<TABLE>
MEASUREMENT SPECIALTIES, INC.
June 30, 1995
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $284,048
Accounts receivable, trade, net of allowance for doubtful
accounts of $27,000 2,532,305
Inventories (Note 3) 2,437,673
Prepaid expenses and other current assets 197,144
---------
Total current assets 5,451,170
Property and equipment 1,859,082
Less accumulated depreciation and amortization 1,111,487
---------
747,595
Other assets:
Intangible assets, net of accumulated amortization of $14,000 57,681
Other assets 308,300
---------
365,981
---------
$6,564,746
(See notes to consolidated financial statements.)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C>
Current liabilities:
Accounts payable, trade $2,396,682
Severance benefit payable to former officer 194,833
Accrued expenses and other current liabilities 1,115,118
---------
Total current liabilities 3,706,633
Other liabilities 356,220
---------
Total liabilities 4,062,853
Contingencies (Notes 7 and 8)
Shareholders' equity (Note 4):
Serial preferred stock; 221,756 shares authorized and
issued; none outstanding
Common stock, no par; 20,000,000 shares authorized;
3,528,987 shares issued and outstanding 5,372,950
Additional paid-in capital 25,000
Deficit (2,921,453)
Currency translation and other adjustments 25,396
---------
Total shareholders' equity 2,501,893
---------
$6,564,746
(See notes to consolidated financial statements.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended
June 30,
1995 1994
<S> <C> <C>
Net sales $5,123,541 $3,325,645
Cost of goods sold (Note 5) 3,333,493 2,105,709
--------- ---------
Gross profit 1,790,048 1,219,936
Other expenses (income):
Selling, general and administrative 1,465,341 1,035,523
Provision for doubtful accounts 1,721
Research and development, net of revenues of
$26,000 for 1995 and $40,000 for 1994 315,888 168,376
Interest and other income (6,433) (5,601)
--------- ---------
1,776,517 1,198,298
--------- ---------
Net income $13,531 $21,638
--------- ---------
Earnings per common share (Note 6) $0.00 $0.01
(See notes to consolidated financial statements.)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the year ended March 31, 1995
and the three months ended June 30, 1995 (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Currency
Serial Additional translation
preferred Common paid-in and other
stock stock capital Deficit adjustments Total
--------- ---------- ---------- ------------ ----------- -----------
Balance, April 1, 1994 $37,599 $5,277,601 $25,000 ($3,268,840) $12,265 $2,083,625
Conversion of convertible preferred Series
C stock into 18,918 common shares (37,599) 37,599
5,500 common shares issued upon exercise
of warrants 22,000 22,000
Net income for the year ended March 31, 1995 333,856 333,856
Currency translation adjustment and
unrealized holding gains and losses on
available-for-sale marketable securities (7,369) (7,369)
---------- ---------- ------------ ----------- -----------
Balance, March 31, 1995 5,337,200 25,000 (2,934,984) 4,896 2,432,112
10,500 common shares issued upon exercise
of options and warrants 35,750 35,750
Net income for the three months ended
June 30, 1995 13,531 13,531
Currency translation adjustment and
unrealized holding gains and losses on
available-for-sale marketable securities 20,500 20,500
---------- ---------- ------------ ----------- -----------
Balance, June 30, 1995 $5,372,950 $25,000 ($2,921,453) $25,396 $2,501,893
(See notes to consolidated financial statements.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months ended June 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $13,531 $21,638
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 104,239 67,812
Provision for doubtful accounts 1,721
Other adjustments (198)
Net changes in operating assets and liabilities:
Accounts receivable, trade (975,563) (466,560)
Inventories (158,971) 2,495
Prepaid expenses and other current assets (52,569) 6,892
Other assets (122,635) (930)
Accounts payable, trade 993,259 (134,255)
Trade indebtedness to former related party 414,489
Accrued expenses and other current liabilities (180,000) 93,300
Other liabilities 58,517
----------- ---------
Net cash provided by (used in) operating activities (318,471) 4,683
Cash flows from investing activities:
Purchases of property and equipment (187,228) (116,636)
Proceeds from sale of property and equipment 3,553
----------- ---------
Net cash used in investing activities (183,675) (116,636)
Cash flows from financing activities:
Proceeds from exercise of options and warrants 35,750
-----------
Net cash provided by financing activities 35,750
Effect of exchange rate changes on cash and cash equivalents 12,635 (872)
Net change in cash and cash equivalents (453,761) (112,825)
Cash and cash equivalents, beginning of period 737,809 749,111
----------- ---------
Cash and cash equivalents, end of period $284,048 $636,286
(See notes to consolidated financial statements.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information about interim periods is unaudited)
1. Interim financial statements:
Basis of presentation:
These unaudited consolidated interim financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include
disclosures required for a fair presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles for complete financial statements.
Additionally, these interim financial statements are subject to adjustments that might result from
the independent audit of the Company's consolidated financial statements for the year ending March
31, 1996. In the opinion of management, all adjustments and disclosures necessary to make these
interim financial statements not misleading have been included. Nevertheless, reference is made to
the consolidated annual financial statements included in the Company's Annual Report on Form 10-KSB
for the year ended March 31, 1995. Operating results for the three months ended June 30, 1995 are
not necessarily indicative of the results that may be expected for the year ending March 31, 1996.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or market. Cost generally has
been estimated using adjusted standard cost.
Income taxes:
Income taxes are provided based on the estimated effective annual tax rate. The estimate gives
effect to net operating loss carryforwards and undistributed earnings of the Company's wholly owned
subsidiaries on which deferred income taxes are not provided.
2. Change in accounting principle:
On April 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." The Company's securities
holdings (included in prepaid expenses and other current assets), all of which are classified as
available-for-sale, are not material. However, unrealized gains and losses thereon are accumulated
as a separate component of shareholders' equity. The cumulative effect of this new accounting
principle on the consolidated financial statements is not material.
3. Inventories:
<S> <C>
Raw materials $ 1,038,787
Work-in-process 118,523
Finished goods 1,280,363
------------
$ 2,437,673
The Company provides for estimated losses on inventories which fail to meet its performance
requirements or which are no longer used as a result of improvements in manufacturing processes or
changes to product lines. The above table reflects write-downs of $165,000 at June 30, 1995.
4. Shareholders' equity:
The Company is authorized to issue 21,200,000 shares of capital stock of which 221,756 shares have
been designated as serial preferred stock and 20,000,000 shares have been designated as common
stock. No serial preferred stock was outstanding at June 30, 1995. The Board of Directors (the
"Board") has not designated 978,244 authorized shares.
On April 27, 1995 and June 19, 1995, the Board awarded certain employees and non-employee Directors
options to purchase an aggregate of 184,000 common shares at $4.00 to $4.875, exercisable under
various conditions through April 27, 2005.
5. Transactions with former related party:
Substantially all consumer products are assembled in China by a company whose principal shareholder
was a non-employee Director through October 27, 1994. Cost of goods sold for 1994 reflects
purchases from this company of approximately $1,547,000.
6. Per share information:
Primary per share information is computed based on the weighted average common and, if dilutive,
common equivalent shares, after deducting preferred dividend requirements from net income. Fully
diluted per share information is computed as above and assumes conversion of dilutive convertible
preferred shares, if any, after adding preferred dividend requirements back to net income. Fully
diluted per share information has not been presented because there would be no dilutive effect. The
weighted average numbers of shares used were 3,695,345 for 1995 and 3,511,155 for 1994.
7. Contingencies:
Consumer products generally are marketed under warranties to end users of up to ten years. The
Company provides for estimated product warranty obligations at the time of sale.
At June 30, 1995, the Company's Hong Kong subsidiary was contingently liable for $116,000 under
discounted letters of credit.
8. Subsequent event:
On July 17, 1995, the Company executed a $2 million revolving line of credit agreement extended by a
domestic bank. Demand borrowings bear interest at 1.125 percent above the bank's prime rate and are
collateralized by a senior security interest in substantially all assets. The agreement requires
the Company to maintain certain levels of working capital and net worth and limits the Company's
capital expenditures and advances to its subsidiaries. There are no commitment fees or compensating
balance requirements. However, the agreement requires payment of an annual facility fee equal to
0.5 percent of the maximum line of credit and, if the Company were to terminate the agreement before
its expiration on July 17, 1997, a declining prepayment premium based on average borrowings.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales of $5,124,000 for the three months ended June 30, 1995 increased by 54 percent compared
with net sales of $3,326,000 for the three months ended June 30, 1994. Operating results were near
break-even for each year, with net income of $14,000 for 1995 and $22,000 for the same period in
1994. Profitability for 1995 was affected by increased infrastructure and by changes in the product
mix, compared with 1994.
Sales gains approximating $1,798,000 primarily resulted from growth in sales of bath scales. The
Company's new glass scale was the major contributor to this increase. Sales of non-bath-scale
consumer products were somewhat lower, compared with 1994. These sales decreases were offset by
increased sales of industrial products.
Gross profit for 1995 exceeded that for 1994 by $570,000, as the result of the higher sales level.
However, the average gross profit margin as a percentage of net sales dipped to 34.9 percent for
1995 from 36.7 percent for 1994. The primary reason for this was the lower gross profit margin
realized on new glass scales sold to certain customers in Europe under private label. The Company
is making efforts to improve the gross profit margin on this product by reducing its cost and by
seeking to increase prices to certain customers.
Selling, general and administrative expenses increased for 1995, compared with 1994, by
approximately $430,000 but at a slower rate than net sales. As a result, selling, general and
administrative expenses comprised 28.6 percent of net sales for 1995, compared with 31.1 percent for
1994. The increase primarily resulted from higher payrolls associated with expanded staffing for
product development, the Company's new facility in China, accounting, materials control and quality
assurance. Additionally, increased payroll costs reflect continued inflation in Hong Kong of 9
percent annually. The Company also increased its use of outside consultants for various business
and technical applications for 1995, compared with 1994. Expenses of providing for warranty
obligations, sales commissions and freight cost increased for 1995, compared with 1994, as the
result of the growth in sales. Higher depreciation and amortization charges for 1995 resulted from
property and equipment for the Company's new offices and tooling additions primarily for new scale
products.
Research and development expenses, net of customer funding, increased by $148,000 for 1995, compared
with 1994. This rise reflects increased engineering support for the development and enhancement of
consumer and industrial products.
Income taxes were not provided for 1995 or 1994 because net operating loss carryforwards were
available to offset substantially all income tax liability.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended June 30, 1995, net cash flows from operating activities used $318,000,
reflecting the Company's break-even operating result, depreciation and amortization of $104,000 and
changes in working capital items. Accounts receivable, which increased by $976,000 as a result of
the sales growth for the three months ended June 30, 1995, mainly were financed by increased
accounts payable.
Net cash of $184,000 was used in 1995 investing activities, mainly for purchases of equipment and
tooling costs for the newer bath scale products and for leasehold improvements, furniture and office
equipment for the Company's new offices. Exercises of common stock purchase warrants and options
provided $36,000.
The Company has benefited from off-balance sheet financing provided by its principal manufacturing
supplier. This supplier purchases certain components used in the Company's products on its behalf,
reducing the Company's need to finance payments to raw materials vendors or furnish letters of
credit. The Company's dependence on this supplier for most of its manufacturing potentially
subjects the Company to the risk of interruption of its supply of finished goods for reasons beyond
its control. There are no agreements which would require the Company to make minimum payments to
the supplier, nor is the supplier obligated to maintain capacity available for the Company's
benefit.
On July 17, 1995, the Company executed a $2 million revolving line of credit agreement extended by a
domestic bank. Demand borrowings bear interest at 1.125 percent above the bank's prime rate and are
collateralized by a senior security interest in substantially all assets. The agreement requires
the Company to maintain certain levels of working capital and net worth and limits the Company's
capital expenditures and advances to its subsidiaries. There are no commitment fees or compensating
balance requirements. However, the agreement requires payment of an annual facility fee equal to
0.5 percent of the maximum line of credit and, if the Company were to terminate the agreement before
its expiration on July 17, 1997, a declining prepayment premium based on average borrowings.
Management believes that these resources will enable the Company to maintain adequate capacity for
existing business and planned growth and continue to pay its obligations timely, although no
assurance can be given.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are incorporated by reference to the Exhibits to Registration Statement on
Form 8-A, previously filed with the Securities and Exchange Commission on July 25, 1995:
(3)(i) Certificate of Incorporation and Amendments Thereto
(3)(ii) By-Laws
The following exhibits are included herein:
(11) Statement re computation of per share earnings
(27) Financial Data Schedule
During the three months ended June 30, 1995, the Company filed a report on Form 8-K dated April 1,
1995 disclosing the appointment of Joseph R. Mallon Jr. as President, Chief Executive Officer and
Chairman of the Board of Directors.
OTHER ITEMS ARE OMITTED BECAUSE THEY ARE NOT REQUIRED OR ARE NOT APPLICABLE.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MEASUREMENT SPECIALTIES, INC.
(Registrant)
Joseph R. Mallon Jr.
Date: August 14, 1995 President, Chief Executive Officer, and
Chairman of the Board of Directors
Mark A. Shornick
Date: August 14, 1995 Chief Financial Officer, Assistant Secretary,
and Treasurer
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EXHIBIT 11 -- STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
For the three months ended June 30,
1995 1994
<S> <C> <C>
Primary net income per common share:
Weighted average common shares outstanding 3,524,113 3,494,069
Net effect of dilutive common equivalent shares based on the
treasury stock method using average market price 171,232 17,086
----------- ---------
Total 3,695,345 3,511,155
Net income $13,531 $21,638
Preferred dividend requirements (759)
----------- ---------
Net income available to common shareholders $13,531 $20,879
----------- ---------
Primary net income per common share $0.00 $0.01
----------- ---------
Fully diluted net income per common share:
Weighted average common shares outstanding 3,524,113 3,494,069
Net effect of dilutive common equivalent shares based on the
treasury stock method using period-end market price, if
higher than average market price 171,232 17,086
Assumed conversion of convertible preferred Series C stock 18,918
----------- ---------
Total 3,695,345 3,530,073
Net income $13,531 $21,638
----------- ---------
Fully diluted net income per common share (a) $0.00 $0.01
(a) Improvements of earnings per common share computed on the fully diluted basis have not been
taken into account
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the small business issuer's unaudited consolidated interim
financial statements as of June 30, 1995 and for the three months
then ended and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000778734
<NAME> MEASUREMENT SPECIALTIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-1-1995
<PERIOD-END> JUN-30-1995
<CASH> 284
<SECURITIES> 0
<RECEIVABLES> 2559
<ALLOWANCES> (27)
<INVENTORY> 2438
<CURRENT-ASSETS> 5451
<PP&E> 1859
<DEPRECIATION> (1111)
<TOTAL-ASSETS> 6565
<CURRENT-LIABILITIES> 3707
<BONDS> 0
<COMMON> 5373
0
0
<OTHER-SE> 50
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</TABLE>
