U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
December 31, 1995 0-11353
(For the year ended) (Commission File No.)
CIRCUIT RESEARCH LABS, INC.
Arizona 86-0344671
State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization
Address of principal executive offices:
2522 West Geneva Drive Tempe, Arizona 85282
Registrant's Telephone No. (602) 438-0888
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 Par Value
This registrant has filed all reports required to be filed by Section 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months and has been
subject to such filing requirements for the past 90 days.
Disclosure of delinquent filers in response to Item 405 of Regulation SB is not
contained in this form, and no disclosure will 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.
The registrant's revenues for fiscal 1995 were $ 1,910,927.
The aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant on February 29, 1996, based on the closing
sales price for such stock in the Over-the-Counter market as reported by
NASDAQ on such date was $431,898.
At February 29, 1996, 597,682 shares of the registrant's common stock were
issued and outstanding.
The registrant's December 31, 1995 Annual Report to Stockholders is incorporated
by reference in Parts I, II and III.
Exhibit Index located on page Sixteen.
<PAGE>1
CIRCUIT RESEARCH LABS, INC.
INDEX TO ANNUAL REPORT ON FORM 10-KSB
<TABLE>
<CAPTION>
Page
<S> <S> <C>
PART I
Item 1 Description of Business 3
Item 2 Description of Property 9
Item 3 Legal Proceedings 9
Item 4 Submission of Matters to a
Vote of Security Holders 9
PART II
Item 5 Market for Common Equity and
Related Stockholder Matters 10
Item 6 Management's Discussion and
Analysis or Plan of Operations 10
Item 7 Financial Statements 10
Item 8 Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure 10
PART III
Item 9 Directors, Executive Officers, Promoters
and Control Persons:Compliance with
Section 16(a) of the Exchange Act 11
Item 10 Executive Compensation 13
Item 11 Security Ownership of Certain Beneficial
Owners and Management 15
Item 12 Certain Relationships and Related Transactions 16
Item 13 Exhibits and Reports on Form 8-K 16
</TABLE>
<PAGE>2
PART I
ITEM 1 - DESCRIPTION OF BUSINESS
General
This information is incorporated by reference to "Corporate Profile" and
"Selected Financial Information" on page 1 of the Company's 1995 Annual Report
to Stockholders (the "1995 Report"); "Corporate Overview" on page 3 of the 1995
Report; and Notes 1, 2 and 9 to the Company's Consolidated Financial Statements
on pages 17-21 of the 1995 Report. In addition, reference is made to "Patents
and Trademarks" on page 6, "Competition" on page 7, and "Dependence on Major
Customers" on page 8 of this Form 10-KSB.
Audio Processing
Audio processing equipment produced by the Company is used by radio and
television stations, entertainers and recording studios. The Company's
equipment "repackages" audio signals produced by microphones, recordings and
other audio sources. The equipment alters such signals to control audio
loudness (amplitude) and tonal balance (equalization) prior to transmission.
Audio processing shapes the audio sound wave when it is in electrical impulse
form before it is transmitted by a carrier wave.
Radio stations utilize audio processing equipment to control the electrical
amplitude limit of audio signals (modulation limit) as required by government
regulations and to control the quality of radio station signals received by
listeners. All radio stations utilize some type of audio processing to comply
with governmental and environmental regulations and to improve the apparent
quality of their signals. Approximately 10,800 AM and FM stations in the United
States use audio processing, as well as more than 19,000 radio stations in other
countries. Of the approximately 1,600 television stations in the United States,
about one half of them now broadcast in stereo, which requires audio processing.
Based on replacement equipment orders, the Company estimates that the average
useful life of audio processing equipment is less than five years. Other
recently developed products are appropriate for the audio processing needs of
the recording and performing industry.
The Principal Products
AUDIO PROCESSING PRODUCTS
CRL's audio processing equipment for radio broadcast can be separated into four
different series or product families, Digital Series, Modular Series, Amigo
Series and the Signature Series.
Digital Series
The newest addition to CRL's radio processors is the Digital Series. CRL digital
products are on the leading edge of technology with 100% digital architecture.
The principal products are:
DP-100 Digital Processor The DP-100 FM digital processor gives a
strong, high quality sound that attracts and holds the listening
audience. The radio audience will enjoy a clear, bright and appealing
sound that is easy to listen to for long periods of time. The DP-100
uses the latest digital technology to its fullest potential to produce
the most advanced digital processor on the market. The DP-100 includes
<PAGE>3
a true digital stereo multiplex generator, gated AGC (Audio Gain
Controller), 5 band compressor, multi-band limiter and graphic
equalizer. Also included is CRL's exclusive stereo sound enhancement
and improved digital version of CRL's patented dynafexR noise
reduction system.
SC-100 RDS/RBDS (Radio Data Systems/Radio Broadcast DataSystems)
allows a FM radio station to transmit additional streams of digital
information giving the station new promotional methods, new public
service opportunities and exciting new revenue possibilities. CRL's
SC-100 is a RDS/RBDS generator using the latest in DSP (Digital Signal
Processing) digital technology. The visual text message that the
SC-100 sends to the new "smart radios" can be used for call letter and
slogan recognition, traffic and weather reports, emergency alert
messages and display advertising. The SC-100 can also be used for
paging, billboard sign control, global positioning plus other
exciting applications.
Modular Series
In its Modular Series CRL designed the entire AM or FM processing chain as
building blocks. As a result, the station can start simpy, with just a limiter
and stereo generator, for instance, and then add a compressor later as its
processing needs change and its budget allows. The modular approach allows the
radio station to buy just what it needs. The principal Modular systems are:
FM1g A basic FM audio processing system consisting of CRL's automatic
gain controller (AGC) /limiter and digitally synthesized stereo
generator.
FM2g A complete system with an AGC, a limiting system and digitally
synthesized stereo generator.
FM2g A comprehensive FM system with an AGC, a limiter, a digitally
synthesized stereo generator and four band compressor.
AM2m An AGC and a peak limiter are the two components of this basic
mono AM system.
AM4m CRL's most popular AM system is a three unit system consisting of
an AGC, a modulation limiter and four band compressor.
AM2s CRL's basic stereo AM system includes a stereo AGC and a limiter.
AM4s Three components form CRL's enhanced stereo AM system. The system
includes a stereo AGC, four band compressor/equalizer and matrix
limiter.
Amigo Series
The next family of radio processing is the Amigo Series. The Amigo family of
processors is an integrated "one box" processing system designed for the small
to mid-size station in both international and domestic markets. The Amigo family
of processors is the best performing processor in its class. The principal Amigo
systems are:
Amigo The Amigo is a combination of a dual band AGC, a variable
pre-emphasis multi-band limiter and digitally synthesized stereo
generator. The single unit contains a complete FM audio processing
system. The Amigo is flexible and powerful, yet designed for easy set
up and use. The Amigo FM is one of CRL's most popular selling systems.
Amigo AM The Amigo AM is a complete matrix stereo audio processing
system. It includes a dual band AGC, patented 3 band matrix limiter,
single channel limiting and NRSC (National Radio Systems Committee)
output filtering.
<PAGE>4
BAP-2000 A complete stand alone audio processor for any mono FM. The
system consists of an advanced dual band audio AGC and limiter.
Internal options selected by the radio station allow the BAP-2000 to
be tailored to handle most any mono audio control job.
Signature Series
The Signature Series is a high performance audio processing system. The
principal products are:
Audio Signature The Audio Signature gives the power of digital
control with multi-band compression and limiting for high performance
power. The FM Audio Signature includes a stereo AGC and four band
compressor with a sophisticated set of processing controls to produce
the radio station's own unique and distinctive sound.
Modulation Signature The Modulation Signature features a digitally
modulated stereo generator and a fully adjustable limiting system.
Real Time Event Sequencer The Real Time Event Sequencer is a
programmable event timer that can control any combination of eight
outputs and store up to 255 events. Events can be programmed to the
second for each day of the week, for each different month of the year.
TELEVISION PRODUCTS
CRL has a complete line of quality audio processing for the television broadcast
industry. The principal products are:
TVS-3001 The TVS-3001 is a state-of-the-art stereo television
processing system that offers maximum control of the audio program
material. It includes a precision tri-band AGC with horizontal sync
rejection filter, exclusive CRL/CBS loudness control circuitry,
reversed phase audio corrector and audio asymmetry removal circuits.
TVS-3003 The TVS-3003 is a digitally synthesized MTS generator with
dbx encoding, advanced transfer function pre-emphasis limiter and a
proprietary stereo sound field enhancer.
TVS-3004 The TVS-3004 Professional Channel (PRO) generator is a
digitally synthesized subcarrier generator for non-public use with
integrated input limiter, data and telemetry inputs.
TVS-3005 The TVS-3005 is a digitally synthesized subcarrier generator
for a secondary audio program (SAP) channel, primarily designed for
public second language usage.
BAP-2000 The BAP-2000 is a complete audio processor with horizontal
sync rejection filter for mono television applications.
<PAGE>5
NOISE REDUCTION SYSTEMS
DX1 & DX2 For the professional audio and music industry, CRL manufactures
noise reduction systems incorporating an integrated circuit patented under
the dynafexR name. The dynafexR noise reduction system effectively reduces
tap hiss and other background noises from virtually any audio source. The
dynafex system is available in mono (DX1) and stereo (DX2). The dynafex
chip is also utilized in all CRL products where possible.
TEST AND MEASUREMENT
DAA-50 With the conversion of audio technology to digital, CRL recognized
the need for an inexpensive test and analysis tool and developed the
DAA-50. The DAA-50 receives and decodes audio data. A variety of
information about the signal can be determined through easily defined LED
status indicator lights. Compact and light weight the DAA-50 can be used
when and wherever it's needed.
TECHNOLOGY RESEARCH AND DEVELOPMENT
Tektronix AM70 CRL licensed certain digital audio testing technology to
Tektronix. Tektronix's Pathfinder AM70 Audio Analyzer/Generator is the
product of this combined effort. The AM70 is a handheld programmable audio
product that operates in three modes: generator (serves as source of
analog and digital signals), monitor (provides visual and audible output),
and modify (allows real-time editing).
New Products
CRL introduced its DP-100 Digital Processor for the international and domestic
FM market. Also new features and improvements were added to CRL's SC-100
RDS/RBDS generator for paging and billboard sign control. In addition CRL is
continuing to research and develop new products for release in the coming years.
Research and Development
This information is incorporated by reference to "Corporate Strategy" on page 3
of the 1995 Report and to that part of "Management's Discussion and Analysis" on
page 8 of the 1995 Report.
Patents and Trademarks
The Company holds eight United States patents including three acquired by
purchase in July 1985 and a British patent. These patents cover circuitry
components that appear basic to the design of the Company's current audio
processing equipment, AM Stereo and its dynafexR chip. During 1993, the Company
entered into a licensing agreement. This information is incorporated by
reference on page 6 of the 1994 Report.
"CRL Systems", "CRL Audio" and "dynafexR" are registered trade names utilized by
the Company.
<PAGE>6
Backlog and Backlog Comparisons
The backlog at December 31, 1995 was approximately $566,720 compared to $103,000
at December 31, 1994. The current backlog is expected to be filled within the
current fiscal year. Additional information is incorporated by reference to
"Selected Financial Information" on page 1 of the 1995 Report.
Effect of Existing or Probable Government Regulations
The Company's current and forthcoming products are not regulated by any
government. The Company's domestic customers are highly regulated by the
Federal Communications Commission ("FCC") and the Company's products perform
certain audio processing to control a radio station's signals within FCC limits.
The Company's stereo generators assist its domestic customers in maintaining
certain specifications set by the FCC.
Competition
Audio processing equipment for broadcast application is produced by several
small companies with less than 100 employees. Based on limited information
available from Dun & Bradstreet, the largest of the companies providing audio
processing equipment is Orban Associates, now a wholly-owned subsidiary of a US
corporation. The Company competes with Orban on the basis of uniqueness of
design, quality and price. Custom audio processing equipment is provided by
several very small competitors.
Marketing and Distribution
This information is incorporated by reference to "Management's Discussion and
Analysis" relative to results of operations on page 8 of the 1995 Report and to
Note 11 to the Company's Consolidated Financial Statements on page 22 of the
1995 Report. In addition, reference is made to "Foreign Operations and Export
Sales" on page 9 of this Form 10-KSB.
Warranties and Service
The Company provides a one-year limited warranty against defects in product,
materials and workmanship. Company employees perform all warranty and repair
service at the Company's facilities. Warranty claims have been minimal
throughout the history of the Company.
Delivery and Installation
The Company delivers its audio processing equipment for installation by the
user. For a fee, the Company will provide installation service or assistance.
Seasonality
Historically, sales of the Company's equipment have been seasonal in that demand
tends to increase before and after market rating periods for radio stations.
The market rating periods for various areas are now staggered, making such
seasonality less important. However, sales do increase after major trade shows,
such as the National Association of Broadcasters and National Society of
Broadcast Engineers.
<PAGE>7
Sales Terms
Company products are currently sold and shipped domestically with payment due 30
days from the invoice date. Products returned in 1995 were approximately 1.8%
of sales. International shipments are made against letters of credit.
Dependence on Major Customers
The current industry market is primarily comprised of individual and small group
ownership's of the broadcast properties. The Company, however, markets its
products through wholesale distributors and agents. Its largest wholesale
distributor, Harris Allied Broadcast Equipment, Richmond, Indiana, accounted for
17% of net sales for the year ended December 31, 1995 and 25% of net sales for
the year ended December 31, 1994 . Additional information is incorporated by
reference to Note 11 of the Company's Consolidated Financial Statements on page
22 of the 1995 Report.
Production and Assembly
The Company produces products at facilities in Tempe, Arizona. The Company
assembles certain components, particularly those utilizing proprietary
information, and subcontracts certain other subassemblies. Other components are
purchased from manufacturers and included in the Company's final assembly.
In a move to diversify, we purchased late in 1995, the assets, name and backlog
of a small subcontractor, Desert Assemblies. Desert Assemblies has been CRL's
contract printed circuit board assembler for several years with proven high
quality and ontime delivery. With the downsizing of many electronic
manufacturers in the Phoenix area, the potential market for subcontract work
expanded beyond the capacity of Desert Assemblies. CRL had excess manufacturing
capacity, including inventory handling. This purchase allows a consolidation of
the subcontract operation into the CRL facility making for a more efficient
operation for both CRL and Desert Assemblies. Desert Assemblies will be
operated as a division of CRL.
Sources and Availability of Raw Materials
The Company has experienced no problems in obtaining needed components and
materials. However, because it purchases components and raw material from
outside suppliers, the Company is dependent on those manufacturers and
suppliers. The Company has made informal arrangements with suppliers for
materials and components, and has second and third sources of supply for most
items. The Company has attempted to exclude materials, parts, and supplies from
its product designs for which availability is not reasonably assured.
Compliance with Environmental Laws
The Company believes that it is in compliance with all environmental laws and
regulations applicable to its operations.
Employees
The Company employs 25 persons, all of whom are full-time, including clerical,
sales, technical and manufacturing personnel, all in Tempe, Arizona. The
Company has not had, and does not expect to have difficulty in recruiting and
training its labor force.
<PAGE>8
Governmental Approval of Principal Products
No governmental approval is required for the production and sale of any of the
Company's products. Certain international shipments require export licenses.
Foreign Operations and Export Sales
The Company has no foreign operations. For the year ended December 31, 1995,
the Company's export sales totaled approximately $1,029,000 which was 55% of
total sales. All foreign sales were made through CRL International, Inc., the
Company's wholly-owned Foreign Sales Corporation, which was incorporated in Guam
in January 1991. The Company's 1995 export sales by region are as follows:
<TABLE>
<CAPTION>
Region Export Sales Percentage
<S> <C> <C>
Europe $ 233,100 23%
Pacific Rim 363,900 35
Latin and South America 121,800 12
Canada and Mexico 124,600 12
Other 185,600 18
Total $1,029,000 100%
</TABLE>
ITEM 2 - DESCRIPTION OF PROPERTY
In June 1983, the Company contracted for the purchase of land and construction
of a building at 2522 West Geneva Drive, Tempe, Arizona. In February 1984, the
Company moved its operations into this 5,300 square foot building on a 37,500
square foot parcel of land that currently houses the Company's executive,
administrative, sales and research facilities. This property is subject to a
mortgage collateralizing the property and is referred to in Note 8 to the
Company's Consolidated Financial Statements on page 20 of the 1995 Report.
In August 1990, the Company entered into a contract for the construction of an
addition to the existing building at 2522 West Geneva Drive. The project was
completed in January 1991 and was financed through cash reserves. The 5,000
square foot addition is being utilized by corporate manufacturing.
It is the Company's policy to not invest in real estate other than that real
estate necessary for the operations of the business.
ITEM 3 - LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of the fiscal year covered by this report.
<PAGE>9
PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
This information is incorporated by reference to "Stock Market Information" on
page 23 of the 1995 Report.
Over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
This information is incorporated by reference to "Management's Discussion and
Analysis" on pages 8 through 11 of the 1995 Report.
ITEM 7 - FINANCIAL STATEMENTS
This information is incorporated by reference to the Consolidated Financial
Statements on pages 12 through 22 of the 1995 Report.
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
<PAGE>10
PART III
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Ronald R. Jones 48 Chief Executive Officer,
President and a Director
Gary D. Clarkson 43 Secretary/Treasurer and a
Director
Erle M. Constable 77 Assistant Treasurer and a
Director
Carl E. Matthusen 52 Director
Gary M. Hamker 59 Director
Santo J. Adams 57 Vice President Manufacturing
Dennis L. Drew 50 Vice President Operations,
Assistant Secretary/Treasurer
</TABLE>
DIRECTORS
Ronald R. Jones has been Chief Executive Officer and a director of the Company
since its incorporation in 1978. Mr. Jones founded Circuit Research Labs in
1974. Since 1976, he has devoted his sole business efforts to the Company and
its affiliates. Prior to that time, Mr. Jones served as a consultant chief
engineer for numerous radio stations. He also taught courses in broadcast
engineering at Phoenix College and the Institute of Broadcast Arts from 1974 to
1976. Mr. Jones holds an associate degree in electronics engineering technology
from DeVry Institute of Technology, Phoenix, Arizona. He is a member of the
Institute of Electrical and Electronics Engineers and the Audio Engineering
Society.
Gary D. Clarkson has been Secretary and a director of the Company since its
incorporation and in July 1992 was elected Treasurer. Mr. Clarkson founded
Circuit Research Labs with Mr. Jones in 1974, and has devoted substantially all
of his business efforts to the Company's business since that time. He has been
a design engineer for Circuit Research Labs from 1974 to present. He holds an
associate degree in electronics engineering technology from DeVry Institute of
Technology, Phoenix, Arizona. Mr. Clarkson served as assistant and chief
engineer at many radio stations from 1971 until 1978.
Erle M. Constable has served as a director of the Company since 1983 and
Treasurer from January 1987 to November 1988 when he reduced his activity to
Assistant Treasurer. In 1983, Mr. Constable retired from Dynalectron
Corporation (now DYNCORP), then a publicly-held diversified technical services
company where he served as Vice President of Finance and Corporate Development.
He was employed by Dynalectron in 1973, and was in charge of an acquisition
program which merged 15 companies into Dynalectron. Prior to joining
Dynalectron, Mr. Constable worked for Fairchild Industries, Lockheed Aircraft
Corporation, Glenn L. Martin Company and Trans World Airlines. He holds
undergraduate and masters degrees in business administration received in 1939
and 1940 from the University of Nebraska. Periodically, Mr. Constable acts as a
consultant to the Company and receives an hourly consulting fee for his
services.
<PAGE>11
Carl E. Matthusen has served as a director of the Company since February 1988.
Mr. Matthusen began his career in the broadcast industry in 1963 serving in
various capacities at seven radio broadcast stations in Arizona, Wisconsin,
Minnesota and Virginia. Since 1978, he has been General Manager of KJZZ/Sun
Sounds operated by the Mesa Community College in Mesa, Arizona. In addition,
he is a guest lecturer at Mesa Community College, Phoenix College and Arizona
State University as well as a consultant to Arizona Western Community College
and the Arizona Commission on Post-secondary Education. Mr. Matthusen also
serves as Chairman of the Board of Directors of the National Public Radio
Network, where he has been a director since 1990.
Gary M. Hamker has been a member of the Board of Directors and a Special
Projects Consultant since July 1993. Mr. Hamker is retired from NCR/AT&T after
30 years in Marketing and Corporate Product Management. While with NCR/AT&T he
had many diversified assignments, including developing new domestic and
international computer product strategies and product/marketing plans for the
worldwide market. He was instrumental in development and sales strategies of
mini-computers and personal computer/network systems during their infancy.
Approval of research and development, new product specifications, monitoring R&D
budgets, developing and approving new product plans and planning profitable
products phase-out, were a few of his responsibilities. His expertise includes
working on system problems, on proposals to increase market penetration with
large multi-national accounts and on developing internal communications to
improve departmental cooperation and effectiveness. Periodically, Mr. Hamker
acts as a consultant to the Company and receives an hourly consulting fee for
his services.
OTHER EXECUTIVE OFFICERS
Santo J. Adams has been with the Company since 1984. In 1994, he was appointed
to the position of Vice President of Manufacturing. Mr. Adams has held
management positions with RCA, Motorola, GTE Sylvania and ITT in his 30 years of
manufacturing experience. He received his electronics training with the U.S.
Navy and Manufacturing Technology Certification from Erie County Community
College, Buffalo, New York. Mr. Adams is a Certified Time and Motion Analyst.
Dennis L. Drew joined the Company in 1993 as controller. In 1994, he was
appointed to the positions of Vice President of Operations, and Assistant
Sectretary/Treasurer. Before joining the Company, Mr. Drew spent three years as
a Project Manager for Computer Cable Specialists. Prior to Computer Cable
Specialists, Mr. Drew held several senior financial management positions with
companies in the computer leasing industry. These positions covered a wide
range of responsibilities including implementing computerized internal controls
to negotiating contracts and loan agreements. Mr. Drew has an MBA from Arizona
State University.
<PAGE>12
ITEM 10 - EXECUTIVE COMPENSATION
The Company did not pay any individual cash compensation in excess of $100,000
for services provided during the fiscal year. The following table sets forth
compensation paid or accrued to the chief executive officer during each of the
three years ended December 31, 1995.
Summary Compensation Table
<TABLE>
<CAPTION>
Name and Other
Principal Position Year Salary Bonus Compensation
<S> <C> <C> <S> <C>
Ronald R. Jones
President and
Chairman of the Board 1995 $ 72,696 -0- $ 2,152(1)
1994 72,696 -0- 2,270(1)
1993 72,804 -0- 2,391(1)
</TABLE>
(1) Fee paid by Company for the personal guarantee of the SBA loan.
The Company has no employment contracts currently in force. The Company has
agreements with all employees calling for nondisclosure of trade secrets.
The Company has group life, disability, and medical insurance plans, a 401(k)
pension plan, and an Employee Stock Purchase Plan. The 1994 Stock Option Plan
was approved by the Company's shareholders at the Company's annual meeting on
May 6, 1994.
Compensation of Directors
During the year ended December 31, 1995, directors received no compensation for
attending meetings.
Employee Pension Plan
The Company sponsors the CRL, INC. 401(k) PROFIT SHARING PLAN (the "Plan") for
the benefit of all employees meeting certain eligibility requirements. Under
the Plan, participants are permitted to make pre-tax contributions to their plan
accounts. The Company will match 50% of a participant's contributions up to a
maximum Company matching contribution of 3% of a participant's annual
compensation. Total annual contributions to a participant's account may not
exceed 25% of annual compensation. In addition, the Company, at its sole
discretion, may make an annual profit sharing contribution to the Plan out of
its current or accumulated profits. The annual contribution, if any, is
allocated to participants based upon each participant's annual compensation.
The Company has not made an annual contribution and currently has no plans to do
so. The Company did not make a contribution to the account of the individual
listed in the preceding cash compensation table for the year ended December 31,
1995.
Stock Purchase Plan
The Company has an employee stock purchase plan which is offered to
substantially all employees, including officers. Employees may purchase the
Company's common stock through payroll deductions not exceeding $50 per week and
shares are purchased at the market price, by a nonaffiliated dealer on the open
market. No shares were purchased in 1995.
<PAGE>13
Stock Options
The following is a brief summary of the Company's 1994 Stock Option Plan. The
closing bid price of the Company's common stock on the NASDAQ National Market
System on February 29, 1996 was $1.5 per share.
In May 1994, the Company's stockholders approved the Company's 1994 Stock
Option Plan, which set aside an aggregate of 60,000 shares of common stock for
which options may be granted to employees, officers, directors, and consultants.
Options granted and not exercised under the Company's previous plan were
canceled and new options were granted. The Company's Board of Directors
appoints the Stock Option Committee which is authorized to grant incentive stock
options and non qualified stock options under the Plan, select optionees,
determine the number of shares to be granted to each nominee, select the term of
the option (up to ten years), and determine the price to be paid on the
exercise of the option, provided that such price must not be less than 100% of
the market value of the shares subject to the option at the time it is granted.
Each option is exercisable from time to time subject to such restrictions on
exercisability as the Stock Option Committee may impose at the grant date. This
plan expires in April 2004.
As of February 29, 1996, options to purchase a total of 14,062 shares were
outstanding to 6 employees and directors.
The following table sets forth information as to all options to purchase Common
Stock under the Plan which were granted to certain officers and directors and to
all officers and directors as a group and which were outstanding as of February
29, 1996:
<TABLE>
<CAPTION>
Average
Name Capacities Shares Price
<S> <C> <C> <C>
Erle M. Constable Director and Assistant Treasurer 1,562(1) $1.25
Carl E. Matthusen Director 1,250(2) $1.25
Santo J. Adams Vice President Manufacturing 3,750(3) $1.25
All officers and directors
as a group (3 individuals) 6,562(4) $1.25
</TABLE>
(1) 1,562 shares granted May 6, 1994. All shares became exercisable on May
6, 1995 and expire May 6, 1997.
(2) 1,250 shares granted May 6, 1994. All shares became exercisable on May
6, 1995 and expire May 6, 1997.
(3) 3,750 shares granted June 1, 1994. All shares became exercisable on May
6, 1995 and expire May 6, 1997.
(4) An additional 7,500 shares may be acquired by employees exercising options
which expire May 6, 1997.
<PAGE>14
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
A. Security Ownership of Certain Beneficial Owners
As of February 29, 1996, the following persons were known by the Company to be
the beneficial owners of more than 5% of the Company's Common Stock:
<TABLE>
<CAPTION>
Amount and
Name and Address of Nature of Percent of
Title of Class Beneficial Owner Beneficial Owner Class(1)
<C> <C> <C> <C>
$.10 par value common Ronald R. Jones 187,500 31.4%
$.10 par value common Gary D. Clarkson 121,312 20.3%
</TABLE>
All of
Circuit Research Labs, Inc.
2522 West Geneva Drive
Tempe, Arizona 85282
(1) On the basis of 597,682 shares outstanding on February 29, 1996.
B. Security Ownership of Management
The stock ownership by directors and officers of the Company as of February 29,
1996 is set forth below. Each person named exercises sole voting power over all
shares beneficially owned.
<TABLE>
<CAPTION>
Amount and
Name and Nature of Percent
Address of Beneficial of Class
Title of Class Beneficial Owner Owner (5)
<C> <C> <C> <C>
$.10 par value common Ronald R. Jones 187,500 31.2%
$.10 par value common Gary D. Clarkson 121,312 20.2%
$.10 par value common Santo J. Adams 5,000(1) .8%
$.10 par value common Erle M. Constable 2,500(2) .4%
$.10 par value common Carl E. Matthusen 1,250(3) .2%
</TABLE>
All of
Circuit Research Labs, Inc.
2522 West Geneva Drive
Tempe, Arizona 85282
Officer and directors as a group (5 persons) 317,562(4) 52.8%
(1) 1,250 shares owned; 3,750 shares under exercisable options.
(2) 938 shares owned; 1,562 shares under exercisable options. Held as
community property with Eugenia Constable.
(3) No shares owned; 1,250 shares under exercisable options.
(4) Includes 2,812 shares which may be acquired by exercising stock options.
(5) Percentage is calculated on the basis that all director and officer shares
under stock options presently exercisable are deemed outstanding, a
total of 600,494 shares.
<PAGE>15
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference to Stockholder Notes Receivable on
page 19 of the 1995 Report and to Notes 6, 8 and 9 of the Consolidated Financial
Statements on pages 19-21 of the 1995 Report.
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
The following consolidated financial statements of Circuit Research Labs, Inc.
and subsidiaries are included in the annual report of the registrant to its
stockholders for the year ended December 31, 1995 and are incorporated by
reference in Item 7:
Consolidated balance sheets - December 31, 1995 and 1994.
Consolidated statements of operations - Years ended December 31,
1995 and 1994.
Consolidated statements of stockholders' equity - Years ended
December 31, 1995 and 1994.
Consolidated statements of cash flows - Years ended December 31,
1995 and 1994.
Notes to consolidated financial statements - Years ended December
31, 1995 and 1994.
Exhibit Index
(a) Exhibit No.
11 Schedule of computation of per share earnings - see page 18.
23 Consent of Deloitte & Touche LLP - see page 17
In addition to the exhibits previously described, the Company hereby
incorporates the following exhibits by reference pursuant to Rule
12B-32, each of which was filed as an exhibit to the Company's
Registration Statement on Form S-18 which was effective October
14, 1983, and subsequent filings in a timely manner.
3 Articles of Incorporation as Amended and Bylaws previously filed and
incorporated herein by reference
10 Stock Option Plan previously filed and incorporated herein by
reference 1994 Stock Option Plan previously filed and incorporated
herein by reference
13 1995 Annual Report to Security Holders incorporated by reference
Previous Annual Reports to Security Holders and Forms 10-Q were
previously filed in a timely manner and are incorporated herein by
reference.
21 Subsidiaries of the Registrant - CRL International, Inc. the Company's
wholly-owned Foreign Sales Corporation was incorporated in Guam in
January 1991.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of 1995.
<PAGE>16
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-82176 of Circuit Research Labs, Inc. on Form S-8 of our report dated March 1,
1996 incorporated by reference in this Annual Report on Form 10-KSB of Circuit
Research Labs, Inc. for the year ended December 31, 1995.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 26, 1996
<PAGE>17
CIRCUIT RESEARCH LABS, INC.
SCHEDULE OF COMPUTATION OF PER SHARE EARNINGS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 994
<S> <C> <C>
PRIMARY(1)
Average shares outstanding 597,682 597,682
Net effect of stock options is
antidilutive
TOTAL 597,682 597,682
NET LOSS $ (306,720) $(92,427)
LOSS PER COMMON SHARE $(.51) $(.15)
</TABLE>
(1) Fully diluted approximates primary.
<PAGE>18
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.
CIRCUIT RESEARCH LABS, INC.
Registrant
Date: March 29, 1996 By /s/Ronald R. Jones
Ronald R. Jones, Chief Executive
Officer and Chairman of the Board
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.
Date: March 29, 1996 By /s/Ronald R. Jones
Ronald R. Jones. Chief Executive
Officer and Director
(Principal Executive Officer)
Date: March 29, 1996 By /s/Gary D. Clarkson
Gary D, Clarkson, Secretary/
Treasurer and Director
Date: March 29, 1996 By /s/Dennis L. Drew
Dennis L. Drew, Controller. Vice
President of Operations
Date: March 29, 1996 By /s/Erle M. Constable
Erle M. Constable, Director
Date: March 29, 1996 By /s/Carl E. Matthusen,
Carl E. Matthusen, Director
Date: March 29, 1996 By /s/Gary M. Hamker
Gary M. Hamker, Director
<PAGE>19
CIRCUIT RESEARCH LABS, INC.
CORPORATE PROFILE
Circuit Research Labs, Inc. (the "Company") is an electronics company
developing, manufacturing and marketing high quality audio processing and
transmission encoding equipment for the radio, television and professional audio
markets world wide.
The Company's main product lines control the audio quality and range of radio
and television audio reception including generators allowing radio and
television stations to broadcast in stereo. Professional sound reinforcement
and digital audio test equipment is also produced having a wide range of
applications.
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1995 1994 1993 1992 1991
Operating Highlights
<S> <C> <C> <C> <C> <C>
Net sales $1,884,402 $2,074,716 $2,089,390 $2,098,422 $2,225,191
Other income 26,524 29,596 29,119 47,38 44,313
Total revenues 1,910,926 2,104,312 2,118,509 2,145,808 2,269,504
Net (loss) income (306,720) (92,427) (126,062) (92,340) 192,744
Net (loss) income per
common share(1) (.51) (.15) (.21) (.15) .32
Weighted average
number of common
shares outstanding(1) 597,682 597,682 597,682 597,685 603,600
Balance Sheet Highlights
Current assets $1,389,754 $1,466,831 $1,533,432 $1,666,304 $1,783,106
Current liabilities 321,974 133,355 154,272 145,007 153,280
Total assets 2,149,670 2,236,761 2,357,265 2,514,126 2,610,985
Long-term obligations 138,458 112,354 119,514 159,578 157,238
Total liabilities 460,432 245,709 273,786 304,585 310,518
Stockholders' equity 1,689,238 1,991,052 2,083,479 2,209,541 2,300,467
</TABLE>
No cash dividends have been declared.
<TABLE>
<CAPTION>
Key Statistics
<S> <C> <C> <C> <C> <C>
Current ratio 4.32 11.00 9.94 11.5 11.6
Book value per share(1) $2.83 $3.33 $3.49 $3.70 $3.81
Working capital $1,067,780 $1,333,476 $1,379,160 $1,521,297 $1,629,826
Order backlog $566,720 $103,000 $227,000 $312,000 $104,000
Employees 25 20 26 24 25
</TABLE>
(1)Adjusted for the one for eight reverse stock split effective September 1992.
<PAGE>1
CIRCUIT RESEARCH LABS, INC.
Dear Shareholders:
Our Company turned in a disappointing financial performance in 1995. This
occurred despite the downsizing in 1994 that appeared to be an answer to profit.
The new products we had planned to bring on line in 1995 were delayed but are
now moving into the market place. As this is written, we have already shipped a
large number of new units.
For many years CRL has depended on high quality engineered products based on
technology proven in the early 1980's. While downsizing we had to move into the
digital era which has strained our limited resources both manpower wise and
financially. We now have digital products proven by extensive field tests of
which we are extremely proud. These new products will provide a major marketing
tool not only for 1996 but for years into the future. Our products will place
us as a technological leader in not only the audio processing field but also in
the arena of paging and remote advertising sign operation.
In a move to diversify, we purchased late in 1995 the assets, name and backlog
of a small subcontractor, Desert Assemblies. Desert Assemblies has been CRL's
contract printed circuit board assembler for several years with proven high
quality and ontime delivery. With the downsizing of many electronic
manufacturers in the Phoenix area, the potential market for subcontract work
expanded beyond the capacity of Desert Assemblies. CRL had excess manufacturing
capacity, including inventory handling. This purchase allows a consolidation of
the subcontract operation into the CRL facility making for a more efficient
operation for both CRL and Desert Assemblies. Desert Assemblies will be
operated as a division of CRL
As in 1994, the international market provided a major portion of our sales with
over 54% of total sales revenue of $1,910,927 derived from sales outside the
U.S. I am optimistic that the domestic market will again provide a large
portion of sales in 1996 due to the new product lines.
With our new products definitely on line in 1996, our new contract division, our
financial strength and our core of faithful experienced personnel, our outlook
for a return to profitable operations, in my opinion, seems promising.
We again thank our shareholders who have maintained their investment during this
trying period.
Very truly yours,
Ronald R. Jones
Chairman and President
<PAGE>2
CIRCUIT RESEARCH LABS, INC.
Corporate Overview
Founded in 1974 as broadcast industry consultants, Circuit Research Labs built
upon its understanding of the broadcast industry's needs by expanding into
product development and manufacturing. In 1978, Circuit Research Labs, Inc.,
herein after referred to as the Company or CRL, was incorporated , and in late
1983 became registered as a public company on the NASDAQ stock exchange.
Since the first product, which was designed to improve the "coverage and
quality" of low powered AM radio stations, CRL has been committed to improving
broadcast quality. CRL's product lines have grown to include digital and analog
audio processing and encoding devices for mono or stereo AM or FM radio,
international short-wave and mono or stereo television, RDS/RBDS generators and
receivers and digital audio analyzers. These products are labeled "CRL Systems".
Corporate Strategy
CRL is dedicated to serving the audio processing needs of the broadcast and
professional audio markets with the highest quality products utilizing
state-of-the-art technology. To achieve this goal requires a high level of
research and development and CRL commits a large portion of its revenues to
developing new products and constantly improving existing product performances.
CRL also monitors new technology frontiers in our existing markets and others
for possible product improvements. CRL has confidence in its engineers'
expertise to develop new products on the leading edge of technology for the
broadcast industry.
In order to prevent dependency on one market, when appropriate, consultants,
licensing of technology and acquisition of product lines are also used to
diversify operations. CRL also encourages product engineering and development
for other complementary broadcast manufacturers. Examples include the
development of digital audio analyzers and the acquisition of Desert Assemblies.
CRL's production capabilities are constantly being improved and new marketing
concepts are being developed to provide increased market share. Trusting in our
dealers internationally and domestically for final product distribution, the CRL
marketing and sales staff works directly in sales efforts with potential
customers along with and for its dealers. Supported by an efficient customer
service department, CRL maintains a reputation for excellent business ethics and
selling standards.
The Broadcast Industry and CRL
CRL was a major participant in the National Radio Systems Committee (NRSC) which
developed standards for AM stations adopted by the FCC. During 1987, CRL
developed and produced equipment enabling AM stations to meet certain NRSC
standards and, as a result, enjoyed an increase in sales and continued to be a
market leader in AM processing.
CRL is a member of the National Association of Broadcasters (NAB). The NAB is
the world's largest, most extensive broadcaster's association, offering a wide
variety of services to radio and television stations, as well as organizations
<PAGE>3
that provide products and/or services to the broadcast industry. CRL's staff
contribute articles and technical papers to various NAB publications and
participate in technical conferences.
CRL is a member of the (Radio Data Systems) RDS Forum. The Forum promotes the
exchange of experience between broadcasters and manufacturers on RDS system
implementation and provides guidance to manufacturers on broadcasters'
operational needs. RDS is a system which enables a radio station to transmit
digital data without interfering with the current audio signal.
In 1985 CRL purchased all rights to the patented dynafexR chip. The dynafexR
noise reduction system effectively reduces tap hiss and other background noises
from virtually any audio source. Two products are being produced under the
dynafexR label and most CRL processors utilize the dynafexR chip.
In the last quarter of 1995 CRL acquired Desert Assemblies, a contract
electronic assemblies company. The acquisition of Desert Assemblies expands and
enhances CRL's production capabilities. CRL now possesses the ability to design,
build and test products for other companies (turnkey production).
CRL holds several patents on component designs for CRL products within the
broadcast industry.
The Principal Products
AUDIO PROCESSING PRODUCTS
CRL's audio processing equipment for radio broadcast can be separated into four
different series or product families, Digital Series, Modular Series, Amigo
Series and the Signature Series.
Digital Series
The newest addition to CRL's radio processors is the Digital Series. CRL digital
products are on the leading edge of technology with 100% digital architecture.
The principal products are:
DP-100 Digital Processor The DP-100 FM digital processor gives a
strong, high quality sound that attracts and holds the listening
audience. The radio audience will enjoy a clear, bright and appealing
sound that is easy to listen to for long periods of time. The DP-100
uses the latest digital technology to its fullest potential to produce
the most advanced digital processor on the market. The DP-100 includes
a true digital stereo multiplex generator, gated AGC (Audio Gain
Controller), 5 band compressor, multi-band limiter and graphic
equalizer. Also included is CRL's exclusive stereo sound enhancement
and improved digital version of CRL's patented dynafexR noise
reduction system.
SC-100 RDS/RBDS (Radio Data Systems/Radio Broadcast Data Systems)
allows a FM radio station to transmit additional streams of digital
information giving the station new promotional methods, new public
service opportunities and exciting new revenue possibilities. CRL's
SC-100 is a RDS/RBDS generator using the latest in DSP (Digital Signal
Processing) digital technology. The visual text message that the
SC-100 sends to the new "smart radios" can be used for call letter and
slogan recognition, traffic and weather reports, emergency alert
messages and display advertising. The SC-100 can also be used for
<PAGE>4
paging, billboard sign control, global positioning plus other
exciting applications.
Modular Series
In its Modular Series, CRL designed the entire AM or FM processing chain as
building blocks. As a result, the station can start simply, with just a limiter
and stereo generator, for instance, and then add a compressor later as its
processing needs change and its budget allows. The modular approach allows the
radio station to buy just what it needs. The principal Modular systems are:
FM1g A basic FM audio processing system consisting of CRL's automatic
gain controller (AGC) /limiter and digitally synthesized stereo
generator.
FM2g A complete system with an AGC, a limiting system and digitally
synthesized stereo generator.
FM2g+ A comprehensive FM system with an AGC, a limiter, a digitally
synthesized stereo generator and four band compressor.
AM2m An AGC and a peak limiter are the two components of this basic
mono AM system.
AM4m CRL's most popular AM system is a three unit system consisting of
an AGC, a modulation limiter and four band compressor.
AM2s CRL's basic stereo AM system includes a stereo AGC and a limiter.
AM4s Three components form CRL's enhanced stereo AM system. The system
includes a stereo AGC, four band compressor/equalizer and matrix
limiter.
Amigo Series
The next family of radio processing is the Amigo Series. The Amigo family of
processors is an integrated "one box" processing system designed for the small
to mid-size station in both international and domestic markets. The Amigo family
of processors is the best performing processor in its class. The principal Amigo
systems are:
Amigo The Amigo is a combination of a dual band AGC, a variable
pre-emphasis multi-band limiter and digitally synthesized stereo
generator. The single unit contains a complete FM audio processing
system. The Amigo is flexible and powerful, yet designed for easy set
up and use. The Amigo FM is one of CRL's most popular selling systems.
Amigo AM The Amigo AM is a complete matrix stereo audio processing
system. It includes a dual band AGC, patented 3 band matrix limiter,
single channel limiting and NRSC (National Radio Systems Committee)
output filtering.
BAP-2000 A complete stand alone audio processor for any mono FM. The
system consists of an advanced dual band audio AGC and limiter.
Internal options selected by the radio station allow the BAP-2000 to
be tailored to handle most any mono audio control job.
Signature Series
The Signature Series is a high performance audio processing system. The
principal products are:
Audio Signature The Audio Signature gives the power of digital
control with multi-band compression and limiting for high performance
<PAGE>5
power. The FM Audio Signature includes a stereo AGC and four band
compressor with a sophisticated set of processing controls to produce
the radio station's own unique and distinctive sound.
Modulation Signature The Modulation Signature features a digitally
modulated stereo generator and a fully adjustable limiting system.
Real Time Event Sequencer The Real Time Event Sequencer is a
programmable event timer that can control any combination of eight
outputs and store up to 255 events. Events can be programmed to the
second for each day of the week, for each different month of the year.
TELEVISION PRODUCTS
CRL has a complete line of quality audio processing for the television broadcast
industry. The principal products are:
TVS-3001 The TVS-3001 is a state-of-the-art stereo television
processing system that offers maximum control of the audio program
material. It includes a precision tri-band AGC with horizontal sync
rejection filter, exclusive CRL/CBS loudness control circuitry,
reversed phase audio corrector and audio asymmetry removal circuits.
TVS-3003 The TVS-3003 is a digitally synthesized MTS generator with
dbx encoding, advanced transfer function pre-emphasis limiter and a
proprietary stereo sound field enhancer.
TVS-3004 The TVS-3004 Professional Channel (PRO) generator is a
digitally synthesized subcarrier generator for non-public use with
integrated input limiter, data and telemetry inputs.
TVS-3005 The TVS-3005 is a digitally synthesized subcarrier generator
for a secondary audio program (SAP) channel, primarily designed for
public second language usage.
BAP-2000 The BAP-2000 is a complete audio processor with horizontal
sync rejection filter for mono television applications.
NOISE REDUCTION SYSTEMS
DX1 & DX2 For the professional audio and music industry, CRL manufactures
noise reduction systems incorporating an integrated circuit patented under
the dynafexR name. The dynafexR noise reduction system effectively reduces
tap hiss and other background noises from virtually any audio source. The
dynafex system is available in mono (DX1) and stereo (DX2). The dynafex
chip is also utilized in all CRL products where possible.
TEST AND MEASUREMENT
DAA-50 With the conversion of audio technology to digital, CRL recognized
the need for an inexpensive test and analysis tool and developed the
DAA-50. The DAA-50 receives and decodes audio data. A variety of
information about the signal can be determined through easily defined LED
status indicator lights. Compact and light weight the DAA-50 can be used
when and wherever it's needed.
<PAGE>6
TECHNOLOGY RESEARCH AND DEVELOPMENT
Tektronix AM70 CRL licensed certain digital audio testing technology to
Tektronix. Tektronix's Pathfinder AM70 Audio Analyzer/Generator is the
product of this combined effort. The AM70 is a handheld programmable audio
product that operates in three modes: generator (serves as source of analog
and digital signals), monitor (provides visual and audible output), and
modify (allows real-time editing).
New Products
CRL introduced its DP-100 Digital Processor for the international and domestic
FM market. Also new features and improvements were added to CRL's SC-100
RDS/RBDS generator for paging and billboard sign control. In addition CRL is
continuing to research and develop new products for release in the coming years.
<PAGE>7
CIRCUIT RESEARCH LABS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
YEARS ENDED DECEMBER 31, 1995 AND 1994
RESULTS OF OPERATIONS
The following tables set forth financial information for each of the four
quarters of the year ended December 31, 1995 and for the years ended December
31, 1995 and 1994.
<TABLE>
<CAPTION>
1995 Quarters Ended
March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
Net sales $537,185 $422,865 $488,577 $435,775
Other income 6,006 7,167 4,887 8,464
Total revenues $543,191 $430,032 $493,464 $444,239
Gross margin on net sales $358,627 $283,925 $306,042 $239,672
Gross margin percent 67% 67% 63% 55%
Net income (loss) $2,483 $(47,261) $(85,713) $(176,229)
Net income (loss) percent 0% (11)% (17)% (40)%
Income (Loss) per share $.00 $(.08) $(.14) $(.29)
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31
1995 1994
<S> <C> <C>
Net sales $1,884,402 $2,074,716
Other income 26,524 29,596
Total revenues $1,910,926 $2,104,312
Gross margin on net sales $1,188,266 $1,308,855
Gross margin percent 63% 63%
Net loss $(306,720) $( 92,427)
Net loss percent (16)% (4)%
Loss per share $(.51) $.(.15)
</TABLE>
Net sales in 1995 at $1,884,402 were lower compared to $2,074,716 for 1994.
The decrease was the result of lower international demand for the Company's
radio products. The percentage of international sales also decreased to 55% or
$1,028,842 compared to 66%, or $1,364,200 for 1994.
Cost of goods sold in 1995 was 37% which was comparable to 1994 at 37%.
<PAGE>8
Selling, general and administrative expense in 1995 of $1,056,000 was
comparable to the selling, general and administrative expense in 1994 of
$1,074,700.
Research and development expense for the period ended December 31, 1995 was
$429,600, an increase of $70,900 compared to the same period of 1994 of
$358,700. The increase was the result of contract engineering work on the new
products, the DP100 and the RDS/RBDS units.
Interest and other income of $26,500 for the period ended December 31, 1995 was
comparable for the same period of 1994 of $29,600.
FINANCIAL CONDITION
As of December 31, 1995, the Company had net working capital of $1,067,800 and
a current ratio of 4.32 to 1. CRL believes that its financial resources are
adequate to fund its operations in 1996 and will continue to finance operations
from its existing sources of cash. The increase in liabilities was due to the
purchase of Desert Assemblies.
Receivables at December 31, 1995 of $162,200 decreased $47,400 over the same
period in 1994 of $209,600 as a result of decreased sales in 1995 and a
receivable for royalties due on the licensing agreement with Tektronics in 1994.
Our credit policy remains the same as in previous years, with letters-of-credit
for international shipments and short-term extension of payment terms to
domestic dealers.
Inventory of $836,600 at December 31, 1995 increased $125,600 compared to
$711,000 of inventory at December 31, 1994. The increase is the result of raw
material purchases for the production of the new product, the DP100.
The Company's credit line of $200,000 was renewed on July 1, 1995 and is
effective through July 1, 1996. As of December 31, 1995, CRL had no borrowings
under the credit line.
CRL purchased late in 1995 the assets, name and backlog of a small
subcontractor, Desert Assemblies. Desert Assemblies has been CRL's contract
printed circuit board assembler for several years with proven high quality and
ontime delivery. With the downsizing of many electronic manufacturers in the
Phoenix area, the potential market for subcontract work expanded beyond the
capacity of Desert Assemblies. CRL had excess manufacturing capacity, including
inventory handling. This purchase allows a consolidation of the subcontract
operation into the CRL facility making for a more efficient operation for both
CRL and Desert Assemblies. Desert Assemblies will be operated as a division of
CRL.
There were no other major capital expenditures in 1995 and none are contemplated
for 1996.
<PAGE>8
CIRCUIT RESEARCH LABS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
YEARS ENDED DECEMBER 31, 1994 AND 1993
RESULTS OF OPERATIONS
The following tables set forth financial information for each of the four
quarters of the year ended December 31, 1994 and for the years ended December
31, 1994 and 1993.
<TABLE>
<CAPTION>
1994 Quarters Ended
March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
Net sales $454,563 $441,928 $555,560 $622,665
Other income 4,222 6,551 26,114 (7,291)
Total revenues $458,785 $448,479 $581,674 $615,374
Gross margin on net sales $296,424 $271,649 $352,981 $387,801
Gross margin percent 65% 61% 64% 59%
Net (loss) income $(85,679) $(73,410) $30,006 $36,656
Net (loss) income percent (19)% (17)% 5% 6%
(Loss) income per share $(.14) $(.12) $.05 $.06
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31
1994 1993
<S> <C> <C>
Net sales $2,074,716 $2,089,390
Other income 29,596 29,119
Total revenues $2,104,312 $2,118,509
Gross margin on net sales $1,308,855 $1,362,670
Gross margin percent 63% 65%
Net loss $(92,427) $(126,062)
Net loss percent (4)% (6)%
Loss per share $(.15) $.(.21)
</TABLE>
Net sales remained level in 1994 at $2,074,716 compared to $2,089,390 for 1993.
The percentage of international sales also remained level at 66%, or $1,364,200
for 1994 and 66%, or $1,382,300 for 1993.
Cost of goods sold in 1994 was 37% which was comparable to 1993 at 35%.
<PAGE>10
Selling, general and administrative expense in 1994 of $1,074,700 was a
decrease of $111,700 from the selling, general and administrative expense in
1993 of $1,186,400. This decrease was the result of cutbacks by management in
specific areas. A reduction in support personnel in accounting, administration,
and marketing resulted in a $69,000 decrease in salaries and benefits in 1994
compared to the same period in 1993. Travel and personnel attending trade shows
was also reduced for the year ended December 31, 1994 resulting in a decrease of
$27,000 compared to the same period in 1993. Advertising and promotion
expenses were lower in 1994 by $14,600 compared to 1993.
Research and development expense for the period ended December 31, 1994 was
$358,700 which was comparable to the same period of 1993 of $355,400.
Interest and other income of $29,600 for the period ended December 31, 1994 was
comparable for the same period of 1993 of $29,100.
FINANCIAL CONDITION
As of December 31, 1994, the Company had net working capital of $1,333,476 and
a current ratio of 11.00 to 1.
Receivables at December 31, 1994 of $209,600 increased $35,800 over the same
period in 1993 of $173,800 as a result of increased sales and a receivable for
royalties due on the licensing agreement with Tektronics. Our credit policy
remained the same as in previous years, with letters-of-credit for international
shipments and short-term extension of payment terms to domestic dealers.
Inventory of $711,000 at December 31, 1994 was comparable to $718,300 of
inventory at December 31, 1993.
The Company's credit line of $500,000 was renewed on July 1, 1994 and was
effective through July 1, 1995. As of December 31, 1994, CRL had no borrowings
under the credit line.
There were no major capital expenditures in 1994.
<PAGE>11
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Circuit Research Labs, Inc.
Tempe, Arizona
We have audited the accompanying consolidated balance sheets of Circuit Research
Labs, Inc. and subsidiaries (the "Company") as of December 31, 1995 and 1994,
and the related consolidated statements of operations, stockholders' equity and
cash flows for the years 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our 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 at December 31, 1995
and 1994, and the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 1, 1996
<PAGE>12
CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash $ 25,974 $ 122,217
Securities available-for-sale (Note 3) 297,667 321,712
Accounts receivable, less allowance for
doubtful accounts of $16,520 in 1995 and
$16,500 in 1994 (Note 7) 162,242 209,597
Income taxes receivable (Note 10) 13,000
Inventories (Note 4) 836,628 711,046
Deferred income taxes (Note 10) 15,000
Prepaid expenses and other 67,243 74,259
Total current assets 1,389,754 1,466,831
PROPERTY, PLANT AND EQUIPMENT - Net (Notes 5 and 8) 594,152 631,467
STOCKHOLDER NOTES RECEIVABLE (Note 6) 1,081 4,462
DEFERRED INCOME TAXES (Note 10) 15,000
OTHER ASSETS - Net 164,683 119,001
TOTAL $2,149,670 $2,236,761
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 91,401 $ 14,839
Accrued salaries and benefits 58,004 47,696
Accrued professional fees 27,405 37,216
Accrued customer deposits 99,818 8,582
Other accrued expenses and liabilities 26,210 17,853
Current portion of long-term debt (Notes 6 and 8) 19,136 7,169
Total current liabilities 321,974 133,355
LONG-TERM DEBT, Net of current portion (Notes 6 and 8)138,458 112,354
Total liabilities 460,432 245,709
STOCKHOLDERS' EQUITY (Note 9):
Preferred stock, $100 par value -
authorized, 500,000 shares, none issued
Common stock, $.10 par value - authorized,
20,000,000 shares, 597,682 shares issued and
outstanding 59,768 59,768
Additional paid-in capital 1,247,240 1,247,240
Retained earnings 377,324 684,044
Unrealized appreciation on securities
available-for-sale 4,906
Total stockholders' equity 1,689,238 1,991,052
TOTAL $2,149,670 $2,236,761
</TABLE>
See notes to consolidated financial statements.
<PAGE>13
CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
NET SALES (Note 11) $1,884,402 $2,074,716
COST OF GOODS SOLD 696,136 765,861
Gross profit 1,188,266 1,308,855
OPERATING EXPENSES (Note 12):
Selling, general and administrative 1,055,950 1,074,694
Research and development 429,630 358,729
Total operating expenses 1,485,580 1,433,423
LOSS FROM OPERATIONS (297,314) (124,568)
OTHER INCOME (EXPENSE):
Interest and other income (Note 6) 26,524 29,596
Interest expense (13,989)
(20,655)
Total other income (expense) 12,535 8,941
LOSS BEFORE INCOME TAX PROVISION (BENEFIT) (284,779) (115,627)
INCOME TAX PROVISION (BENEFIT) (Note 10):
Current (8,059) (10,200)
Deferred 30,000 (13,000)
Total income tax provision (benefit) 21,941 (23,200)
NET LOSS $ (306,720) $ (92,427)
LOSS PER COMMON SHARE $(.51) $(.15)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 597,682 597,682
</TABLE>
See notes to consolidated financial statements.
<PAGE>14
CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Unrealized
Additional Appreciation On
Common Paid-in Retained Securities
Stock Capital Earnings Available-for-Sale Total
BALANCE,
<S> <C> <C> <C> <C> <C>
JANUARY 1, 1994 $59,768 $1,247,240 $ 776,471 $2,083,479
Net loss (92,427) (92,427)
BALANCE,
DECEMBER 31, 1994 59,768 1,247,240 684,044 1,991,052
Unrealized appreciation
on securities available-
for-sale $4,906 4,906
Net loss (306,720) (306,720)
BALANCE,
DECEMBER 31, 1995 $59,768 $1,247,240 $ 377,324 $4,906 $1,689,238
</TABLE>
See notes to consolidated financial statements.
<PAGE>15
CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(306,720) $(92,427)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 77,867 90,580
Deferred income taxes 30,000 (13,000)
Changes in assets and liabilities:
Accounts receivable 47,355 (35,765)
Income taxes receivable 13,000 35,000
Inventories (125,582) 7,226
Prepaid expenses and other 7,016 13,364
Other assets (452) (19,494)
Accounts payable and accrued expenses 176,652 (21,768)
Net cash used in operating activities (80,864) (36,284)
INVESTING ACTIVITIES:
Capital expenditures (40,552) (15,637)
Purchase of securities (396,049) (146,712)
Proceeds from sale or maturity of securities 425,000 140,505
Payments received on stockholder notes 3,381 3,454
Net cash used in investing activities (8,220) (18,390)
FINANCING ACTIVITIES -
Principal payments on long-term debt (7,159) (6,309)
NET DECREASE IN CASH (96,243) (60,983)
CASH, BEGINNING OF YEAR 122,217 183,200
CASH, END OF YEAR $ 25,974 $ 122,217
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 13,989 $ 16,496
Debt issued to purchase Desert Assemblies $ 45,230
</TABLE>
See notes to consolidated financial statements.
<PAGE>16
CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements include
the accounts of Circuit Research Labs, Inc. and its wholly-owned
subsidiaries: CRL Systems, Inc., National Communications Research Center,
Inc. ("NCRC") and CRL International, Inc. (collectively, the "Company").
Significant intercompany accounts and transactions have been eliminated in
consolidation.
Securities available-for-sale are securities being held for indefinite
periods of time, including securities that management intends to use for
liquidity needs or that may be sold in response to changes in interest
rates, prepayments or other factors and are carried at estimated fair value,
with the net, after-tax unrealized gain or loss recorded as a separate
component of stockholders' equity with no effect on current results of
operations.. Realized gains and losses are included in other income and are
computed using specific identification.
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Property, plant and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
related assets ranging from 3 years to 31.5 years.
Other assets consist principally of cash surrender values on officers' life
insurance, patents which are stated at cost less amortization computed on
the straight-line method over the underlying asset's estimated useful life
and certain intangibles acquired from Desert Assemblies. See Note 2.
Accumulated amortization of patents was $35,831 and $34,416 at December 31,
1995 and 1994, respectively.
Income Taxes - Income tax expense is calculated under the liability method
as required under Statement of Financial Accounting Standards ("SFAS") No.
109. Under the liability method, deferred tax assets and liabilities are
determined based upon the differences between financial statement carrying
amounts and the tax bases of existing assets and liabilities and are
measured at the tax rates that will be in effect when these differences
reverse. These differences arise principally from the use of accelerated
depreciation methods for income tax purposes and capitalization of costs in
inventories for income tax purposes in excess of those capitalized for
financial reporting purposes.
Revenue is recognized on sales of products at the time of shipment.
New accounting pronouncements - In March 1995, the Financial Accounting
Standards Board issued SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". The Company
has not completed the process of evaluating the impact that will result from
adopting this Statement. However, management does not believe the adoption
will have a significant impact on the Company's financial position and
results of operations. SFAS No. 121 is required to be adopted in the first
quarter of 1996. In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123 "Accounting for Stock Based Compensation". The Company
has determined that it will not change to the fair value method and will
continue to use Accounting Principles Board Opinion No. 25 for measurement
<PAGE>17
and recognition of employee stock based compensation. SFAS No. 123 will
require additional disclosures in the 1996 financial statements.
Use of estimates - The preparation of financial statements in conformity
with generally accepted accounting principles necessarily 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 these estimates.
Financial instruments - SFAS No. 107 "Disclosures About Fair Value of
Financial Instruments" was adopted for the year ended December 31, 1995.
SFAS No. 107 requires disclosures of the estimated fair value of certain
financial instruments. The Company has estimated the fair value of its
financial instruments using available market data. However, considerable
judgment is required in interpreting market data to develop estimates of
fair value. The use of different market assumptions or methodologies may
have a material effect on the estimates of fair value. The carrying values
of cash, securities available-for-sale, receivables, accounts payable and
long-term debt approximate fair values due to the short-term maturities or
market rates of interest of these instruments.
Research and development costs are charged to expense as incurred.
Loss per common share is based on the weighted average number of shares
outstanding during each period, after giving effect for any dilutive stock
options, which are considered to be common stock equivalents. For the years
ended December 31, 1995 and 1994, options that would otherwise qualify as
common stock equivalents are excluded because their inclusion would be
antidilutive.
Reclassifications - Certain reclassifications were made to the 1994
financial statements to conform with the 1995 presentation.
2. DESCRIPTION OF BUSINESS
The Company develops, manufactures and markets audio processing and
transmission encoding equipment for the broadcast and professional
entertainment industries. On December 4, 1995, the Company purchased certain
assets of Desert Assemblies, a former contractor and sub-assembler for the
Company. The results of operations related to the acquired assets of Desert
Assemblies are included in the consolidated statement of operations of the
Company for the period from December 4, 1995 through December 31, 1995.
3. SECURITIES AVAILABLE-FOR-SALE
The Financial Accounting Standards Board issued SFAS No. 115 in May 1993
establishing certain new financial accounting and reporting standards for
investments in debt and equity securities. SFAS No. 115 requires the
classification of securities at acquisition into one of three categories:
held-to-maturity, available-for-sale or trading -- with different reporting
requirements for each classification. All of the Company's marketable
securities are classified as available-for-sale. The Company adopted SFAS
No. 115 as of January 1, 1994. The fair value of the Company's securities
are estimated based on quoted market prices for those or similar
instruments.
<PAGE>18
A summary of the Company's securities is as follows at December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Amortized cost:
Preferred stocks $ 50,000 $50,000
United States Treasury bonds 242,761 271,712
Total $292,761 $321,712
Estimated fair value:
Preferred stocks $ 54,500 $ 50,000
United States Treasury bonds 243,167 271,712
Total $297,667 $321,712
Gross unrealized holding gains $4,906 0
</TABLE>
At December 31, 1995, the United States Treasury bonds mature within one
year.
4. INVENTORIES
Inventories consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Raw materials and supplies $437,368 $354,298
Work in process 169,640 97,433
Finished goods 229,620 259,315
Total $836,628 $711,046
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land $ 130,869 $ 130,869
Building and improvements 497,004 497,004
Furniture and fixtures 383,523 379,435
Machinery and equipment 564,734 528,270
Total 1,576,130 1,535,578
Less accumulated depreciation 981,978 904,111
Property, plant and equipment - net $ 594,152 $ 631,467
</TABLE>
6. STOCKHOLDER NOTES RECEIVABLE
In February 1993, the Board of Directors of the Company elected to provide
compensation to two principal stockholders for their continuing guarantee of
the long-term notes payable for the Company's operating facility. Such
compensation is calculated at 3% of the outstanding balance of the long-term
notes payable at each fiscal year-end and is used to reduce the stockholder
notes receivable based upon the stockholders' proportionate shares of stock
owned. The notes receivable accrue interest at 10% per annum. Interest
income recognized on these notes for the years ended December 31, 1995 and
1994 was $171 and $292, respectively.
<PAGE>19
7. CREDIT ARRANGEMENTS
The Company maintains a $200,000 line of credit with a commercial bank.
Borrowings accrue interest at the bank's prime rate (8.5% at December 31,
1995) plus 1%. There were no outstanding borrowings under this line
of credit at December 31, 1995 and 1994. The line of credit commitment
expires July 1, 1996 and is collateralized by accounts receivable. The line
of credit commitment requires the maintenance of certain financial ratios
and limits advances to 75% of eligible receivables. At December 31, 1995,
the Company was in compliance with such requirements.
8. LONG-TERM DEBT
Long-term debt consists of the following at
December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
12.7% mortgage note collateralized by the
Company's operating facility requiring
monthly principal and interest payments of
$1,913 through April 2004 $112,364 $119,523
Noninterest-bearing note issued in connection
with acquisition of Desert Assemblies, requiring
annual payments of $11,000 through January 2000 55,000
Less unamortized discount based on imputed interest
rate of 10% (9,770)
Total 157,594 119,523
Less current portion (19,136) (7,169)
Long-term debt, net of current portion $138,458 $112,354
</TABLE>
Principal payments on long-term debt are scheduled as follows: 1996,
$19,136; 1997, $16,325; 1998, $18,626; 1999, $20,894; 2000, $23,478 and
$59,135, thereafter.
9. STOCKHOLDERS' EQUITY
In May 1994, the Company's stockholders approved the Company's 1994 Stock
Option Plan, which set aside an aggregate of 60,000 shares of common stock
for which options may be granted to employees, officers, directors, and
consultants. Options granted and not exercised under the Company's previous
plan were canceled and new options were granted. The Company's Board of
Directors appointed the Stock Option Committee which is authorized to grant
incentive stock options and non qualified stock options under the Plan,
select optionees, determine the number of shares to be granted to each
nominee, select the term of the option (up to ten years), and determine the
price to be paid on the exercise of the option, provided that such price
must not be less than 100% of the market value of the shares subject to the
option at the time it is granted. Each option is exercisable from time to
time subject to such restrictions on exercisability as the Stock Option
Committee may impose at the grant date. This plan expires in April 2004.
<PAGE>20
Information with respect to stock option activity follows:
<TABLE>
<CAPTION>
Option Price
Shares Per Share
<S> <C> <C>
Outstanding at January 1, 1994 14,062 $1.25
Cancelled (14,062) $1.25
Issued 14,062 $1.25
Outstanding at December 31, 1994 14,062 $1.25
Cancelled 0
Issued 0
Outstanding at December 31, 1995 14,062 $1.25
</TABLE>
The exercise date of all outstanding options is May 6, 1995, and the
expiration date is May 6, 1997. The aggregate exercise price of options
outstanding at December 31, 1995 was $17,578.
Preferred stock may be issued in amounts with such designations,
preferences, voting rights, privileges and such other restrictions and
qualifications as the Board of Directors may establish. No preferred stock
has been issued.
10.INCOME TAXES
The principal reasons for the difference between the income tax (benefit)
provision and the amounts computed by applying the statutory income tax rates
to loss before income tax (benefit) provision for the years ended December
31, are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Federal tax at statutory rates $(88,300) $(39,300)
State tax at statutory rates (25,600)
Dividends deduction (1,300) (2,600)
Officers' life insurance 3,400 3,700
Other (6,259) 2,000
Increase in valuation allowance 140,000 13,000
Total $ 21,941 $(23,200)
</TABLE>
At December 31, the deferred taxes represent the tax effect of temporary
differences related to:
<TABLE>
<CAPTION>
1995 1994
Current deferred taxes:
<S> <C> <C>
Inventory capitalization $ 25,900 $ 26,900
Prepaid expenses (26,900) (27,300)
Inventory obsolescence reserve 30,200 32,000
Allowance for doubtful accounts 6,600 6,600
Other 800
Deferred tax valuation allowance (35,800) (24,000)
Total $ 0 $ 15,000
<PAGE>21
Non-current deferred taxes:
Depreciation (22,000) (11,900)
State operating loss carryforward 65,300 39,500
Federal general business credit carryforward 85,000 85,000
Federal operating loss carryforward 96,200
Other 3,200 1,900
Deferred tax valuation allowance (227,700) (99,500)
Total $ 0 $ 15,000
</TABLE>
At December 31, 1995, a valuation allowance totaling $263,500 was recorded
which relates to, among other items, federal and state net operating losses
and federal general business credit carryforwards for which the utilization
is not reasonably assured.
For the year ended December 31, 1994 a benefit of $10,000 was recognized as
a result of carrying back the 1994 net operating loss. Net operating loss
carryforwards of approximately $310,000 and $725,000 which expire through
2010 are available for federal and state purposes respectively.
11.SALES TO MAJOR CUSTOMERS AND EXPORT SALES
Sales during the two years ended December 31, 1995 were conducted primarily
through wholesale distributors and dealers. One wholesale distributor
accounted for approximately 17% of net sales for the year ended December 31,
1995 and 25% of net sales for the year ended December 31,1994.
International sales in 1995 and 1994 totaled approximately $1,029,000 and
$1,364,200, respectively. Foreign sales are made through the Company's
wholly-owned foreign sales corporation. The Company requires that all sales
be paid in U.S. currency. Accordingly, there are no foreign currency gains
or losses for the years ended December 31, 1995 or 1994. The Company's
export sales by region are as follows:
Export Sales
<TABLE>
<CAPTION>
Region 1995 % 1994 %
<S> <C> <C> <C> <C>
Europe $ 233,100 23% $ 157,100 12%
Pacific Rim 363,900 35 620,900 45
Latin and South America 121,800 12 107,500 8
Canada and Mexico 124,600 12 140,400 10
Other 185,600 18 338,300 25
Total $1,029,000 100% $1,364,200 100%
</TABLE>
12.EMPLOYEE BENEFIT PLAN
As of January 1, 1991, the Company adopted a 401(k) profit sharing plan (the
"Plan") for the benefit of all employees who meet certain eligibility
requirements. The Company will match 50% of employee contributions up to
a maximum contribution by the Company of 3% of a participant's annual
compensation. Total annual contributions to a participant's account may
not exceed 25% of compensation. Company contributions made to the Plan
were $15,498 and $16,008 in 1995 and 1994, respectively.
<PAGE>22
CIRCUIT RESEARCH LABS, INC.
STOCK MARKET INFORMATION
The Company's common stock is publicly traded in the over-the-counter market
(NASDAQ symbol: CRLI) and commenced trading on November 4, 1983. As of
February 29, 1995, there were 597,682 shares of common stock issued and
outstanding, with an estimated 324 stockholders of record. The following table
sets forth the high and low closing bid prices as reported by the National
Association of Securities Dealers Automated Quotations (NASDAQ).
<TABLE>
<CAPTION>
1995 - Quarters Ended
March 31 June 30 September 30 December 31
Bid Quotation Range
<S> <C> <C> <C> <C>
High $1.75 $2.00 $1.68 $1.63
Low $1.38 $1.63 $1.13 $1.38
</TABLE>
<TABLE>
<CAPTION>
1994 - Quarters Ended
March 31 June 30 September 30 December 31
Bid Quotation Range
<S> <C> <C> <C> <C>
High $1.50 $1.50 $1.50 $1.63
Low $1.25 $1.25 $1.25 $1.38
</TABLE>
Over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.
DIVIDENDS
The Company has not paid any dividends on its common stock for the two most
recent fiscal years and intends to retain its earnings for use in the
development of its business. Therefore, the Company does not expect to pay cash
dividends at any time in the foreseeable future. No contractual restrictions or
limitations exist on the Company's present or future ability to pay dividends.
<PAGE>23
CIRCUIT RESEARCH LABS, INC.
CORPORATE DIRECTORY
OFFICERS AND DIRECTORS:
Ronald R. Jones
Chairman of the Board of Directors, President, Chief Executive Officer and
Chief Operating Officer
Gary D. Clarkson
Secretary/Treasurer and Director
Erle M. Constable
Assistant Treasurer and Director
Carl E. Matthusen
Director
General Manager KJZZ/Sun Sounds
Gary M. Hamker
Director
Santo J. Adams
Vice President Manufacturing
Dennis L. Drew
Vice President Operations and Assistant Secretary/Treasurer
CORPORATE INFORMATION
Corporate Headquarters:
Circuit Research Labs, Inc.
2522 West Geneva Drive
Tempe, Arizona 85282
Transfer Agent and Registrar: Independent Auditors:
Bank One Deloitte & Touche LLP
Trust Department 2901 North Central Avenue
Post Office Box 71 Suite 1200
Phoenix, Arizona 85001 Phoenix, Arizona 85012
Financial Public Relations Counsel: Corporate Counsel:
The Equity Group Inc. James S. Freedman, Esquire
919 Third Avenue 4455 East Camelback Rd., Suite E160
New York City, New York 10022 Phoenix, Arizona 85018
Additional Information:
A copy of Circuit Research Labs, Inc.'s current Form 10-KSB has been filed with
the Securities and Exchange Commission and is available on request without
charge by writing to the Company's corporate headquarters and marked:
Attention: Investor Relations.
<PAGE>26
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 25,974
<SECURITIES> 297,667
<RECEIVABLES> 178,762
<ALLOWANCES> 16,520
<INVENTORY> 836,628
<CURRENT-ASSETS> 1,389,754
<PP&E> 1,576,130
<DEPRECIATION> 981,978
<TOTAL-ASSETS> 2,149,670
<CURRENT-LIABILITIES> 321,974
<BONDS> 138,458
0
0
<COMMON> 59,768
<OTHER-SE> 1,629,470
<TOTAL-LIABILITY-AND-EQUITY> 2,149,670
<SALES> 1,884,402
<TOTAL-REVENUES> 1,910,926
<CGS> 696,136
<TOTAL-COSTS> 1,055,950
<OTHER-EXPENSES> 429,630
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,989
<INCOME-PRETAX> (284,779)
<INCOME-TAX> 21,941
<INCOME-CONTINUING> (306,720)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (306,720)
<EPS-PRIMARY> (.51)
<EPS-DILUTED> (.51)
</TABLE>
