost of a split dollar whole life insurance policy with a
     face value of $1,005,000 as of August 31, 2001 and a long-term disability
     policy.  The Company is a beneficiary of the life insurance policy to the
     extent of all premiums paid upon the death of John Waldstein.  Mr.
     Waldstein may purchase the life insurance policy upon termination of his
     employment for the cash surrender value as of August 31, 2001.

(2)  Does not include perquisites, which do not exceed 10% of annual salary.

(3)  Amount represents commissions and/or bonus earned during the applicable
     year.

     The Company's Board of Directors, commencing in fiscal 1993, established an
annual bonus plan for officers and certain key employees.  The available funds
for the plan shall be up to five percent of income before taxes.  The final
amount and subsequent distribution to employees and officers shall be determined
by the Company's Compensation Committee.

                                       18
<PAGE>

Options Granted During Fiscal 2001

     The following table sets forth certain information with respect to the
grant of stock options in fiscal 2001 to any of the Named Executive Officers:

<TABLE>
<CAPTION>
                                                                           Potential Realizable
                                     Individual Grants                       Value of Assumed
                   ----------------------------------------------------      Annual Rates of
                   Number of      Percent of                                   Stock Price
                    Shares       Total Options                               Appreciation for
                  Underlying      Granted To       Exercise                  Option Term (2)
                    Options        Employees         Price     Expiration    -------  -------
Name              Granted (1)       In Year        Per Share      Date        5%($)     10%($)
----              -------           -------        ---------      ----        ------    ------
<S>               <C>            <C>               <C>        <C>          <C>          <C>
John Waldstein       7,000            15%            $1.70    Aug. 30, 2010    $7,484   $18,966
</TABLE>

     (1)  The options vest annually over a 4-year period from the date of grant.

     (2)  Amount represents hypothetical gains that could be achieved for the
          respective options if exercised at the end of the option term. These
          gains are based on assumed rates of stock price appreciation of 5% and
          10% compounded annually from the date the respective options were
          granted to their expiration date.

Compensation on Involuntary Termination

     John Waldstein has an employment contract with the Company which provides
for certain compensation to be paid to him if he is discharged by the Company
without cause, as defined before the end of the term of his contract.  Mr.
Waldstein has a continuous three-year employment contract with a current minimum
annual salary of approximately $160,000, subject to adjustment for inflation,
plus an annual minimum bonus of $50,000 payable upon the achievement of
specified goals and objectives.  The salary and bonus of Mr. Waldstein is
subject to performance reviews and annual adjustment as determined by the
Company's Compensation Committee.

     If the employment of Mr. Waldstein is terminated by the Company without
cause, including the election of a slate of board of director members not
approved by Mr. Waldstein or a change in status as a result of an acquisition,
merger or sale of assets (an "Acquisition"), the Company is obligated to pay at
such termination an amount equal to his total salary and benefits to the
conclusion of the contract period.  In the event of an Acquisition of the
Company, Mr. Waldstein's base salary shall increase to a minimum annual salary
of $175,000, based on future adjustments for inflation.  As of November 1, 2001,
John Waldstein's base salary to the conclusion of his contract period is
approximately $480,000, plus future cost of living adjustments.

     After an Acquisition of the Company, provided Mr. Waldstein continues his
employment for at least a six-month period, and he subsequently voluntarily
resigns, he shall be paid severance of one year's compensation and benefits.
For each additional six months that he works thereafter, in the event Mr.
Waldstein subsequently voluntarily resigns, he shall be paid severance of an
additional six months compensation and benefits provided any such severance
payments shall not exceed three years of compensation.

                                       19
<PAGE>

     In addition to the foregoing, the Company also has employment arrangements
with certain key management (including Messrs. Brierley and Hentschel) that
require salary and benefit continuation for one year in the event of a
termination of such employment as a result of an Acquisition.  As of August 31,
2001, the annual salaries of such management personnel represent an aggregate of
$427,000.

Year End Option Table


The following table sets forth the number and value of unexercised options held
as of August 31, 2001 by the Named Executive Officers:

                  Aggregated Option Exercises In Last Fiscal
                    Year and Fiscal Year End Option Values
<TABLE>
<CAPTION>
                                                                                                   Value of Unexercised
                                                               Number of Unexercised             In-the-Money Options at
                               Shares                      Options at End of Fiscal 2001           End of Fiscal 2001 (1)
                             Acquired on    Value          -----------------------------        ---------------------------
Name                          Exercise    Realized (3)       Exercisable    Unexercisable       Exercisable  Unexercisable
-----                         -------     -----------        ------------   -------------       ------------ --------------
<S>                          <C>          <C>              <C>              <C>               <C>            <C>
John Waldstein (2)            13,333       $12,466            117,792         34,875             $103,945      $24,161
James Brierley, Jr.             -             -                27,500          2,500               22,075        2,125
Christopher Hentschel           -             -                17,584          3,417               10,722        2,421
</TABLE>

(1)  Difference between the fair market value of the underlying common stock on
     November 2, 2001 and the exercise price.

(2)  Includes warrants to purchase an aggregate of 35,000 shares of common
     stock.  See Note 9 to the Consolidated Financial Statements.

(3)  Difference between fair market value of the underlying common stock on the
     date of exercise and the exercise price, multiplied by the number of shares
     issued upon exercise.

Compensation of Directors

     Directors who are not officers receive $500 for each Board of Directors
meeting and $500 for each Committee meeting that they attend in person or by
telephone conference call.  For the fiscal year ended August 31, 2001,
directors' fees were paid in the amounts of $3,500 to Ms. Balcom, $4,500 to Mr.
Moyes and $3,500 to Mr. Paley.

                                       20
<PAGE>

Item 11.                 Security Ownership of Certain
                       Beneficial Owners and Management

     Set forth below is information concerning ownership of the Company's common
stock as of November 2, 2001, (i) by all persons known by the Company to own
beneficially 5% or more of the outstanding common stock, (ii) each director and
Named Executive Officer of the Company and (iii) by all directors and executive
officers as a group.

<TABLE>
<CAPTION>
                                                               Percent of
                                                Number of     Common Stock
Name                                            Shares(1)        Owned
----                                            ---------        -----
<S>                                          <C>              <C>
Executive Officers and Directors:

        John Waldstein                           263,881(2)       15.6%
        c/o International Electronics, Inc.
        427 Turnpike Street
        Canton, Massachusetts

        Heath Paley                               44,852(3)        2.8%
        c/o International Electronics, Inc.
        427 Turnpike Street
        Canton, Massachusetts

        James Brierley, Jr.                       37,576(5)        2.4%
        c/o International Electronics, Inc.
        427 Turnpike Street
        Canton, Massachusetts

        Christopher Hentschel                     28,384(7)        1.8%
        c/o International Electronics, Inc.
        427 Turnpike Street
        Canton, Massachusetts

        Kenneth Moyes                             25,430(6)        1.6%
        526 Boston Post Road
        Wayland, Massachusetts

        Diane Balcom                              20,560(4)        1.3%
        1403 Sharps Hill Road
        Pittsburgh, Pennsylvania

        All directors and executive officers
        as a group (6 persons)                   420,683(8)       23.6%

5% Shareholders:

        Warren Paley                             217,267          13.9%
        3 Mill Street
        New Baltimore, New York

        Steven Tannenbaum                        209,627(9)       13.4%
        125 Country Club Road
        Newton, Massachusetts
</TABLE>

       (see footnotes on following page)

                                       21
<PAGE>

(1) Except as otherwise indicated below, the named owner has sole voting and
    investment power with respect to the shares set forth. No arrangements are
    known to the Company, which may result in a change in control. The number of
    shares shown does include shares which may be acquired through the exercise
    of options which are exercisable currently or within sixty (60) days after
    November 2, 2001.

(2) Includes vested options and warrants to purchase an aggregate 122,042 shares
    of the Company's common stock granted at prices ranging from $0.74-$2.12 per
    share. Includes 6,234 shares of common stock held by Mr. Waldstein's wife.
    Mr. Waldstein disclaims beneficial ownership of these shares.

(3) Includes vested options to purchase an aggregate 21,167 shares of the
    Company's common stock granted at prices ranging from $0.81-$2.81 per
    share.

(4) Includes vested options to purchase an aggregate 11,500 shares of the
    Company's common stock granted at prices ranging from $0.72-$2.81 per
    share.

(5) Includes vested options to purchase an aggregate 30,000 shares of the
    Company's common stock granted at prices ranging from $1.35-$2.54 per share.

(6) Includes 4,000 shares of common stock held in trust for the benefit of Mr.
    Moyes' minor children. Mr. Moyes serves as co-trustee of two such trusts.
    Includes vested options to purchase an aggregate 7,750 shares of the
    Company's common stock at prices ranging from $1.17-$2.81 per share.

(7) Includes vested options to purchase an aggregate 20,084 shares of the
    Company's common stock at prices ranging from $0.81-$2.54 per share.

(8) Includes vested options and warrants to purchase an aggregate 212,543 shares
    of the Company's common stock granted at prices ranging from $0.72-$2.81
    per share.

(9) Includes 157,477 shares of common stock held by Greenwood Capital Limited
    Partnership ("GCLP"). Mr. Tannenbaum serves as the president, sole
    stockholder and sole director of Greenwood Investments, Inc., which is the
    sole general partner of GCLP and has sole voting and investment power with
    respect to such shares. With respect to the remaining 52,150 shares of
    common stock, Mr. Tannenbaum holds such shares jointly with his wife and has
    shared voting and investment power.

                                       22
<PAGE>

                                    PART IV

Item 12.        Certain Relationships and Related Transactions

                                     None

Item 13.        Exhibits, Financial Statement Schedules and
                             Reports on Form 8-K.

      (a)1. The following Consolidated Financial Statements are included in Item
            7:

            Independent Auditors' Report

            Consolidated Balance Sheets as of August 31, 2001 and 2000

            Consolidated Statements of Income for the Years Ended August 31,
            2001, 2000 and 1999

            Consolidated Statements of Shareholders' Equity for the Years Ended
            August 31, 2001, 2000 and 1999

            Consolidated Statements of Cash Flows for the Years Ended August 31,
            2001, 2000 and 1999

            Notes to Consolidated Financial Statements

      (a)2. The following schedule is included in Item 7:

            Valuation and qualifying accounts

      (a)3. Exhibits:

            (3)    Restated Articles of Organization and By-Laws are
                   incorporated by reference to Exhibit 3 to the Company's
                   Registration Statement on Form S-18 (2-91218-B), filed on May
                   18, 1984 (hereinafter referred to as the Company's S-18).

            (3)(a) Amendment to Articles of Organization are incorporated by
                   reference to Exhibit 3.1(a) of the Company's Registration
                   Statement on Form S-1 (Registration No. 33-16333 which became
                   effective on October 8, 1987 hereinafter referred to as the
                   Company's S-1).

            (4)    Instruments defining the rights of securities holders include
                   the Restated Articles of Organization, By-Laws, Stock
                   Certificate and Stock Purchase Warrant which are incorporated
                   by reference to Exhibits 3, 4b and 4c to the Company's S-18.

                                       23
<PAGE>

           (10)(a) Nonqualified Stock Option Plan is incorporated by reference
                   to Exhibit 10.1(ll) of Post-Effective Amendment No. 2 of the
                   Company's S-1.

           (10)(b) 1999 Stock Option Plan is incorporated by reference to the
                   definitive proxy material for the 1999 special meeting in
                   lieu of the annual meeting of shareholders.

           (10)(c) Stock Purchase Agreement dated as of June 19, 1990 by and
                   among the Company and Ecco Industries, Inc. is incorporated
                   by reference to Exhibit (2.1) on Form 8-K dated July 2, 1990.

           (10)(d) Lease for Canton, Massachusetts facility between 427 Turnpike
                   Street Realty Trust and the Registrant dated March 28, 1995
                   is incorporated by reference to Exhibit 10(w) on Form 10-KSB
                   for the year ended August 31, 1995.

           (10)(e) First amendment to original lease of March 28, 1995, Canton,
                   Massachusetts between 427 Turnpike Street Realty Trust and
                   the Registrant dated April 1, 1998 is incorporated by
                   reference to Exhibit 10(k) on Form 10-KSB for the year ended
                   August 31, 1998.

           (10)(f) Second amendment to original lease of March 28, 1995, Canton,
                   Massachusetts between 427 Turnpike Street Realty Trust and
                   the Registrant dated January 28, 1999 is incorporated by
                   reference to 10(m) on Form 10-KSB for the year ended August
                   31, 1999.

           (10)(g) Third amendment to original lease of March 28, 1995, Canton,
                   Massachusetts between 427 Turnpike Street Realty Trust and
                   the Registrant dated September 27, 1999 is incorporated by
                   reference to 10(n) on Form 10-KSB for the year ended August
                   31, 1999.

           (10)(h) Fourth amendment to original lease of March 28, 1995, Canton,
                   Massachusetts between 427 Turnpike Street Realty Trust and
                   the Registrant dated October 31, 2001.

           (10)(i) 2001 Restatement of the Employment, Non-Disclosure, and Non-
                   Compete Agreement for John Waldstein dated September 13,
                   2001.

           (21)    Subsidiaries of the Registrant.

   (b)     Reports on Form 8-K

           No reports on Form 8-K were filed during the last quarter of the
           period covered by this report.


                                       24
<PAGE>

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                              INTERNATIONAL ELECTRONICS, INC.

Date:  November 27, 2001      By:  /s/ John Waldstein
                                 ------------------------------------------
                              John Waldstein, President and Chief Executive
                              Officer

     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.

<TABLE>
<CAPTION>
Signature                                                Title                                            Date
---------                                                -----                                            ----
<S>                                                <C>                                               <C>
        /s/ John Waldstein                         President and Chief                               November 27, 2001
-----------------------------------                Executive Officer, Treasurer,
            John Waldstein                         Chief Financial and Accounting
                                                   Officer, Chairman of the Board
                                                   and a Director

        /s/ Heath Paley                            Director                                          November 27, 2001
-----------------------------------
            Heath Paley

        /s/ Kenneth  Moyes                         Director                                          November 27, 2001
-----------------------------------
            Kenneth Moyes

        /s/ Diane  Balcom                          Director                                          November 27, 2001
-----------------------------------
            Diane Balcom
</TABLE>

                                       25
<PAGE>

INTERNATIONAL ELECTRONICS, INC.
AND SUBSIDIARIES


TABLE OF CONTENTS
------------------------------------------------------------------------------

                                                                          Page
INDEPENDENT AUDITORS' REPORT                                               F-2

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED AUGUST 31, 2001,
 2000 AND 1999:

 Consolidated Balance Sheets                                               F-3

 Consolidated Statements of Income                                         F-4

 Consolidated Statements of Shareholders' Equity                           F-5

 Consolidated Statements of Cash Flows                                     F-6

 Notes to Consolidated Financial Statements                               F-7-16

FINANCIAL STATEMENT SCHEDULE FURNISHED PURSUANT TO THE
 REQUIREMENTS OF FORM 10-KSB:

 Schedule II - Valuation and Qualifying Accounts                           F-18

All other schedules are omitted because they are inapplicable, or not required
under the instructions.

                                      F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Directors of
 International Electronics, Inc.
Canton, Massachusetts

We have audited the accompanying consolidated balance sheets of International
Electronics, Inc. and subsidiaries (the "Company") as of August 31, 2001 and
2000, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended August 31, 2001.
Our audits also included the financial statement schedule listed in the Table of
Contents.  These financial statements and the financial statement schedule are
the responsibility of the Company's management.  Our responsibility is to
express an opinion on the financial statements and the financial statement
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America.  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 audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of August 31, 2001
and 2000, and the results of their operations and their cash flows for each of
the three years in the period ended August 31, 2001, in conformity with
accounting principles generally accepted in the United States of America.  Also,
in our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

/s/ Deloitte & Touche LLP
--------------------------------
Boston, Massachusetts
November 9, 2001

                                      F-2
<PAGE>

INTERNATIONAL ELECTRONICS, INC.
AND SUBSIDIARIES

<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 2001 AND 2000
------------------------------------------------------------------------------------------------------------------------------------

ASSETS                                                     2001            2000
<S>                                                     <C>             <C>
CURRENT ASSETS:
  Cash and cash equivalents                             $1,549,954      $1,642,359
  Accounts receivable, net of allowances for
    doubtful accounts and returns of $215,000
    and $171,000 in 2001 and 2000, respectively          1,211,884       1,135,128
  Inventories                                              848,742         831,993
  Deferred income taxes                                    330,000         348,000
  Other current assets                                     239,486         250,097
                                                        ----------      ----------

           Total current assets                          4,180,066       4,207,577
                                                        ----------      ----------

PROPERTY AND EQUIPMENT, net of
  accumulated depreciation and amortization                476,359         505,101
                                                        ----------      ----------

OTHER ASSETS:
  Deferred income taxes                                     88,000          76,000
  Other                                                     36,711          11,950
                                                        ----------      ----------

           Total other assets                              124,711          87,950


                                                        ----------      ----------

                                                        $4,781,136      $4,800,628
                                                        ==========      ==========


<CAPTION>
   LIABILITIES AND SHAREHOLDERS' EQUITY                       2001            2000
   <S>                                                  <C>             <C>
   CURRENT LIABILITIES:
     Accounts payable                                  $   330,627    $    444,884
     Accrued expenses                                      987,306       1,118,401
     Income taxes payable                                   31,000          15,000
     Current portion of long-term obligations              218,066         172,336
                                                        -----------   ------------

         Total current liabilities                       1,566,999       1,750,621
                                                        -----------   ------------

   LONG-TERM OBLIGATIONS - less
   current portion                                         201,488         188,543
                                                        -----------   ------------

   COMMITMENTS


   SHAREHOLDERS' EQUITY:
   Common stock, $0.01 par value - authorized,
    5,984,375 shares; issued, 1,589,313 and
    1,570,813 shares in 2001 and 2000, respectively         15,893          15,708
   Capital in excess of par value                        4,868,791       4,853,991
   Accumulated deficit                                  (1,833,391)     (1,969,591)
   Treasury stock, at cost - 35,000 shares                 (38,644)        (38,644)
                                                        -----------   ------------

         Total shareholders' equity                      3,012,649       2,861,464
                                                        -----------   ------------

                                                       $ 4,781,136    $  4,800,628
                                                        ===========   ============
</TABLE>

See notes to consolidated financial statements.

                                      F-3
<PAGE>

INTERNATIONAL ELECTRONICS, INC.
AND SUBSIDIARIES

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED AUGUST 31, 2001, 2000 AND 1999
------------------------------------------------------------------------------------------------------------------------------------
                                                      2001              2000              1999
<S>                                              <C>                <C>                <C>
NET SALES                                        $10,584,081        $11,452,278        $9,425,569

COST OF SALES                                      5,884,800          6,295,556         5,028,089
                                                 -----------        -----------        ----------

GROSS PROFIT                                       4,699,281          5,156,722         4,397,480
                                                 -----------        -----------        ----------

OPERATING EXPENSES:
  Research and development costs                   1,045,389          1,201,859           731,302
  Selling, general and administrative expenses     3,525,479          3,732,147         3,394,207
                                                 -----------        -----------        ----------

         Total operating expenses                  4,570,868          4,934,006         4,125,509
                                                 -----------        -----------        ----------

INCOME FROM OPERATIONS                               128,413            222,716           271,971

INTEREST EXPENSE                                     (32,329)           (29,706)          (15,680)

OTHER INCOME                                          77,116             81,755            37,379
                                                 -----------        -----------        ----------

INCOME BEFORE INCOME TAXES                           173,200            274,765           293,670

PROVISION (BENEFIT) FOR INCOME TAXES                  37,000            (80,000)         (261,800)
                                                 -----------        -----------        ----------

NET INCOME                                       $   136,200        $   354,765        $  555,470
                                                 ===========        ===========        ==========


NET INCOME PER SHARE:
  Basic                                          $      0.09        $      0.23        $     0.37
                                                 ===========        ===========        ==========

  Diluted                                        $      0.08        $      0.21        $     0.35
                                                 ===========        ===========        ==========

SHARES USED IN COMPUTING NET INCOME
  PER SHARE:
    Basic                                          1,539,145          1,524,964         1,493,479
                                                 ===========        ===========        ==========

    Diluted                                        1,647,282          1,688,549         1,574,279
                                                 ===========        ===========        ==========
</TABLE>


See notes to consolidated financial statements.

                                     F-4
<PAGE>

INTERNATIONAL ELECTRONICS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED AUGUST 31, 2001, 2000 AND 1999
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                         Capital in
                                                        Common Stock     Excess of    Accumulated    Treasury Stock
                                                      Shares   Amount    Par Value      Deficit      Shares     Cost        Total
<S>                                                 <C>        <C>       <C>         <C>             <C>     <C>         <C>
BALANCE, SEPTEMBER 1, 1998                          1,528,301  $ 15,283  $4,796,149  $ (2,879,826)   35,000  $ (38,644)  $ 1,892,962

  Issuance of stock warrants                                -         -       6,356             -         -          -         6,356

  Stock issued upon exercise of stock warrants          5,000        50       4,450             -         -          -         4,500

  Net income                                                -         -           -       555,470         -          -       555,470
                                                   ----------  --------  ----------  ------------    ------  ---------   -----------

BALANCE, AUGUST 31, 1999                            1,533,301    15,333   4,806,955    (2,324,356)   35,000    (38,644)    2,459,288

  Issuance of stock options                                 -         -       7,074             -         -          -         7,074

  Stock issued upon exercise of stock options
    and warrants                                       37,512       375      39,962             -         -          -        40,337

  Net income                                                -         -           -       354,765         -          -       354,765
                                                   ----------  --------  ----------  ------------    ------  ---------   -----------

BALANCE, AUGUST 31, 2000                            1,570,813    15,708   4,853,991    (1,969,591)   35,000    (38,644)    2,861,464

  Stock issued upon exercise of stock options          18,500       185      14,800             -         -          -        14,985

  Net income                                                -         -           -       136,200         -          -       136,200
                                                   ----------  --------  ----------  ------------    ------  ---------   -----------

BALANCE, AUGUST 31, 2001                            1,589,313  $ 15,893  $4,868,791  $ (1,833,391)   35,000  $ (38,644)  $ 3,012,649
                                                   ==========  ========  ==========  ============    ======  =========   ===========
</TABLE>

See notes to consolidated financial statements.

                                      F-5
<PAGE>

INTERNATIONAL ELECTRONICS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED AUGUST 31, 2001, 2000 AND 1999
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                            2001         2000          1999
<S>                                                     <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                            $  136,200    $  354,765    $  555,470
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation and amortization                        329,374       343,691       306,505
      Stock options and warrants issued for
       professional services                                     -         7,074         6,356
      Deferred income taxes                                  6,000       (95,000)     (329,000)
      Changes in operating assets and liabilities:
        Accounts receivable                                (76,756)     (410,796)      262,071
        Inventories                                        (16,749)      201,104      (286,527)
        Other current assets                                10,611       (67,926)      (28,355)
        Accounts payable and accrued expenses             (245,352)      144,546       190,578
        Income taxes payable                                16,000       (47,000)       18,000
                                                        ----------    ----------    ----------

           Net cash provided by operating activities       159,328       430,458       695,098
                                                        ----------    ----------    ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Net purchase of equipment and furniture                 (299,382)     (291,221)     (346,679)
  Other assets                                             (26,011)            -             -
                                                        ----------    ----------    ----------

           Net cash used in investing activities          (325,393)     (291,221)     (346,679)
                                                        ----------    ----------    ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Additions to debt obligations                            256,748       280,727       157,390
  Payments of debt obligations                            (198,073)     (144,974)      (79,153)
  Proceeds from exercise of stock options and               14,985        40,337         4,500
   warrants                                             ----------    ----------    ----------

           Net cash provided by financing activities        73,660       176,090        82,737
                                                        ----------    ----------    ----------

CASH AND CASH EQUIVALENTS - (Decrease) increase            (92,405)      315,327       431,156
 during the year

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR             1,642,359     1,327,032       895,876
                                                        ----------    ----------    ----------

CASH AND CASH EQUIVALENTS, END OF YEAR                  $1,549,954    $1,642,359    $1,327,032
                                                        ==========    ==========    ==========

SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
   Interest paid                                        $   31,538    $   29,984    $   15,680
                                                        ==========    ==========    ==========

   Income taxes paid                                    $      425    $    2,500    $   52,868
                                                        ==========    ==========    ==========
</TABLE>

See notes to consolidated financial statements.

                                      F-6
<PAGE>

INTERNATIONAL ELECTRONICS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED AUGUST 31, 2001, 2000 AND 1999
--------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

   Description of the Business - International Electronics, Inc. and
   subsidiaries (the "Company") designs, manufactures, markets and sells
   electronic products for the security industry and other commercial
   applications.

   Principles of Consolidation - The accompanying consolidated financial
   statements include the accounts of International Electronics, Inc. and its
   majority-owned subsidiary, Ecco Industries, Inc. ("Ecco") and its wholly
   owned subsidiary International Electronics Europe Limited.  All material
   intercompany transactions, balances and profits have been eliminated.

   Cash Equivalents - The Company considers all highly liquid instruments
   purchased with a remaining maturity of three months or less to be cash
   equivalents.

   Fair Value of Financial Instruments - The fair value of the Company's assets
   and liabilities which constitute financial instruments approximate their
   recorded value.

   Concentration of Credit Risk - Financial instruments that potentially subject
   the Company to concentrations of credit risk are cash and accounts
   receivable.  The Company has no significant off-balance-sheet concentrations
   such as foreign exchange contracts, options contracts or other foreign
   hedging arrangements. The majority of the Company's cash is maintained with a
   commercial bank.  Concentration of credit risk with respect to accounts
   receivable is limited to certain customers to whom the Company makes
   substantial sales (see Note 11).

   Inventories - Inventories are stated at the lower of cost or market.  Cost is
   determined on a first-in, first-out basis.  Reserves are recorded for slow-
   moving, obsolete, unsalable or unusable items based upon a product-level
   review.

   Property and Equipment - Property and equipment are stated at cost.
   Expenditures for maintenance and repairs are charged to expense as incurred,
   whereas major betterments are capitalized as additions to property and
   equipment.  Depreciation and amortization are provided using the straight-
   line method over the estimated useful lives of the applicable assets,
   including capital leases.

                                                              Estimated
                                                                Lives

      Machinery and equipment                                 3-5 years
      Office furniture and equipment                          3-7 years
      Leasehold improvements                                Life of lease

   Other Assets - Other assets include a license for certain technology embedded
   in the Company's products.  The license is amortized over its estimated
   three-year useful life.

                                      F-7
<PAGE>

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

   Significant Estimates and Assumptions - The preparation of consolidated
   financial statements in conformity with accounting principles generally
   accepted in the United States of America requires management to make
   estimates and assumptions that affect the reported amounts of assets and
   liabilities and disclosure of contingent assets and liabilities at the date
   of the financial statements and the reported amounts of revenues and expenses
   during the reporting period.  Actual results could differ from those
   estimates.

   Revenue Recognition - Revenue from product sales is recognized upon shipment
   provided there are no uncertainties regarding acceptance, persuasive evidence
   of an arrangement exists, the sales price is fixed or determinable, and
   collection of the related receivable is probable.  If uncertainties exist,
   the Company recognizes revenue when these uncertainties are resolved.  An
   allowance for estimated future returns is recorded at the time revenue is
   recognized based on the Company's historical experience.  Estimated product
   warranty costs are recorded at the time of product revenue recognition.

   Research and Development Costs - All research and development costs are
   charged to operations as incurred.

   Net Income Per Share - Basic net income per share is computed by dividing net
   income by weighted-average common shares outstanding during the year.
   Diluted net income per share is computed by dividing net income by the
   weighted-average number of common and dilutive option and warrant shares
   outstanding based on the average market price of the Company's common stock
   (under the treasury stock method).

   The following table sets forth the computation of the weighted-average number
   of shares used in calculating basic and diluted net income per share:

<TABLE>
<CAPTION>
                                                         2001         2000         1999
<S>                                                   <C>          <C>          <C>
     Weighted-average shares outstanding for
      basic net income per share                       1,539,145    1,524,964    1,493,479
     Effect of dilutive option and warrant shares        108,137      163,585       80,800
                                                      ----------   ----------   ----------

     Total shares for diluted net income per share     1,647,282    1,688,549    1,574,279
                                                      ==========   ==========   ==========
</TABLE>

   The calculations for diluted net income per share do not include aggregate
   stock options and warrants of 186,667, 36,000 and 77,037 for the years ended
   August 31, 2001, 2000 and 1999, respectively.

   Employee Stock-Based Compensation - The Company uses the intrinsic-value-
   based method of Accounting Principles Board Opinion ("APB") No. 25,
   "Accounting for Stock Issued to Employees," as permitted under Statement of
   Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
   Compensation," to account for all of its employee and director stock-based
   compensation plans.

   Nonemployee Stock-Based Compensation - The Company complies with the
   provisions of SFAS No. 123 relating to the accounting for awards of stock-
   based compensation to nonemployees. Accordingly, stock-based compensation
   awarded to nonemployees is accounted for using the fair-value method.

                                      F-8
<PAGE>

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

   Comprehensive Income - The Company reports comprehensive income in accordance
   with SFAS No. 130, "Reporting Comprehensive Income." Comprehensive income for
   the three years ended August 31, 2001 does not differ from the reported net
   income.

   Disclosure About Segments of an Enterprise - The Company has adopted SFAS No.
   131, "Disclosure About Segments of an Enterprise and Related Information,"
   which requires companies to report selected information about operating
   segments, products and services, geographic areas and major customers.
   Operating segments are determined based on the way the chief operating
   decision-maker organizes the business for making operating decisions and
   assessing performance.  The Company has determined that it conducts its
   operations in one business segment.

   Reclassifications - Certain reclassifications have been made to prior year's
   financial statements to conform to the 2001 presentation.

   Recent Accounting Pronouncements - During 1999, the Financial Accounting
   Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative
   Instruments and Hedging Activities." In June 2000, the FASB issued SFAS No.
   137, "Accounting for Derivative Instruments and Hedging Activities - Deferral
   of the Effective Date of FASB Statement No. 133 - an amendment of FASB
   Statement No. 133." SFAS No. 133 is effective in fiscal year 2001. The
   implementation of this statement did not have a material impact on the
   Company's consolidated financial statements because the Company did not have
   any derivative instruments.

   In December 1999, the Securities and Exchange Commission issued Staff
   Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
   Statements."  This bulletin established guidelines for revenue recognition.
   The implementation of this SAB in fiscal year 2001 did not have a material
   impact on the Company's consolidated financial statements.

   In June 2001, the FASB issued SFAS No. 141, "Business Combinations," and SFAS
   No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that
   all business combinations initiated after June 30, 2001 be accounted for
   using the purchase method of accounting and prohibits the use of the pooling-
   of-interests method. SFAS No. 142 eliminates the amortization of goodwill and
   certain other intangibles and instead subjects these assets to periodic
   impairment assessments. SFAS No. 142 is effective immediately for all
   goodwill and certain other intangible assets acquired after June 30, 2001.
   The Company does not expect that the implementation of SFAS Nos. 141 and 142
   will have a material impact on its consolidated financial statements.

   In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
   or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121,
   "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
   to Be Disposed Of," and the accounting and reporting provisions of APB No.
   30, "Reporting the Results of Operations - Reporting the Effects of Disposal
   of a Segment of a Business, and Extraordinary, Unusual and Infrequently
   Occurring Events and Transactions." SFAS No. 144 specifies accounting for
   long-lived assets to be disposed of by sale, and broadens the presentation of
   discontinued operations to include more disposal transactions than were
   included under the previous standards. The Company is required to implement
   SFAS No. 144 on September 1, 2002, and it has not determined the impact, if
   any, that this statement will have on its consolidated financial position or
   results of operations.

                                      F-9
<PAGE>

2. INVENTORIES

   Inventories at August 31 consist of the following:

                                                       2001           2000

     Raw materials and subassemblies               $   578,839    $   555,136
     Work-in-process                                   123,479        116,054
     Finished goods                                    146,424        160,803
                                                   -----------    -----------

                                                   $   848,742    $   831,993
                                                   ===========    ===========

3. PROPERTY AND EQUIPMENT

   Property and equipment at August 31 consist of the following:

                                                       2001           2000

     Machinery and equipment                       $ 1,228,567    $ 1,011,250
     Office furniture and equipment                  1,008,419        986,289
     Leasehold improvements                            165,113        161,181
                                                   -----------    -----------

                                                     2,402,099      2,158,720

     Less accumulated depreciation and
      amortization                                  (1,925,740)    (1,653,619)
                                                   -----------    -----------

                                                   $   476,359    $   505,101
                                                   ===========    ===========

4. ACCRUED EXPENSES

   Accrued expenses at August 31 consist of the following:

                                                       2001           2000

     Payroll and related amounts                   $   323,050    $   407,154
     Warranty                                          347,833        395,124
     Professional fees                                 150,952        157,039
     Other                                             165,471        159,084
                                                   -----------    -----------

                                                   $   987,306    $ 1,118,401
                                                   ===========    ===========


                                      F-10
<PAGE>

5. LONG-TERM OBLIGATIONS

   Long-term obligations at August 31 consist of the following:

<TABLE>
<CAPTION>
                                                               2001           2000
     <S>                                                   <C>           <C>
     Equipment line of credit, 6.75% - 7.75% (Note 6)      $   417,948   $   347,424
     Collateralized 8% equipment loans, final payments
      through November 2001                                      1,606         7,727
     Capitalized lease obligations                                   -         5,728
                                                           -----------   -----------

                                                               419,554       360,879

     Less current portion                                     (218,066)     (172,336)
                                                           -----------   -----------

                                                           $   201,488   $   188,543
                                                           ===========   ===========
</TABLE>

   The future principal payments on long-term obligations as of August 31, 2001
   are $218,066 in 2002, $141,641 in 2003, and $59,847 in 2004.

6. BANK ARRANGEMENTS

   As of August 31, 2001, the Company has available an equipment line of credit
   that provides for borrowings of up to $132,000, expiring February 28, 2002
   and a demand line of credit that provides for borrowings of up to $1,000,000.
   Both lines of credit are at the bank's prime rate of interest, and all of the
   Company's assets are collateralized under these arrangements.  The credit
   agreements contain certain restrictive covenants including covenants limiting
   the payment of dividends, a minimum debt to tangible net worth ratio, and
   annual net income.  As of August 31, 2001, no borrowings have been made under
   the demand line of credit and the Company has an aggregate of $417,948
   outstanding as equipment debt which is payable in monthly installments
   through August 2004 (Note 5).

7. COMMITMENTS

   Leases - The Company leases an administrative and production facility under
   an operating lease which expires in April 2004 at an annual rate of $145,000.
   The Company is responsible for certain real estate taxes, utilities and
   maintenance costs.  Total rental expense for operating leases for the years
   ended August 31, 2001, 2000 and 1999 amounted to approximately $197,000,
   $198,000 and $171,000, respectively.

   Employment Arrangements - The Company has a continuous, three-year employment
   agreement with its President and Chief Executive Officer providing minimum
   annual aggregate compensation of approximately $160,000.  This employment
   agreement contains certain termination provisions.  In addition, the Company
   has employment arrangements with certain other key management that require
   salary and benefit continuation for one year (representing an aggregate of
   approximately $427,000 in salaries as of August 31, 2001) in the event of a
   termination of such employment as a result of an acquisition, merger or sale
   of assets of the Company (an "Acquisition").

                                      F-11
<PAGE>

8. INCOME TAXES

   The provision (benefit) for income taxes is composed of the following for the
   years ended August 31:

<TABLE>
<CAPTION>
                                                    2001           2000           1999
     <S>                                       <C>            <C>             <C>
     Current:
       Federal                                 $          -   $          -    $      1,000
       State                                         31,000         15,000          58,700
       Foreign                                            -              -           7,500
                                               ------------   ------------    ------------

     Total current provision                         31,000         15,000          67,200
                                               ------------   ------------    ------------
     Deferred:
       Federal                                        5,000       (103,000)       (257,000)
       State                                          1,000          8,000         (72,000)
                                               ------------   ------------    ------------

     Total deferred provision (benefit)               6,000        (95,000)       (329,000)
                                               ------------   ------------    ------------

     Total provision (benefit)                 $     37,000   $    (80,000)   $   (261,800)
                                               ============   ============    ============
</TABLE>

   The Company's effective tax rate differs from the statutory federal income
   tax rate due to the following for the years ended August 31:

<TABLE>
<CAPTION>
                                                            2001             2000           1999
     <S>                                                   <C>             <C>            <C>
     Statutory federal income tax rate                      34.0 %           34.0 %         34.0 %
     State income taxes, net of federal benefit             11.8              3.8           (1.0)
     Amortization of goodwill                                  -              7.8            9.9
     Other permanent items                                   0.9              4.1            4.7
     Recognition of previously reserved tax assets         (62.9)          (109.6)        (140.2)
     Other                                                  37.6             30.8            3.5
                                                           -----           ------         ------

     Effective tax rate                                     21.4 %          (29.1)%        (89.1)%
                                                           =====           ======         ======
</TABLE>

   As of August 31, 2001, the Company has net operating loss carryforwards of
   approximately $760,000, expiring in varying amounts from 2004 to 2010
   (primarily 2004 to 2007).  Included in this amount is approximately $340,000
   of net operating loss carryforwards which are limited to use against income
   of Ecco.  Aggregate research and development credit carryforwards of $10,000
   at August 31, 2001 expire in varying amounts through the year 2005.  Net
   operating loss carryforwards may be limited in the event of certain
   circumstances, including significant changes in ownership interests.

   Deferred income taxes reflect the net tax effects of temporary differences
   between the carrying amounts of assets and liabilities for financial
   reporting purposes and the amounts for income tax purposes.  Valuation
   allowances have been recorded to offset net deferred tax assets due to the
   uncertainty of realizing the benefit of some assets. During the years ended
   August 31, 2001 and 2000, the Company reduced its valuation allowance by
   $88,000 and $301,000, respectively, because of utilization of the Company's
   net operating loss carryforwards.

                                      F-12
<PAGE>

8. INCOME TAXES (CONTINUED)

   The following is a summary of the significant components of the Company's
   deferred tax assets at August 31:

                                                      2001             2000

     Deferred tax assets:
       Net operating loss carryforwards            $ 260,000        $ 348,000
       Tax credits                                    10,000           10,000
       Accounts receivable reserves                   86,000           68,000
       Inventories and related reserves              220,000          228,000
       Other                                          23,000           67,000
       Depreciation                                   89,000           61,000
       Valuation allowance                          (270,000)        (358,000)
                                                   ---------        ---------

                                                   $ 418,000        $ 424,000
                                                   =========        =========

9. CAPITAL TRANSACTIONS

   Stock Options - Since 1988, the Company has approved and reserved shares of
   common stock for nonqualified and incentive stock option plans for the
   benefit of certain employees, nonemployee directors, and key advisors.  The
   option plans are administered by a committee appointed by the Board of
   Directors (the "Committee"), which determines the terms of options including
   the exercise price, expiration date (no longer than 10 years), number of
   shares and vesting provisions.  All options vest at the rate of 25% per year
   with the exception of options issued to certain officers, nonemployee
   directors and key advisors with vesting provisions established by the
   Committee.  All of the options vest 100% and are fully exercisable in the
   event of an Acquisition of the Company.  At August 31, 2001, 71,492 shares
   remain available for future grants.

   A summary of activity of the stock option plans is as follows:

<TABLE>
<CAPTION>
                                                                      Weighted-Average
                                                                          Exercise
                                                            Shares     Price Per Share
     <S>                                                  <C>         <C>
     Outstanding, September 1, 1998                        321,767         $1.41
      Granted (weighted-average fair value of $0.84)        75,333          1.34
      Canceled/expired                                     (40,670)         1.56
                                                          --------

     Outstanding, August 31, 1999                          356,430          1.38
      Granted (weighted-average fair value of $1.66)        48,500          2.48
      Exercised                                            (20,000)         1.42
      Canceled/expired                                      (8,621)         1.28
                                                          --------

     Outstanding, August 31, 2000                          376,309          1.53
      Granted (weighted-average fair value of $1.36)        48,000          2.02
      Exercised                                            (18,500)         0.81
      Canceled/expired                                      (4,149)         1.19
                                                          --------

     Outstanding, August 31, 2001                          401,660         $1.63
                                                          ========         =====
</TABLE>

                                      F-13
<PAGE>

9.   CAPITAL TRANSACTIONS (CONTINUED)

     The following table summarizes information concerning outstanding and
     exercisable options as of August 31, 2001:

<TABLE>
<CAPTION>
                                              Options Outstanding                               Options Exercisable
                              ------------------------------------------------------   ----------------------------------
                                                    Weighted-
                                                     Average
                                                    Remaining        Weighted-
                                                   Contractual        Average                              Weighted-
                Range of              Number          Life           Exercise               Number          Average
            Exercise Prices        Outstanding       (Years)           Price             Exercisable      Exercise Price
            <S>                    <C>             <C>               <C>                <C>               <C>
             $0.72 - $1.00            41,200           1.60            $ 0.80               41,200             $ 0.80
             $1.01 - $2.00           248,293           6.11              1.44              175,502               1.39
             $2.01 - $2.81           112,167           5.90              2.35               68,167               2.25
                                     -------                                               -------

                                     401,660           5.59            $ 1.63              284,869             $ 1.51
                                     =======           ====            ======              =======             ======
</TABLE>

     Stock Warrants - The Company has issued stock warrants in connection with
     certain services and financing arrangements. A summary of activity of stock
     warrants is as follows:

<TABLE>
<CAPTION>
                                               Consultants             Officers             Debt                Total
<S>                                         <C>                     <C>               <C>                 <C>
     Outstanding, September 1, 1998               51,167                35,000              2,512               88,679
       Exercised                                  (5,000)                    -                  -               (5,000)
                                                 -------                ------             ------              -------

     Outstanding, August 31, 1999                 46,167                35,000              2,512               83,679
       Exercised                                 (15,000)                    -             (2,512)             (17,512)
       Expired                                    (3,333)                    -                  -               (3,333)
                                                 -------                ------             ------              -------

     Outstanding, August 31, 2000                 27,834                35,000                  -               62,834
       Expired                                   (10,000)                    -                  -              (10,000)
                                                 -------                ------             ------              -------

     Outstanding, August 31, 2001
       (weighted-average exercise
       price of $1.29)                            17,834                35,000                  -               52,834
                                                 =======                ======             ======              =======

     Exercisable                                  17,834                35,000                  -               52,834
                                                 =======                ======             ======              =======

     Exercise prices                           $0.72 - $2.07         $0.74 - $2.12         $    -            $0.72 - $2.12
                                               =============         =============         ======            =============
 </TABLE>

     The Company has granted certain "piggy-back" rights to certain warrant
     holders with respect to the registration of such shares underlying the
     warrants with the Securities and Exchange Commission.

                                      F-14
<PAGE>

9.   CAPITAL TRANSACTIONS (CONTINUED)

     Employee Stock-Based Compensation - With respect to employee and director
     stock-based compensation, the Company has adopted the disclosure-only
     requirements of SFAS No. 123. Accordingly, no compensation cost has been
     recognized in the accompanying consolidated financial statements for
     employee and director stock-based compensation awarded under employee stock
     option plans as the option exercise price equals the market price of the
     underlying stock on the date of grant. If compensation cost had been
     determined for awards under the Company's employee and director stock
     option plans based on the fair value of the awards at the date of grant in
     accordance with the provisions of SFAS No. 123, the Company's net income
     and net income per share for the years ended August 31, 2001, 2000 and 1999
     would have decreased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                    2001              2000              1999
       <S>                                                        <C>               <C>               <C>
       Net income - as reported                                   $136,200          $354,765          $555,470
       Net income - pro forma                                       83,991           322,366           483,730
       Net income per share - diluted - as reported                   0.08              0.21              0.35
       Net income per share - diluted - pro forma                     0.05              0.19              0.31
</TABLE>

     The pro forma disclosures presented are not necessarily representative of
     the effects on reported net income for future years. The fair value of each
     option grant is estimated on the date of the grant using the Black-Scholes
     option-pricing model with an assumed risk-free interest rate of 5.0% in
     2001 and 5.5% in 2000 and 1999, an expected life of five years and an
     expected volatility of 80% and assumes no dividends will be paid for 2001,
     2000 and 1999.

     Common Stock Reserved - Common stock reserved for future issuance at August
     31, 2001 consists of the following:

       Stock warrants                                     52,834
       Stock options                                     473,152
                                                         -------
                                                         525,986
                                                         =======

10.  BENEFIT PLAN

     The Company sponsors a savings plan for its employees which has been
     qualified under Section 401(k) of the Internal Revenue Code. Eligible
     employees are permitted to contribute to the 401(k) plan through payroll
     deductions within statutory and plan limits. Contributions from the Company
     are made at the discretion of the Board of Directors. The Company has made
     no contributions to the 401(k) plan to date.

                                      F-15
<PAGE>

11.  VENDORS, CUSTOMER AND INTERNATIONAL SALES

     The Company is dependent upon sole-source suppliers for a number of key
     components of its products. There can be no assurance that these suppliers
     will be able to meet the Company's future requirements for such components
     or that the components will be available at favorable terms. Any extended
     interruption in the supply of any such components or any significant price
     increase could have a material adverse effect on the Company's operating
     results in any given period.

     Two customers in 2001 and one customer in both 2000 and 1999 each
     contributed more than 10% of net sales, representing an aggregate of 46% of
     net sales in 2001, 36% in 2000, and 40% in 1999. The accounts receivable
     from these customers amounted to approximately $542,000 and $181,000 at
     August 31, 2001 and 2000, respectively.

     The Company sources a significant amount of components, manufactures
     products and maintains certain molds for its products in Asia. The Company
     believes that such sourcing reduces its cost of sales through lower parts,
     labor and tooling costs. There can be no guarantee that the Asian political
     or economic environment will remain sufficiently stable to allow reliable
     and consistent delivery of product. Any extended interruption in the supply
     or significant increase in the price of any such components and products
     could have a material adverse effect on the Company's operating results in
     any given period. International sales, primarily to Canada, Europe and
     Asia, were approximately $1,038,000 in 2001, $918,000 in 2000 and $977,000
     in 1999. Substantially all of the Company's long-lived assets are located
     in the United States of America.

12.  OTHER INCOME

     Other income consists of the following for the years ended August 31:

                                             2001      2000     1999

       Interest                            $77,360   $77,530  $ 60,343
       Other (expense) income                 (244)    4,225   (22,964)
                                           -------   -------  --------

                                           $77,116   $81,755  $ 37,379
                                           =======   =======  ========

                                  * * * * * *

                                      F-16
<PAGE>

                         FINANCIAL STATEMENT SCHEDULE
                         FURNISHED PURSUANT TO THE
                         REQUIREMENTS OF FORM 10-KSB

                                      F-17
<PAGE>

                                                                     SCHEDULE II

INTERNATIONAL ELECTRONICS, INC.
AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED AUGUST 31, 2001, 2000 AND 1999
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                      Additions
                                                  Balance at          Charged to        Charged to                    Balance at
                                                   Beginning          Costs and           Other        Deductions       End of
              Description                           of Year            Expenses          Accounts          (A)           Year
<S>                                               <C>                 <C>               <C>            <C>             <C>

Allowance for doubtful accounts and returns:

  August 31, 2001                                  $171,000            $90,000            $   -         $(46,000)      $215,000

  August 31, 2000                                   201,000              2,000                -          (32,000)       171,000

  August 31, 1999                                   176,000             31,000                -           (6,000)       201,000
</TABLE>


(A)  Net write-offs of bad debts (net of recoveries) and returns.


                                      F-18
<PAGE>

                        International Electronics, Inc.
                              Exhibits to 10-KSB

(10)(h)  Fourth amendment to original lease of March 28, 1995, Canton,
         Massachusetts between 427 Turnpike Street Realty Trust and the
         Registrant dated October 31, 2001.

(10)(i)  2001 Restatement of the Employment, Non-Disclosure, and Non-Compete
         Agreement for John Waldstein dated September 13, 2001.

(21)     Subsidiaries of the Registrant.