White Electronic Designs 8-K/A Financial statements and exhibits

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): January 22, 2003

WHITE ELECTRONIC DESIGNS CORPORATION

(Exact Name of Registrant as Specified in Charter)

Indiana	1-4817	35-0905052
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

3601 E. University Drive, Phoenix, Arizona	85034
(Address of Principal Executive Offices)	(Zip Code)

(602) 437-1520

(Registrant’s telephone number, including area code)

Not applicable

(Former Name or Former Address, if Changed Since Last Report)

     This Form 8-K/A amends the Current Report on Form 8-K dated January 24, 2003 and includes the financial statements and pro forma financial information that had been omitted from the previously filed Form 8-K as permitted by Item 7 of Form 8-K.

TABLE OF CONTENTS

EX-23.1

ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.

(a) Consolidated Financial Statements of Interface Data Systems, Inc.	Page
Report of the Independent Auditors		5
Consolidated Balance Sheet as of June 29, 2002		6
Consolidated Statement of Income for the year ended June 29, 2002		7
Consolidated Statement of Stockholders’ Equity for the year ended June 29, 2002		8
Consolidated Statement of Cash Flows for the year ended June 29, 2002		9
Notes to Consolidated Financial Statements		10
Consolidated Balance Sheet as of December 28, 2002 (Unaudited)		22
Consolidated Statement of Income for the six months ended December 28, 2002 (Unaudited) and December 29, 2001 (Unaudited)		23
Consolidated Statement of Cash Flows for the six months ended December 28, 2002 (Unaudited) and December 29, 2001 (Unaudited)		24
Notes to Unaudited Consolidated Financial Information		25
(b) Pro Forma Financial Information
Unaudited Pro Forma Combined Financial Information		26
Unaudited Pro Forma Combined Balance Sheet as of September 28, 2002		27
Notes to Unaudited Pro Forma Combined Balance Sheet		28
Unaudited Pro Forma Combined Statement of Income for the year ended September 28, 2002		30
Unaudited Pro Forma Combined Statement of Income for the three months ended December 28, 2002		31
Notes to Unaudited Combined Statement of Income		32

2

(c)Exhibits:

Exhibit No.	Description
2.1*	Agreement and Plan of Reorganization dated as of January 22, 2003 by and among White Electronic Designs Corporation, IDS Reorganization Corp. and Interface Data Systems, Inc.
4.1*	Indemnification and Release Agreement dated as of January 22, 2003 by and among White Electronic Designs Corporation and all of the outstanding shareholders of Interface Data Systems, Inc.
23.1	Consent of Nelson Lambson & Co., PLC
99.1*	Press Release dated January 23, 2003.

* Previously filed

3

SIGNATURES

     Pursuant to the requirements 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.

	WHITE ELECTRONIC DESIGNS CORPORATION
Date: April 7, 2003	By: /s/ William Rodes Vice President and Chief Accounting Officer

4

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors
Interface Data Systems, Inc.

We have audited the accompanying consolidated balance sheet of Interface Data Systems, Inc. (an Arizona corporation) and subsidiary as of June 29, 2002, and the related consolidated statements of income, stockholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Interface Data Systems, Inc. and subsidiary as of June 29, 2002, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Nelson Lambson & Co., PLC
Mesa, Arizona
August 27, 2002

5

INTERFACE DATA SYSTEMS, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
June 29, 2002

ASSETS
CURRENT ASSETS
	Cash and cash equivalents			$	1,153,654
	Accounts receivable, net				4,576,469
	Inventories, net				2,907,942
	Deferred income taxes				641,000
	Prepaid expenses and other assets				169,633
			Total current assets		9,448,698
PROPERTY, NET					6,645,381
RESTRICTED CASH					750,885
OTHER ASSETS					288,532
				$	17,133,496
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
	Current portion of notes payable and long-term debt			$	962,428
	Current portion of capital lease obligation				13,679
	Accounts payable				2,115,587
	Accrued liabilities				1,416,778
	Income taxes payable				42,526
			Total current liabilities		4,550,998
LONG-TERM DEBT
	Notes payable and long-term debt, less current portion				6,682,572
	Capital lease obligation, less current portion				67,008
	Deferred income taxes				915,000
			Total long-term debt		7,664,580
			Total liabilities		12,215,578
STOCKHOLDERS’ EQUITY
	Common stock, Class A voting, $.001 par value:				4,804
		Authorized shares - 10,000,000 Issued and outstanding shares - 4,766,603 Common stock, Class B nonvoting, no par value:			6,250
		Authorized shares - 1,000,000 Issued and outstanding shares - 5,000 Additional paid-in capital, Class A			1,832,490
	Unearned compensation				(350,000	)
	Retained earnings				3,471,017
	Less — Treasury Stock (37,314 Class A shares), at cost				(46,643	)
			Total stockholders’ equity		4,917,918
				$	17,133,496

The accompanying notes are an integral part of this consolidated financial statement.

6

INTERFACE DATA SYSTEMS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
For the year ended June 29, 2002

NET SALES			$	29,831,499
COST OF SALES				24,696,480
		Gross profit		5,135,019
OPERATING EXPENSES
	Selling, General, and Administrative			3,459,971
	Research & Development			856,271
		Total Operating Expenses		4,316,242
		Operating income		818,777
OTHER INCOME (EXPENSE)
	Interest income			30,316
	Interest expense			(584,086	)
	Loss on disposition of property			(44,869	)
	Other income, net			22,805
		Other expense, net		(575,834	)
	Income before provision for income taxes			242,943
PROVISION FOR INCOME TAXES				100,432
NET INCOME			$	142,511

The accompanying notes are an integral part of this consolidated financial statement.

7

INTERFACE DATA SYSTEMS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
For the year ended June 29, 2002

		Common Stock
		Class A				Class B					Additional
										��	Paid-In		Unearned			Retained		Treasury
		Shares		Amount		Shares		Amount			Capital		Compensation			Earnings		Stock			Total
Balance at June 30, 2001			4,766,603	$	4,804		5,000	$	6,250		$	1,832,490	$	(450,000	)	$	3,328,506	$	(46,643	)	$	4,675,407
	Net income		—		—		—		—			—		—			142,511		—			142,511
	Amortization of unearned compensation		—		—		—		—			—		100,000			—		—			100,000
Balance at June 29, 2002			4,766,603	$	4,804		5,000	$	6,250		$	1,832,490	$	(350,000	)	$	3,471,017	$	(46,643	)	$	4,917,918

The accompanying notes are an integral part of this consolidated financial statement.

8

INTERFACE DATA SYSTEMS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended June 29, 2002

CASH FLOWS FROM OPERATING ACTIVITIES
	Net income				$	142,511
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation				1,301,867
		Loss on disposition of property				44,869
		Provision for bad debts				19,101
		Deferred income taxes				(55,420	)
		Amortization of unearned compensation				100,000
		(Increase) decrease in Accounts receivable, net				1,291,893
			Inventories, net			546,468
			Income taxes receivable			188,326
			Prepaid expenses and other assets			4,125
			Other assets			82,508
		Increase (decrease) in Accounts payable				38,827
			Accrued liabilities			(64,269	)
			Income taxes payable			42,526
				Net cash provided by operating activities		3,683,332
CASH FLOWS FROM INVESTING ACTIVITIES
	Proceeds from sale of property					34,747
	Purchase of property					(149,943	)
	Decrease in restricted cash					1,793,461
				Net cash provided by investing activities		1,678,265
CASH FLOWS FROM FINANCING ACTIVITIES
	Payments on notes payable and long-term debt					(4,451,614	)
	Payments on capital lease obligation					(15,383	)
				Net cash used in financing activities		(4,466,997	)
Net increase in cash and cash equivalents						894,600
CASH AND CASH EQUIVALENTS — Beginning of year						259,054
CASH AND CASH EQUIVALENTS — End of year					$	1,153,654

The accompanying notes are an integral part of this consolidated financial statement.

9

INTERFACE DATA SYSTEMS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 2002

(1) OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Operations

     Interface Data Systems, Inc. was incorporated on April 2, 1991, under the laws of the state of Arizona. The Company designs and manufacturers membrane and elastomer keypads, control panels, custom full-travel keyboards, and complete electronic interface devices. These capabilities include hardware, software, and packaging, and are focused on hand-held through desktop electronic instruments. The Company also has turnkey manufacturing services, including the sourcing of components and full functional testing. The Company operates under a 52/53 week year-end, with year-end falling on the Saturday closest to June 30. The year ended June 29, 2002 was a 52-week year.

     Principles of Consolidation

     The accompanying consolidated financial statements include the accounts of Interface Data Systems, Inc. and its wholly owned subsidiary, IDS Acquisition Corporation (collectively, the “Company”). All intercompany transactions have been eliminated for the year ended June 29, 2002.

     Cash and Cash Equivalents

     For purposes of reporting the consolidated statement of cash flows, the Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents.

     Accounts Receivable

     The Company does not require collateral on accounts receivable balances. The allowance for doubtful accounts totaled approximately $137,000 at June 29, 2002.

     Inventories

     Inventories are carried at the lower of cost or market using the first-in, first-out (FIFO) method for raw materials and specific identification for work-in-process and finished goods.

     Property

     Property is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets which range from 3 to 31.5 years.

10

INTERFACE DATA SYSTEMS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 2002

(1) OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     Stock Based Compensation

     The Company grants stock options to employees for a fixed number of shares with an exercise price which generally does not exceed the fair value of the shares at the date of grant. The Company accounts for stock option grants in accordance with Accounting Principles Board Opinion No. 25 (APB 25),Accounting for Stock Issued to Employees, and has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123 (SFAS 123),Accounting for Stock-Based Compensation, and, accordingly, recognizes no compensation expense for the stock option grants unless they are granted at less than fair value.

     Income Taxes

     The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards No. 109,Accounting for Income Taxes.

     Advertising

     Advertising costs are expensed as they are incurred. Advertising costs for the year ended June 29, 2002, totaled approximately $35,000.

     Revenue Recognition

     Sales are recorded at the time individual items are shipped.

     Research and Development

     Research and development expenses are charged to expense as incurred.

     Shipping Costs

     Substantially all costs of shipping products to customers are included in cost of sales.

     Use of Estimates

     The preparation of 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 revenue and expenses during the reporting period. Actual results may differ from those estimates.

11

INTERFACE DATA SYSTEMS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 2002

(2) INVENTORIES

     Inventories consisted of the following at June 29, 2002:

Raw materials		$	1,790,463
Work in process			1,065,522
Finished goods			923,069
	Total inventories		3,779,054
Less reserves			(871,112	)
	Inventories, net	$	2,907,942

(3) PROPERTY

     Property consisted of the following at June 29, 2002:

Land			$	240,000
Building				3,593,879
Computers				1,593,182
Machinery and equipment				6,399,734
Furniture and fixtures				407,729
Construction in progress				18,927
	Total property			12,253,451
		Less — Accumulated depreciation		(5,608,070	)
	Property, net		$	6,645,381

Included in cost of sales for the year ended June 29, 2002, is depreciation expense of approximately $997,000. Included in selling, general and administrative expenses for the year ended June 29, 2002, is depreciation expense of approximately $250,000. Included in research and development expenses for the year ended June 29, 2002, is depreciation expense of approximately $54,000.

12

INTERFACE DATA SYSTEMS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 2002

(4) NOTES PAYABLE AND LONG-TERM DEBT

     Notes payable and long-term debt consisted of the following at June 29, 2002:

Subordinated notes payable to stockholders and an affiliate of a stockholder, uncollateralized, bearing interest at rates ranging from 12 to 12.5 percent, interest payable generally quarterly, principal matured in January 2000. Certain note holders have not expressed a demand for payment

$80,000

Arizona Industrial Development Authority Bonds, collateralized by a letter of credit from a bank which is collateralized by substantially all assets of the Company and guaranteed by the majority stockholder, with the proceeds restricted to qualifying building and manufacturing equipment purchased before October 2001. The bonds are payable in quarterly principal installments beginning in July 1999 based on amortization periods of 7 years for equipment and 15 years for buildings, based on the proceeds actually advanced plus the amounts outstanding under the term loan. All principal payments were first applied to a term loan until it was paid in full in 2002, then to the bonds. The bonds bear interest, payable monthly, at the adjustable interest rate mode, as defined (1.55 percent effective rate at June 29, 2002). The last of the bonds mature in October 2017.

3,905,000

13

INTERFACE DATA SYSTEMS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 2002

(4) NOTES PAYABLE AND LONG-TERM DEBT (continued)

Ohio Industrial Development Authority Bonds, which are collateralized by a letter of credit from a bank, which is collateralized by substantially all assets of the Company and guaranteed by the majority stockholder and the Company’s wholly-owned subsidiary. Proceeds from the bonds are restricted to qualifying building and manufacturing equipment purchased before August 2003 (restricted cash of approximately $745,000 at June 29, 2002). The bonds are payable in quarterly principal installments commencing September 20, 2000, based on amortization periods of 7 years for equipment and 20 years for real property, based on the proceeds actually advanced. All principal payments were first applied to a term loan until paid in full in 2002, and then to the Arizona bonds in an allocation set by the bank. The bonds bear interest, payable monthly, at the adjustable interest rate mode, as defined (1.55 percent effective rate at June 30, 2002). In connection with the bond issuance of these bonds, the Company paid off existing debt in August 2000 in the amount of approximately $2,141,000. The last of these bonds mature in August 2020.	3,660,000
$3,500,000 line of credit with a bank, expiring July 2004, collateralized by substantially all assets of the Company and a guarantee by the majority stockholder, bearing interest at the bank’s prime rate plus a variable rate ranging from .25 percent to 1.75 percent (6.5 percent effective rate at June 29, 2002)	—
Total notes payable and long-term debt	7,645,000
Less — Current portion	(962,428)
Notes payable and long-term debt,          less current portion	$6,682,572

14

INTERFACE DATA SYSTEMS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 2002

(4) NOTES PAYABLE AND LONG-TERM DEBT (continued)

     Annual principal payments on notes payable and long-term debt for the years subsequent to June 29, 2002 are scheduled as follows:

2003		$	962,428
2004			882,428
2005			882,428
2006			882,428
2007			882,428
Thereafter			3,152,860
	Total notes payable and long-term debt	$	7,645,000

     Principal payments made to related parties was approximately $25,000 for the year ended June 29, 2002. Interest paid to related parties was approximately $17,000 for the year ended June 29, 2002.

     The Company’s borrowing agreements contain certain covenants, including the maintenance of certain financial ratios. The Company was in compliance with the covenants requiring the maintenance of certain financial ratios at June 29, 2002. However, they were in violation of the covenant requiring the timely issuance of audited financial statements. The bank has waived this violation as of and for the year ended June 29, 2002.

     At June 29, 2002, the Company had approximately $9,394,000 of unused letters of credit with a bank, which collateralize the industrial bonds noted above, with a facility fee ranging between 1.5% and 2.75%.

15

INTERFACE DATA SYSTEMS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 2002

(5) OBLIGATION UNDER CAPITAL LEASE

     During the fiscal year 2002, the Company entered into an equipment capital lease agreement which expires in May 2006. The gross amount of the asset recorded under this capital lease agreement was approximately $96,000 and the related accumulated amortization was approximately $23,000 as of June 29, 2002. Amortization expense on this capital lease is included in depreciation expense. Future minimum lease payments on this lease obligation for the years subsequent to June 29, 2002 are scheduled as follows:

2003			$	25,062
2004				25,062
2005				25,062
2006				23,626
	Total future minimum lease payments			98,812
	Less — Interest			(18,125	)
		Total obligation under capital lease		80,687
	Less — Current Portion			(13,679	)
		Capital lease obligation, less current portion	$	67,008

6) INCOME TAXES

     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 used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows at June 30, 2002:

Deferred tax liabilities — Tax over book depreciation			$	915,000
Deferred tax assets:
	Accrued liabilities and other			132,000
	Nondeductible reserves			475,000
	Other			34,000
		Total deferred tax assets		641,000
		Net deferred tax liability	$	274,000

16

INTERFACE DATA SYSTEMS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 2002

(6) INCOME TAXES (continued)

     Significant components of the federal and state income tax expense at June 29, 2002 are as follows:

Current:
	Federal		$	144,187
	State			11,665
		Total current		155,852
Deferred:
	Federal			(48,500	)
	State			(6,920	)
		Total deferred		(55,420	)
	Total provision for income taxes		$	100,432

(7) SUPPLEMENTAL CASH FLOW INFORMATION

     Cash paid for interest for the year ended June 29, 2002, was approximately $559,000.

     Total income tax payments, net of any refunds received, during the year ended June 29, 2002, were approximately $27,000.

(8) SUPPLEMENTAL INFORMATION ON NON-CASH INVESTING AND FINANCING ACTIVITIES

     During the year ended June 29, 2002, the Company entered into a capital lease obligation for equipment totaling approximately $96,000.

(9) OPERATING LEASES

     The Company leases certain equipment under noncancelable operating leases that expire in various years through fiscal year 2005. Total rent expense was approximately $233,000 for the year ended June 29, 2002.

17

INTERFACE DATA SYSTEMS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 2002

(9) OPERATING LEASES (continued)

     Future minimum payments under noncancelable operating leases with initial terms of one year or more for the years subsequent to June 29, 2002 are as follows:

2003		$	87,244
2004			34,045
2005			753
	Total future minimum rental payments	$	122,042

(10) COMMON STOCK AND STOCK-BASED AWARDS

     In January 2001, the Company’s Board of Directors issued a stock warrant to purchase 500,000 shares of Class A stock to the President of the Company at $1.00 per share, which was less than the fair value of the Company’s Class A stock on the date of issuance, as determined by management of the Company. The warrant is exercisable at the rate of 20 percent per year commencing December 31, 2001 with a provision that upon a change in control of the Company, the warrant shall become 100% exercisable. In connection with this issuance, the Company recorded an increase to additional paid-in capital and recorded unearned compensation of $500,000 representing the excess of the fair value of the shares underlying the warrant over the exercise price. Unearned compensation is being amortized to selling, general and administrative expense over the service period with $100,000 charged to expense for the year ended June 29, 2002.

     During the year ended June 24, 1995, the Company’s Board of Directors adopted a Long-Term Incentive Plan (the Plan) for employees and directors, for the issuance of various stock based awards for a maximum of 900,000 shares of Class A Stock and 600,000 shares of Class B Stock. In January 2001, the Company’s Board of Directors approved an amendment to increase the total shares covered by the Plan from 1,500,000 shares to 1,750,000 shares. The options granted generally become exercisable at the rate of 25 percent per year, commencing retroactively two years from the date of hire, and for new employees subsequent to fiscal 1995, two years from the date of grant. In September 2001, the Company changed the vesting schedule for options granted from that point forward to a vesting rate of 25% per year commencing on the date of grant.

     The Company has elected to follow APB 25, and related Interpretations in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under FASB Statement No. 123 (SFAS 123),Accounting for Stock-Based Compensation, requires use of options valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company’s

18

INTERFACE DATA SYSTEMS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 2002

(10) COMMON STOCK AND STOCK-BASED AWARDS (continued)

employee stock options was not less than the market price of the underlying stock on the date of grant, no compensation expense is recognized. Had compensation expense been determined based on the fair value at the grant date of rewards consistent with the provisions of SFAS 123, the effect on the Company’s income would not have been significant for the period presented. The Company further believes that, based on the models required to be used by SFAS 123, pro forma amounts derived under such methodologies would not be representative, if material, since such models are not designed for use of stock options of the type issued by the Company.

     Stock options outstanding under the Long-Term Incentive Plan are as follows:

								Weighted
								Average
		Class A			Class B			Exercise Price
		Shares			Shares			per Share
Outstanding at June 30, 2001			744,000			558,500		$	0.87
	Granted		25,000			125,000		$	2.00
	Exercised		—			—			—
	Expired or canceled		(55,000	)		(95,000	)	$	1.84
Outstanding at June 29, 2002			714,000			588,500		$	0.89
Exercisable at June 29, 2002			714,000			404,750		$	0.71

19

INTERFACE DATA SYSTEMS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 2002

(10) COMMON STOCK AND STOCK-BASED AWARDS (continued)

     The following table summarizes information about stock options outstanding at June 29, 2002:

		Outstanding Options					Exercisable Options
				Weighted-
				Average	Weighted-				Weighted-
Range				Remaining	Average				Average
of Exercise		June 29,		Contractual	Exercise		June 29,		Exercise
Prices		2002		Life	Price		2002		Price
$	0.66		1,062,500	2.6 years	$	0.66		1,062,500	$	0.66
	1.25		35,000	3.9 years		1.25		31,250		1.25
	2.00		205,000	8.7 years		2.00		25,000		2.00

(11) CONCENTRATIONS

     Major Customers

     During the year ended June 29, 2002, the Company had major customers with sales greater than 5% of total sales of which sales were approximately as follows:

	Sales from		Percent of
	Major		Total
	Customers		Sales
A	$	9,118,000		30.6	%
B		7,901,000		26.5	%
C		2,310,000		7.7	%
D		1,535,000		5.1	%
	$	20,864,000		69.9	%

20

INTERFACE DATA SYSTEMS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 2002

(11) CONCENTRATIONS (continued)

     Information regarding accounts receivable from these major customers at June 29, 2002 was approximately as follows:

			Percent
			of Total
			Trade
	Amount		Receivables
A	$	1,072,000		23.4	%
B		1,511,000		33.0	%
C		641,000		14.0	%
D		—		0.0	%
	$	3,224,000		70.4	%

     The Company performs ongoing credit risk evaluations of its customers’ financial condition and generally does not require collateral. The Company’s significant customers are major, well-known businesses in the telephone equipment, entertainment systems, and appliance industries, generally in the United States. Credit losses have been provided for in the financial statements and are within the range of management’s expectations.

     Cash Deposits

     The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash balances. At June 29, 2002, the Company’s uninsured balance was approximately $2,192,000.

(12) RELATED PARTY TRANSACTIONS

     The Company paid consulting fees of approximately $6,000 to a company owned by a member of the Board of Directors during the year ended June 29, 2002.

(13) 401(K) PLAN

     The Company sponsors a 401(k) Plan covering substantially all employees. The Plan provides for employer contributions based primarily on employee participation. The total contributions made to the Plan by the Company were approximately $94,000 for the year ended June 29, 2002.

(14) EVENT (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITORS' REPORT

     On January 22, 2003, White Electronic Designs Corporation (“White”) acquired the Company in exchange for $9.0 million in cash and 577,595 shares of White common stock as well as the issuance of 639,097 White options in exchange for all of the Company's vested and unvested stock options and warrants outstanding as of the acquisition date.

21

INTERFACE DATA SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands of dollars)

				December 28, 2002
ASSETS
Current Assets
	Cash and cash equivalents			$	864
	Accounts receivable, net				3,928
	Inventories, net				2,318
	Income tax receivable, net				165
	Deferred income taxes				672
	Prepaid expenses and other assets				93
		Total Current Assets			8,040
	Property, net				6,171
	Restricted cash				776
	Other assets				280
		Total Assets		$	15,267
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
	Current portion of notes payable and long-term debt			$	943
	Current portion of capital lease obligation				18
	Accounts payable				1,114
	Accrued liabilities				1,598
		Total Current Liabilities			3,673
	Notes payable and long-term debt, less current portion				6,187
	Capital lease obligation, less current portion				54
	Deferred income taxes				810
		Total Liabilities			10,724
Shareholders’ Equity
	Common stock				11
	Additional paid-in capital				1,832
	Unearned compensation				(300	)
	Retained earnings				3,047
	Less — Treasury Stock				(47	)
			Total Shareholders’ Equity		4,543
Total Liabilities and Shareholders’ Equity				$	15,267

The accompanying notes are an integral part of these unaudited consolidated financial statements.

22

INTERFACE DATA SYSTEMS, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(In thousands of dollars)

				Six months ended
				December 28, 2002			December 29, 2001
Net sales				$	11,760		$	15,987
Cost of sales					9,693			13,131
			Gross profit		2,067			2,856
Operating expenses
	Selling, general and administrative				2,014			1,847
	Research and development				482			403
			Total operating expenses		2,496			2,250
			Operating income (loss)		(429	)		606
Other income (expense)
	Interest income				9			32
	Interest expense				(201	)		(356	)
	Gain (loss) on disposition of property				50			(33	)
	Other income, net				19			8
			Other expense, net		(123	)		(349	)
		Income (loss) before provision for income taxes			(552	)		257
Provision (benefit) for income taxes					(128	)		120
Net income (loss)				$	(424	)	$	137

The accompanying notes are an integral part of these unaudited consolidated financial statements.

23

INTERFACE DATA SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands of dollars)

				Six months ended
				December 28,			December 29,
				2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net income(loss)				$	(424	)	$	137
Adjustments to reconcile net income(loss) to net cash provided by operating activities:
	Depreciation and amortization				680			694
	Provision for bad debts				5			48
	Deferred income taxes				(136	)		—
	Amortization of unearned compensation				50			50
	(Increase) decrease in:
		Accounts receivable			643			1,981
		Inventories, net			590			120
		Income taxes payable/receivable			(208	)		121
		Prepaid expenses and other assets			86			42
	Increase (decrease) in:
		Accounts payable			(1,002	)		(782	)
		Accrued liabilities			181			(3	)
			Net cash provided by operating activities		465			2,408
CASH FLOWS FROM INVESTING ACTIVITIES
	Purchase of property				(206	)		(64	)
	(Increase) decrease in restricted cash				(25	)		362
			Net cash provided (used in) investing activities		(231	)		298
CASH FLOWS FROM FINANCING ACTIVITIES
	Payments on notes payable and long-term-debt				(515	)		(2,602	)
	Proceeds (payments) on capital lease obligations				(9	)		89
			Net cash used in financing activities		(524	)		(2,513	)
Net increase (decrease) in cash and cash equivalents					(290	)		193
Cash and cash equivalents at beginning of the period					1,154			259
Cash and cash equivalents at end of the period				$	864		$	452

The accompanying notes are an integral part of these unaudited consolidated financials statements.

24

INTERFACE DATA SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL INFORMATION

Note 1 – Basis of Presentation

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles. However, certain information or footnote disclosures have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the statements include all adjustments necessary (which are of a normal and recurring nature) for the fair presentation of the results of the interim periods presented. These financial statements should be read in connection with the Company’s audited financial statements for the year ended June 29, 2002, included elsewhere in this document.

Note 2 – Inventories

Inventories consisted of the following at December 28, 2002 (in thousands of dollars):

Raw material		$	2,073
Work in process			551
Finished goods			725
	Total inventories		3,349
Less reserves			(1,031	)
	Inventories, net	$	2,318

25

Unaudited Pro Forma Combined Financial Information

On January 22, 2003, White Electronic Designs Corporation (“White”) completed the acquisition of Interface Data Systems, Inc. (“IDS”) in exchange for $9.0 million in cash and 577,595 shares of White common stock as well as the issuance of 639,097 White options in exchange for all of IDS’ vested and unvested stock options and warrants outstanding as of the acquisition date.

The accompanying unaudited pro forma combined balance sheet as of September 28, 2002 gives effect to the acquisition of IDS by White as if such acquisition had occurred as of September 28, 2002. Additionally, the unaudited pro forma combined statements of income for the year ended September 28, 2002 and for the three months ended December 28, 2002 give effect to that acquisition as if it had occurred as of October 1, 2001. The unaudited pro forma combined financial information is included only for purposes of illustration, and it does not necessarily indicate what the financial condition or operating results would have been if the acquisition of IDS by White had been completed on the dates indicated.

White will account for the acquisition of IDS as a purchase business combination. The pro forma allocation of the purchase price to the acquired assets and liabilities is based on management’s preliminary estimates of the respective fair values and is subject to completion.

The unaudited pro forma combined financial information should be read in conjunction with the notes to the unaudited pro forma combined financial information, the audited historical consolidated financial statements included in White’s Form 10-K for the year ended September 28, 2002 previously filed with the Securities and Exchange Commission, and the audited historical financial statements of IDS as of and for the year ended June 29, 2002, as well as the unaudited historical financial statements of IDS as of December 28, 2002 and for the six months ended December 28, 2002 and December 29, 2001, included elsewhere in this Current Report on Form 8-K/A.

White’s fiscal year ends the Saturday closest to September 30th (September 28, 2002) while IDS’ fiscal year ends the Saturday closest to June 30th (June 29, 2002). Consistent reporting periods have been used for purposes of preparing the accompanying unaudited pro forma financial information.

26

WHITE ELECTRONIC DESIGNS CORPORATION
UNAUDITED PRO FORMA
COMBINED BALANCE SHEET
(In thousands of dollars)

					White			IDS						Unaudited
					September 28,			September 28,			Pro Forma			Pro Forma
					2002			2002			Adjustments(a)			Combined
ASSETS
Current Assets
	Cash and cash equivalents				$	12,097		$	537		$	(9,000	)(b)	$	3,634
	Accounts receivable, net					14,916			4,025						18,941
	Inventories, net					16,109			3,010			130	(c)		19,249
	Prepaid expenses					575			232
															807
	Deferred income taxes					3,995			641						4,636
			Total Current Assets			47,692			8,445			(8,870	)		47,267
Property, plant and equipment, net						10,481			6,423			55	(d)		16,959
Restricted cash						—			833						833
Deferred income taxes						3,122			—						3,122
Goodwill						6,516			—			9,201	(e)		15,717
Intangible assets						370						7,100	(f)		7,470
Other assets, net						185			280						465
			Total Assets		$	68,366		$	15,981		$	7,486		$	91,833
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
		Current portion of long-term debt			$	—		$	943		$			$	943
		Accounts payable				6,037			1,363						7,400
		Accrued salaries and benefits				2,344			595						2,939
		Accrued expenses				3,842			737			474	(g)		5,053
			Total Current Liabilities			12,223			3,638			474			16,335
Accrued long-term pension liability						671			—
															671
Long term debt						—			6,482						6,482
Deferred income taxes									915			2,880	(h)		3,795
Other long term liabilities						702			59						761
			Total Liabilities			13,596			11,094			3,354			28,044
Shareholders’ Equity
		Common stock				2,009			11			47	(i)		2,067
		Treasury stock				(4	)		(47	)		47	(i)		(4	)
		Additional paid-in capital				53,313			1,832			7,180	(i)		62,325
		Retained earnings				(293	)		3,415			(3,415	)(i)		(293	)
						55,025			5,211			3,859			64,095
		Less accumulated other comprehensive loss				(255	)								(255	)
		Less deferred compensation							(324	)		273	(i)		(51	)
				Total Shareholders’ Equity		54,770			4,887			4,132			63,789
Total Liabilities and Shareholders’ Equity					$	68,366		$	15,981		$	7,486		$	91,833

The accompanying notes are an integral part of these unaudited pro forma combined financial statements.

27

White Electronic Designs Corporation
Notes to Unaudited Pro Forma Combined Balance Sheet

Pro Forma Adjustments to the Balance Sheet

     (a)  The following is a summary of the estimated aggregate purchase price:

Cash paid to IDS stockholders		$	9,000,000
Market value of White common shares issued to IDS stockholders			4,613,426
Estimated fair value of IDS’ options and warrants			4,456,539
White transaction costs			473,424
	Total purchase price	$	18,543,389

     The estimated pro forma allocation of the purchase price is as follows:

IDS’ historical assets and liabilitites, net		$	4,887,000
Adjustment of IDS’ historical assets and liabilities to fair value			13,656,389
	Total purchase price	$	18,543,389

(b)	Represents cash paid to IDS stockholders.
(c)	Represents adjustment to reflect IDS’ inventory at fair value.
(d)	Represents adjustments of IDS’ property, plant and equipment to fair value. These assets will be depreciated over the estimated remaining useful life of the respective assets using the straight-line method. Estimated remaining useful lives are expected to be 3 to 20 years.
(e)	Represents the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed in connection with the acquisition.
(f)	Represents identifiable intangible assets acquired including customer relationships, existing technology, contracted backlog and a non-compete agreement. These assets will be amortized over the estimated remaining useful life of the respective assets using the straight-line method. Estimated remaining useful lives are expected to range from 8 months to 15 years.
(g)	Represents an accrual for White’s transaction costs incurred in connection with the IDS acquisition.
(h)	Represents the adjustment of deferred income tax liabilities associated with the allocation of the purchase price at a combined federal and state income tax rate of 39.5%.

28

(i) Represents the elimination of IDS’ stockholders’ equity and the issuance of White common stock in exchange for IDS’ common stock as well as the issuance of White stock options in exchange for IDS’ stock options.

29

WHITE ELECTRONIC DESIGNS CORPORATION
UNAUDITED PRO FORMA
COMBINED STATEMENT OF INCOME
(In thousands of dollars except share and per share data)

			Year ended
			September 28, 2002									Unaudited
									Pro Forma			Pro Forma
			White			IDS			Adjustments			Combined
Net sales			$	90,458		$	25,809		$	—		$	116,267
Cost of sales				61,558			21,420			(545	)(a)		82,433
Gross profit				28,900			4,389			545			33,834
Expenses:
	Selling, general and administrative			13,939			3,364			(137	)(a)		17,166
							—			25	(b)		25
	Product development			4,264			872			(30	)(a)		5,106
	Interest expense			147			480						627
	Interest income			(165	)		(16	)					(181	)
	Other income			—			(22	)					(22	)
	Amortization of intangible assets			1,587			—			1,233	(c)		2,820
	Total expenses			19,772			4,678			1,091			25,541
Income (loss) before income taxes				9,128			(289	)		(546	)		8,293
Provision (benefit) for income taxes				388			(92	)		(216	)(d)		80
Net income (loss)			$	8,740		$	(197	)	$	(330	)	$	8,213
Net income per common share — basic (e)			$	0.44								$	0.40
Net income per common share-diluted (e)			$	0.42								$	0.38
Weighted average number of common shares and equivalents:
		Basic		19,815,162						577,595			20,392,757
		Diluted		20,922,434						826,792			21,749,226

The accompanying notes are an integral part of these unaudited pro forma combined financial statements.

30

WHITE ELECTRONIC DESIGNS CORPORATION
UNAUDITED PRO FORMA
COMBINED STATEMENT OF INCOME
(In thousands of dollars except share and per share data)

			Three months ended
			December 28, 2002									Unaudited
									Pro Forma			Pro Forma
			White			IDS			Adjustments			Combined
Net sales			$	23,604		$	5,886		$	—		$	29,490
Cost of sales				15,171			4,919			(136	)(a)		19,954
Gross profit				8,433			967			136			9,536
Expenses:
	Selling, general and administrative			3,993			1,133			(34	)(a)
										6	(b)		5,098
	Product development			1,193			248			(8	)(a)		1,433
	Interest expense			—			97						97
	Interest income			(65	)		(4	)					(69	)
	Other income			—			(19	)					(19	)
	Amortization of intangible assets			21			—			158	(c)		179
	Total expenses			5,142			1,455			122			6,719
Income (loss) before income taxes				3,291			(488	)		14			2,817
Provision (benefit) for income taxes				1,061			(113	)		6	(d)		954
Net income (loss)			$	2,230		$	(375	)	$	8		$	1,863
Net income per common share — basic (e)			$	0.11								$	0.09
Net income per common share-diluted (e)			$	0.11								$	0.08
Weighted average number of common shares and equivalents:
		Basic		20,108,720						577,595			20,686,315
		Diluted		21,197,623						882,556			22,080,179

The accompanying notes are an integral part of these unaudited pro forma combined financial statements.

31

White Electronic Designs Corporation
Notes to Unaudited Pro Forma Combined Statement of Income

Pro Forma Adjustments to the Statement of Income

(a)	Represents a reduction in the depreciation of IDS property, plant and equipment based on the fair value adjustments of such assets, as well as the impact relating to revisions of the remaining useful lives of such assets.
(b)	Represents expense relating to amortization of unearned compensation attributable to unvested IDS’ options assumed at the date of the acquisition.
(c)	Represents the effect of adjustments increasing amortization of identifiable intangible assets based on the adjustment of such assets to fair value as discussed in the Notes to Unaudited Pro Forma Combined Balance Sheet.
(d)	Represents the aggregate pro forma income tax effect (39.5%) of the adjustments summarized at (a) through (c) above.
(e)	Pro forma net income per common share – basic has been adjusted to reflect the issuance of 577,595 shares of White common stock in exchange for the outstanding shares of IDS common stock. Pro forma net income per share — diluted is similar to pro forma net income per share – basic, except that the denominator has been increased to include the number of additional common shares that would have been outstanding if the stock options issued in exchange for IDS options and warrants had been exercised.

32

EXHIBIT INDEX

Exhibit No.	Description
2.1*	Agreement and Plan of Reorganization dated as of January 22, 2003 by and among White Electronic Designs Corporation, IDS Reorganization Corp. and Interface Data Systems, Inc.
4.1*	Indemnification and Release Agreement dated as of January 22, 2003 by and among White Electronic Designs Corporation and all of the outstanding shareholders of Interface Data Systems, Inc.
23.1	Consent of Nelson Lambson & Co., PLC
99.1*	Press Release dated January 23, 2003.

* Previously filed