<TABLE>
MEASUREMENT SPECIALTIES, INC.
80 Little Falls Rd.
Fairfield, NJ 07004
March 31, 1996
INDEX
PART I
Item 1.Description of Business
Item 2.Description of Property
Item 3.Legal Proceedings
Item 4.Submission of Matters to a Vote of Security Holders
PART II
Item 5.Market for Common Equity and Related Stockholder Matters
Item 6.Management's Discussion and Analysis or Plan of Operations
Item 7.Financial Statements
Item 8.Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure
PART III
Item 9.Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act
Item 10.Executive Compensation
Item 11.Security Ownership of Certain Beneficial Owners and Management
Item 12.Certain Relationships and Related Transactions
Item 13.Exhibits and Reports on Form 8-K
Other items are omitted because they are not required or are not applicable.
SIGNATURES
PART I
Item 1.Description of Business
GENERAL
Measurement Specialties, Inc. ("MSI") and its wholly owned subsidiaries, Measurement
Limited ("ML") and Jingliang Electronics (Shenzhen) Co. Ltd. ("JL"), (collectively
referred to as the "Company") design, develop, produce and sell low cost electronic
measurement devices for consumer and industrial markets. These devices measure and
display distance, motion, force, pressure or temperature. The Company's core
technology employs specialized electronic components known as micromechanical
transducer sensors, and application specific integrated circuits ("ASICs"). Sensors
transform the various measurable phenomena into analog electronic signals. ASICs
convert these analog signals to digital signals which are processed in proprietary
circuitry. Calibration is achieved using specialized software and test equipment
developed by the Company.
The Company was incorporated in 1981 as an engineering consulting firm and began
manufacturing products of its own design following the completion of an initial
public offering in 1986. The Company has sold electronic measurement products since
1987. By 1991, the Company introduced four principal consumer product lines:
digital bathroom scales, food and postal scales, digital tire pressure gauges and an
ultrasonic distance measuring device. Subsequently, the Company added industrial
pressure transducers and medical pressure measurement devices to its product lines.
There are certain factors that could cause results to materially differ from those
in the forward-looking statements contained in the following discussion. Among such
important factors are the Company's timely development and market acceptance of new
products, the risk associated with the shift in the Company's engineering effort
from consumer products to industrial products, the impact of competitive products
and pricing, the uncertainty of doing business in China, and such risks and
uncertainties as are detailed from time to time in the Company's SEC reports and
filings, including this 10-KSB for the year ended March 31, 1996.
The Company operates in two principal industry segments, consumer products and
industrial products. The Company's consumer products segment, comprising bath
scales, food scales, fish scales, tire pressure gauges, and distance estimators of
approximately 94 percent of its revenues, is marketed directly and through
manufacturers' representatives, to retail merchandisers and to manufacturers and
distributors of such products. Consumer bath scales comprises approximately 66
percent of the Company's revenues. The Company's industrial products, which are
sold, also directly and through manufacturers' representatives, to industrial
customers requiring controls for pneumatics, hydraulics, refrigeration, off-road,
and other applications, include industrial pressure transducers and Shockwriter.
PRODUCTS
The Company's digital scales feature sleek designs, high contrast liquid crystal
displays, accurate springless electronic weight measurement using strain gages,
automatic zero-set and shut-off and a factory installed lithium battery, guaranteed
to function properly for up to ten years. The Company has extended its line of
bathroom scales to include a number of models marketed under the Company's
"Thinner"(TM) brand, with additional models under development. During the latter
part of 1995, the Company released a new bath scale model, handsomely designed from
tempered glass using "Sensor Disc"(TM) technology. The glass bath scale has become
the Company's leading bath scale model. On December 27, 1993, the Company announced
a five year manufacturing and supply agreement with Health o meter Products, Inc.
("Health o meter"), which grants Health o meter exclusivity in certain markets
provided that, over the course of the five year term, Health o meter makes minimum
purchases aggregating $10,000,000.
The Company also has extended its line of consumer scales to include a food and diet
scale ("Portion Power"(TM)), principally marketed in Europe. Another model,
marketed in the United States, is used to measure postage ("Postal Power"(TM)).
These scales share features with the Company's bathroom scales and add a tare
capability. Additionally, the Company's postal scale has a built-in algorithm that
causes the scale to round up the displayed reading for proper postal rate
calculation.
The Company's digital tire gauges ("AccuTire"(TM)) feature accurate electronic
pressure measurement, liquid crystal displays and a factory installed lithium
battery. Because consumers need not replace batteries, the Company's tire gauges
may compete with non-electronic mechanical gauges. The Company has extended its
line of tire gauges to include several models.
The Company's digital distance estimator ("Accutape II"(TM)) uses an ultrasonic
sensor developed by Polaroid Corporation to measure distance of rooms and enclosures
up to fifty feet. The distance estimator features a liquid crystal display and a
factory installed lithium battery.
The Company produces a line of low cost, high output, stainless-steel-isolated
pressure transducers using its silicon strain gage sensors. These compact pressure
gages, which transmit measurements to remote monitoring systems by wire, are
designed for diverse applications in demanding environments, including pumps and
compressors, hydraulic and pneumatic systems, energy and water management, pressure
instrumentation and process control.
Shockwriter, a product which is a triaxial acceleration data monitor, records
information about shocks sustained by freight in transit. By monitoring and
recording information about acceleration on three axes, including duration of impact
and other details of dates and times, Shockwriter may be used to identify the
parties responsible for transport damage to valuable cargo. The Shockwriter
product, which is sold to, and marketed by AMP, Incorporated, a US manufacturer of
electronic components, to the cargo and insurance industries, has recently passed
qualification testing, and a production order has been placed by AMP for a small
manufacturing run.
During the past several years the Company maintained a modest medical product line.
Generally, sales from theses products have been decreasing and the Company has de-
emphasized marketing this line.
The Company actively seeks to develop additional innovative products using its core
technology for both consumer and industrial market segments. From time to time, the
Company will form strategic business alliances with other companies for the
development and marketing of new technologies and products, which at times may be
partially funded by the customer. Additionally, from time to time the Company
markets components to manufacturers for use in their scale manufacturing operations.
MANUFACTURING CAPACITY
Substantially all the Company's manufacturing capacity is located in the People's
Republic of China (the "PRC"). Consumer products are manufactured by Hong Kong
suppliers with principal manufacturing operations in the PRC and industrial products
are manufactured by JL. Members of ML's and JL's staffs train production personnel
at suppliers and provide engineering and purchasing support and oversee quality
assurance. Additionally, the various strain gage sensor processing operations
required for the Company's scales are undertaken at MSI, ML and JL.
The Company recently established an industrial pressure sensor technology center in
Newport News, Virginia, expanding the Company's initiative into the industrial
sensor market. The center's purpose is for the design of high performance, high
quality, low-cost, OEM, pressure transducers and the manufacturing cells used in
their production. This technology center will produce prototypes of new products
and short production runs of semi-custom pressure transducers, plus provide a pilot
plant environment during the product's development phase prior to transferring their
manufacturing to JL.
BUSINESS AND CURRENCY RISKS
A former Director of the Company is a principal shareholder of River Display, Ltd.
("RDL"), the Company's primary supplier. There are no agreements which would
require the Company to make minimum payments to RDL, nor is RDL obligated to
maintain capacity available for the Company's benefit. The Company believes,
however, that it accounts for a significant portion of RDL's revenues. The
Company's dependence on external and foreign suppliers for most of its production
presents risks of interruption for reasons beyond its control.
Although the PRC is one of the world's fastest growing economies, its potential
economic, political and labor developments (including potential political
instability, possible nationalization policies, high inflation, currency fluctuation
and uncertain legal system) provide a number of uncertainties and risks. While the
PRC government now appears committed to an economic system hospitable to free
enterprise, adoption of economic, legal or trading policies harmful to private
industry or high inflation without offsetting devaluation's could significantly
disrupt the Company's manufacturing capabilities and the Company's operations and
financial condition could be materially adversely affected. The territory of Hong
Kong will revert to the PRC pursuant to a long-term land lease which expires after
June 30, 1997. Management cannot predict what impact the expiration of this lease
might have on the Company's operations. However, the Company has benefited from the
PRC's encouragement of foreign investment and has not been adversely affected by
political events. The Company also has benefited from the PRC's "most favored
nation" tariff status. Accordingly, changes in tariffs might have an adverse effect
on the cost of goods imported.
Generally, the Company's revenues are priced in United States dollars and its costs
and expenses are priced in United States dollars, Hong Kong dollars and Chinese
renminbi. Accordingly, the Company is potentially subject to the risks of foreign
currency transaction and translation losses which might result from fluctuations in
the values of the Hong Kong dollar and the renminbi. To reduce the Company's
exposure to foreign currency transaction gains or losses resulting from currency
fluctuations, the Company may, though to date it has not, purchase currency exchange
forward contracts or currency options. The Company has not employed derivatives or
otherwise hedged against these accounting risks because, since October 17, 1983, the
Hong Kong government has tied the value of the Hong Kong dollar to that of the
United States dollar. Accordingly, fluctuations in the value of the Hong Kong
dollar have not been significant. However, there can be no assurance that the value
of the Hong Kong dollar will continue to be tied to that of the United States dollar
or that foreign customers and vendors will continue to do business in these
currencies. The Company is unable to determine how sales may have been affected by
the performance of the United States dollar compared to that of foreign customers'
currencies. The Company has not employed derivatives or otherwise hedged against
these economic risks because foreign customers' orders generally do not result in
significant long-term purchase commitments.
Most raw materials are available from several domestic and Asian vendors. However,
certain specialized electronic components (the sensors used in pressure transducers
and the ASICs) now are obtained from a limited number of sources. ASICs are
fabricated to the Company's order by one domestic supplier. While alternative ASIC
fabricators are available, the Company has no current plans to develop a second
source for the ASICs. The ultrasonic sensor used in the Company's distance
estimators is obtained solely from Polaroid Corporation, which uses the ultrasonic
sensor in its cameras.
PATENTS
The Company is the holder or assignee of issued and pending patents for certain
applications of its core technology in the measurement of force, pressure and
temperature. Additionally, pursuant to an agreement with the fabricator of its
ASICs, the Company holds an irrevocable license to the fabricator's related
proprietary software under the Semiconductor Chip Protection Act of 1984. The
Company also has obtained a license to make, use and sell its tire gauges from the
holder of certain patents related to electronic tire pressure measurement. However,
the Company has not obtained patents for all its innovations, nor does it plan to do
so. Additionally, at times the Company engages engineering consultants. While the
Company generally enters into confidentiality agreements with its consultants, there
can be no assurance that proprietary information will not pass to competitors.
Accordingly, assurance cannot be given that competitors might not introduce
competitive products nor that holders of related patents might not assert claims of
infringement.
CUSTOMERS AND MARKETING
Since 1987, the Company has derived substantially all its revenues from sales of
consumer products marketed in North America, Europe and Asia. United States sales,
produced by the Company's personnel and sales representatives, mainly are derived
from retail and catalog merchandisers. Sales to United States customers, to whom 30
to 90 day payment terms generally are extended, comprised 45 percent of consolidated
net sales for 1996 and 39 percent for 1995. Foreign sales, produced by the
Company's personnel, principally are derived from distributors in Europe, Asia and
Canada. The Company generally requires foreign customers to furnish letters of
credit which are discounted, with recourse. Sales to Korona Haushaltswaren GmbH
("Korona"), a German distributor of houseware products, comprised 32 percent of
consolidated net sales for 1996 and 30 percent for 1995. No other customers
accounted for 10 percent or more of annual consolidated net sales for either year.
Two customers accounted for 10 percent or more of consolidated accounts receivable
at March 31, 1996. Service Merchandise Company, Inc., a United States chain of
retail catalog stores offering general merchandise, accounted for 20 percent of
accounts receivable at that date. Korona accounted for 37 percent of accounts
receivable at that date.
Orders for consumer products are characterized by short lead times and certain
seasonal effects on volume. Additionally, sales generally decline in February, when
ML, JL and suppliers suspend operations in Hong Kong and the PRC for the Chinese
Lunar New Year holiday. Accordingly, the Company's backlog and revenues ordinarily
fluctuate. Backlog approximated $3,300,000 at March 31, 1996 and $5,700,000 at
March 31, 1995. Backlog consists only of orders believed to be firm and having
designated performance dates. Substantially all the backlog at March 31, 1996 is
expected to be filled within the fiscal year ending March 31, 1997, although no
assurance can be given. The dollar amount of backlog orders is not necessarily
indicative of the results that may be expected for an ensuing fiscal period.
The Company is obligated to repair or replace defective products and, accordingly,
provides for estimated product warranty obligations. Consumer products generally
are marketed under warranties to end users of up to ten years.
The markets for the Company's products are characterized by frequent introductions
of competitive products, particularly for consumer products where competitors vie
for retail customer recognition. The Company is unable to estimate the number of
companies marketing electronic measuring devices for industrial applications. Some
competitors have been marketing accepted lines of electronic measuring devices for a
longer period of time than the Company and possess greater resources than the
Company. The Company estimates that it holds approximately 5 percent of the market
share for its main product which is bath scales. Generally, the Company's
competitive advantage is characterized by the combination of its sleek product
designs, features, and low cost. However, no assurance can be given that the
Company will continue to enjoy these advantages over its competitors.
RESEARCH AND DEVELOPMENT
Research and development expenses, net of customer funding aggregated $1,237,000 for
1996 and $833,000 for 1995. Pursuant to Statement of Financial Accounting Standards
No. 2, these costs - mainly for "development" rather than "research" as these terms
are defined therein - were charged to expense when incurred. Increased engineering
resources are required for product design, testing and improvement especially during
the early stages of a product's commercial production. This is particularly typical
for the industrial pressure transducers. Additionally, the Company continually
develops innovative product design modifications and new technologies, intended to
improve their performance, appeal, and to further reduce products' unit costs. A
more recent and significant innovation was the development of the "Sensor Disc"(TM)
technology used in the Company's glass bath scale. Receipts of funding from
customer-sponsored development projects were $95,000 for 1996 and $82,000 for 1995.
Pursuant to the Company's accounting policies, recognition of these funds from
customer-sponsored development projects generally is deferred until customers'
acceptance of performance milestones. Provisions for estimated losses on customer-
sponsored projects in progress are made when determined.
EMPLOYEES
At March 31, 1996, the Company had 215 employees compared to 95 at March 31, 1995.
MSI employed 27 persons (1996), compared to 23 (1995), including the Company's four
executive officers. ML had 39 employees (1996), compared to 61 (1995), and JL had
149 (1996), compared to 11 (1995). During 1996, the Company moved all its
manufacturing support from ML in Hong Kong to JL in the PRC where employee
compensation is significantly lower. Employees are not represented by collective
bargaining.
Item 2.Description of Property
MSI's headquarters, United States sales office and distribution warehouse and
certain design engineering facilities are located in a 14,000 square foot facility
in Fairfield, New Jersey, under an operating lease expiring on June 30, 1999.
Additional design engineering, related to the Company's industrial pressure sensor
products, is conducted in a 2,000 square foot facility in Newport News, Virginia
under an operating lease expiring on June 30, 1999.
JL occupies a 15,000 square foot facility in Shenzhen, PRC under an operating lease
expiring on March 1, 2000. This location contains the Company's PRC facilities for
production engineering, quality assurance and certain manufacturing operations.
ML occupies a 7,000 square foot facility in Kwai Chung, in Hong Kong's New
Territories under an operating lease expiring on April 30, 1998. This location
contains the Company's Hong Kong sales office and facilities for certain
manufacturing operations and support activities. Generally, land in Hong Kong is
held by the, pursuant to a long-term land lease expiring after June 30, 1997. The
land underlying ML's lease, now held by the United Kingdom Crown, will revert to the
PRC by June 30, 2047 pursuant to the Sino-British Joint Declaration of 1984.
These premises are suitable and adequate for the Company's present operations.
Item 3.Legal Proceedings
None
Item 4.Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fiscal quarter
ended March 31, 1996.
PART II
Item 5.Market for Common Equity and Related Stockholder Matters
The Company's common stock, no par value, is traded on the American Stock Exchange
(ticker symbol MSS). At May 31, 1996, the Company's transfer agent reported that
there were 112 record holders of common shares, excluding beneficial owners whose
shares are held in the names of various dealers and clearing agencies. High and low
sales prices for the last two fiscal years were:
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Fiscal Quarter Ended High Low
June 30, 1994 $ 3.88 $ 1.88
September 30, 1994 3.25 2.13
December 31, 1994 3.75 2.50
March 31, 1995 4.88 3.00
June 30, 1995 6.00 3.75
September 30, 1995 5.88 4.38
December 31, 1995 7.00 4.00
March 31, 1996 5.00 3.75
The Company has not declared cash dividends on its common equity. Management
expects that earnings which may be generated from the Company's near-term operations
will be reinvested and that, accordingly, dividends will not be paid to common
shareholders in the near future. Additionally, the payment of dividends is subject
to the consent of a bank with which the Company has a revolving credit agreement.
Item 6. (b) Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
During 1996 the Company continued to achieve record sales and improve its operating
results. Net sales for 1996 were $23,060,000 compared to $17,039,000 for 1995, a
net increase of $6,021,000, or 35 percent. Net income of $987,000 increased by
$653,000 from the prior year's net income results of $334,000. Sales of bath scales
continues to set the pace of the Company's sales growth. During the latter part of
1995, the Company introduced a new, state-of-the-art electronic bath scale,
handsomely designed from tempered glass.
Sales of the Company's bath scales were approximately $15,289,000 in 1996 compared
to $9,420,000 in 1995, an increase of $5,869,000, or 62 percent reflecting the
significant impact the glass scale's performance had on the Company's sales growth.
The Company's single largest customer is Korona Haushaltswaren GmbH, a German
distributor of houseware products and is the largest customer of all bath scale
products.
The Company's industrial pressure transducers, increased by approximately $353,000
to $551,000 in 1996 as early marketing results encouraged the launch of a technical
development center in Newport News, Virginia. The purpose of the technical center
is to enhance product development and build new technologies in a pilot
manufacturing environment prior to manufacturing it at JL.
Gross profit of $8,362,000 for 1996 compared to $6,264,000 increased by
approximately $2,098,000, or 34 percent. The percent of gross margin from year to
year compared to 36.3 percent for 1996 to 36.8 percent for 1995. Gross profit
margins can fluctuate by the changes in product, customer, and geographic sales mix.
During 1996, 45 percent of the Company's sales were derived from customers in the
United States and 36 percent from customers in Germany compared to 39 percent and 33
percent for 1995, respectively. Sales to customers within the United States tend to
support higher profit margins due to differences in distribution channels employed.
The Company has also benefited from manufacturing cost reduction efforts and
customer price increases imposed during the latter part of the 1996.
Selling, general and administrative expenses for 1996 of $6,226,000 increased by
approximately $1,315,000 from $4,911,000 for 1995. These expenses have grown at a
slower rate compared to sales the sales growth and for 1996 selling, general and
administrative expenses comprised 27 percent of sales compared to 29 percent for
1995. The largest increases are attributed to increases in variable expenses
related to higher revenue levels and increases in marketing and distribution costs
such as sales commissions, depreciation and staff expansions. Selling, general and
administrative expenses are net of the effects of two changes in accounting
estimates. Product warranty obligations were adjusted to reflect more recent
warranty claims experience, which decreased 1996 warranty expense by $97,000.
Additionally, ML revised its postemployment benefits to give effect to its employee
turnover experience, which decreased 1996 postemployment benefits costs by $47,000.
During 1996, a severance payment of approximately $195,000 was paid to a former
officer of the Company under an employment severance agreement. Accruals for this
payment were provided in the preceding year.
During 1996, JL commenced operations and now manufactures the Company's industrial
pressure transducers. Further, JL plans to manufacture certain key components for
the glass bath scale model. In connection with this expansion the Company purchased
new product tooling, production and testing equipment resulting in higher
depreciation costs. By establishing JL, the Company has the opportunity to reduce
costs at ML whereas in Hong Kong employee compensation is comparatively much higher
than in the PRC. Additionally, the Company increased its use of consultants during
1996 for both business and technical applications.
The Company established a provision for doubtful accounts of $18,000 for 1996. To
limit credit exposure, the Company actively evaluates the financial condition and
trade payment experience of domestic customers, who generally are granted payment
terms of up to 90 days. Additionally, the Company generally requires foreign
customers to furnish letters of credit and periodically evaluates the credit
standing of these customers' financial institutions.
Research and development expenses, net of customer funding, increased by
approximately $404,000 to $1,237,000 in 1996 compared to $833,000 for 1995.
Increased engineering resources were required for developing innovative product
design modifications and new technologies intended to improve their performance,
appeal, and to further reduce products' unit costs. A more recent and significant
innovation was the development of the "Sensor Disc"(TM) technology used in the
Company's glass bath scale. Receipts for funding customer-sponsored development
projects were $95,000 for 1996 and $82,000 for 1995. Pursuant to the Company's
accounting policies, recognition of these funds from customer-sponsored development
projects generally is deferred until customers' acceptance of performance
milestones. Provisions for estimated losses on customer-sponsored projects in
progress are made when determined.
In July 1995, the Company established a $2 million revolving line of credit from a
domestic bank. A maximum amount of approximately $830,000 was borrowed for an
interim period, subsequently repaid and resulting in an interest expense of
approximately $19,000. There was no loan balance outstanding at March 31, 1996.
The loan agreement subjects the Company to certain covenants, or restrictions, all
of which the Company complied to at March 31, 1996.
Interest, net of expense and other income totaled approximately $22,000 primarily
the result of the Company's investment of its surplus cash.
For the year ended March 31, 1996, the Company reported a credit for income taxes of
$85,000 for 1996 which reflects United States and Hong Kong tax benefits from the
use of net operating loss carryforwards. Additionally, the credit for 1996 reflects
a reduction in the 100 percent valuation allowance for deferred tax assets at March
31, 1995. The reduction in the valuation allowance to 75 percent is based on
management's assessment that federal net operating loss carryforwards approximating
$600,000, equivalent to 1996 domestic pretax earnings, are more likely than not to
be utilized.
For 1996, dilutive common equivalent shares were computed using the modified
treasury stock method, which assumes investment of a portion of the exercise
proceeds. Fully diluted per share information is computed as above and assumes
conversion of dilutive convertible preferred shares, after adding preferred dividend
requirements back to net income.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities provided $880,000 of cash and cash equivalents, reflecting the
Company's profitable operating results. Overall, the operating cash flows were
substantial enough to allow the Company's repayment of borrowings on a line of
credit required to support the seasonality of working capital needs and fund capital
expenditures. The Company's investing activities of $829,000, was primarily for the
purchase of property and equipment and computer software. Financing activities used
only $5,000 of cash and cash equivalents and the effects of exchange rate changes on
cash and cash equivalents absorbed $13,000.
Changes in operating assets reflect a decrease in working capital of approximately
$655,000. This is largely attributed to increases in accounts receivable, inventory
and prepaid expenses resulting from the Company's sales growth. Increases in
operating liabilities provided working capital of approximately $254,000 after the
payment of the severance benefit to a former officer. The other changes resulted
primarily from customer's cash advances for shipment schedules set prospectively by
the customer, the Company's acceptance of certain product returns from a customer
net of restocking fees, plus provisions made for the future payment of employee
incentive compensation. The Company's acceptance of product returns from a certain
customer requires that the customer apply the sales credit granted to future
purchases at a proration whereby the customer must also pay partially in cash.
For 1996, net cash of $829,000 was used in investing activities, principally for the
purchase of new property, equipment and computer software. Manufacturing, test and
calibration equipment, plus office computers and equipment, and leasehold
improvements were purchased as the Company expanded its manufacturing lines and
established its new JL manufacturing facility. The Company plans to continue
investing new products and facilities. However, at March 31, 1996 there were no
material commitments for capital expenditures.
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 material vendors or furnish letters of credit. The financing benefit becomes a
declining proportion of the Company's financing as the Company assumes the
manufacturing of key components of certain bath scale models. 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.
The Company established a $2 million domestic bank line which expires on July 17,
1997. No borrowings were outstanding at March 31, 1996 however, during the year the
Company borrowed $830,000 for an interim period which was shortly thereafter,
repaid. The purpose of such borrowings were necessary as the growth in the relative
proportion of domestic business verses foreign (partially financed with letters of
credit), as well as growth of the business in general, required the line and
provided the collateral necessary for obtaining the line. 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. Additionally,
the amount available to be borrowed is subject to the eligibility of certain
collateral, specifically, accounts receivable and inventories. The Company has
grown its capital expenditures and research and development spending financed with
positive operating cash flows and as such the need for capital expenditures and
product development may continue. There is no assurance which may be given that
funds for such events may be available timely, or at a interest rates attractive to
the Company.
Tax payments required in the coming year are expected to exceed those of 1996, as
the current tax payable provision of approximately, $79,000 for Hong Kong comes due.
The Company is committed to capitalize JL with approximately $484,000 US dollars, in
equity, which was accomplished by March 31, 1996. PRC exchange controls limit the
Company's ability to repatriate loans or dividends. Restricted net assets in the
PRC at March 31, 1996 were $568,000. Foreign currency translation effects have not
been material.
At March 31, 1996, the Company had a current ratio of 1.81 compared to 1.63 at March
31, 1995. The Company continues to benefit from off-balance sheet financing
provided by River Display, Ltd., 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 material vendors or furnish
letters of credit. 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.
Management believes that cash provided from operations and the existing bank line of
credit are expected to be adequate for the Company's existing business and planned
growth, plus continue to pay its obligations timely.
NEW ACCOUNTING STANDARDS
During 1996, the FASB issued Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" and Statement No.
123, "Accounting for Stock-Based Compensation". Under the present circumstances
these pronouncements are not expected to have a material effect on the Company's
financial statements.
Item 7.Financial Statements
The following financial statements are filed at the end of this report:
Report of Independent Certified Public Accountants
Consolidated Balance Sheet, March 31, 1996
Consolidated Statements of Operations,
Years Ended March 31, 1996 and 1995
Consolidated Statements of Shareholders' Equity,
Years Ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows,
Years Ended March 31, 1996 and 1995
Notes to Consolidated Financial Statements
Item 8.Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure
None
PART III
Item 9.Directors, Executive Officers, Promoters and Control Persons; Compliance With
Section 16(a) of the Exchange Act
On October 20, 1995, Directors listed below were elected to serve on the Board of
Directors (the "Board") until the next Annual Meeting of Shareholders.
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Name Age Positions and offices Director since
Joseph R. Mallon Jr. 51 President, Chief Executive April 1, 1992
Officer, and Chairman of
the Board of Directors
Damon Germanton 53 Executive Vice President, March 5 ,1981
Chief Operating Officer,
Secretary, and Director
Richard S. Betts 52 Director April 1, 1992
Steven P. Petrucelli 43 Director June 15, 1992
The Hon. Dan J. Samuel 71 Director Oct. 27, 1994
John D. Arnold 42 Director June 19, 1995
Theodore J. Coburn 42 Director Oct. 20, 1995
Mark Cappiello 42 Vice President of Sales N/A
and Marketing
Mark A. Shornick 42 Chief Financial Officer, N/A
Treasurer, and Assistant
Secretary
Joseph R. Mallon Jr., who has served as a Director since April 1, 1992, became the
Company's President, Chief Executive Officer and Chairman of the Board on April 1,
1995. Mr. Mallon has over thirty years experience in electronic sensor technology.
He is a recognized pioneer in silicon micromachining, having published 50 technical
papers and having been granted 40 patents. In October 1985, Mr. Mallon co-founded
NovaSensor, where he served as Co-President and a Director until its acquisition by
Lucas Industries, Inc., a United States subsidiary of Lucas Industries plc. of the
United Kingdom, in January 1990. From that time until his departure in January
1993, Mr. Mallon was the Executive Vice President and a Director of Lucas
NovaSensor. Thereafter, until his appointment as President, Chief Executive Officer
and Chairman of the Board, Mr. Mallon pursued a graduate program at Stanford
University. Mr. Mallon serves on the Board's Operations Committee.
Damon Germanton has been a Director and an executive officer since founding the
Company in 1981. Previously, Mr. Germanton obtained sixteen years experience in
military and aerospace applications of micromachined sensor technology. In addition
to serving as Chief Operating Officer, Mr. Germanton is the Company's chief
technologist and Managing Director of its Asian operations. Mr. Germanton, who
holds seven patents, serves on the Board's Operations Committee.
Richard S. Betts was appointed to the Board on April 1, 1992. Mr. Betts has been
the President of Rich Plan of Lake Plains, Inc., a distributor of privately labeled
food products, since 1973. Mr. Betts chairs the Board's Audit Committee and serves
on its Compensation Committee.
Steven P. Petrucelli, who was elected a Director on June 15, 1992, has consulted in
medical technology for more than the past five years. Since 1979, Dr. Petrucelli
has served as an Assistant Professor at Rutgers University in the Biomedical and
Electrical Engineering Departments. Dr. Petrucelli joined the Company's staff in
1991. Previously, Dr. Petrucelli consulted for the Company. Dr. Petrucelli chairs
the Board's Operations Committee.
The Hon. Dan J. Samuel, who was elected a Director on October 27, 1994, has been a
business consultant since his retirement in 1986. Previously, Mr. Samuel served as
President and Chief Executive Officer of Scallop Corporation, a wholly owned
subsidiary of the Royal Dutch/Shell Group. Mr. Samuel currently serves on the
Boards of Directors of Canadian Overseas Packaging Company and, since 1985, Witco
Corporation. Mr. Samuel chairs the Board's Compensation Committee.
John D. Arnold was appointed to the Board on June 19, 1995. Mr. Arnold has been in
private law practice since 1989 and primarily focuses on relationships between
United States technology companies and Asian manufacturers. Before 1989, Mr. Arnold
was employed with the law firm of Wilson, Sonsini, Goodrich & Rosati in Palo Alto,
California and prior thereto with Foley & Lardner in Milwaukee, Wisconsin. Mr.
Arnold serves on the Board's Audit Committee.
Theodore J. Coburn, elected to the Board on October 20, 1995, provides strategic and
financial consulting services for emerging growth companies, is a member of the
board of directors for Moovies, Inc., Emerging Germany Fund, Nicholas Applegate
Fund, Inc. and is a trustee for Nicholas Applegate Mutual Fund. Mr. Coburn was
Managing Director of the Global Equity Transactions Group and a member of the Board
of Directors for Prudential Bache Securities from 1986 to 1991 and of Merrill Lynch
Capital Markets from 1983 to 1986. Mr. Coburn holds a masters degree from the
Harvard University Graduate School of Education and a masters degree at the Harvard
University Divinity School. Mr. Coburn serves on the Board's Audit and Compensation
Committees.
Mark Cappiello has served as Vice President of Sales and Marketing since January
1988. Mr. Cappiello has twenty years experience in international consumer products
marketing, seventeen of which have been in the scale industry. Mr. Cappiello
previously was employed by Terraillon S.A., a French manufacturer and distributor of
scales and balance products, Borg and Sunbeam Corporation.
Mark A. Shornick has served as Chief Financial Officer since he joined the Company
on July 10, 1989. He later added the duties of Treasurer and Assistant Secretary.
Mr. Shornick has nineteen years experience in finance and accounting for emerging
companies. Before joining the Company, he was employed as an audit manager by
national and regional accounting firms, Miller, Ellin & Co., Laventhol & Horwath and
Brout & Co., where he specialized in services to publicly held, middle-market
multinationals.
Based solely on a review of Forms 3, 4 and 5 and amendments thereto furnished to the
Company, one reporting person failed to file reports required by Section 16(a) of
the Exchange Act on a timely basis, as disclosed in these Forms, during the year
ended March 31, 1996. There were no known failures to file required Forms. Mr.
Mallon filed one late report for one stock purchase in February 1996. Messrs.
Mallon, Betts, Petrucelli, Samuel, Cappiello and Shornick and Jens F. Hoeg (then a
Director) each filed one late report for one stock option awarded on October 27,
1994. Mr. Germanton filed one late report for one stock option awarded on December
9, 1994.
Item 10.Executive Compensation
The Company's Summary Compensation Table, Option/SAR Grants Table and Aggregated
Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table for the year ended
March 31, 1996 appear on the following pages. For the year ended March 31, 1996,
there were no long-term incentive plan ("LTIP") awards, nor were any stock options
or stock appreciation rights repriced.
Non-officer Directors are paid $1,000 for attending each regularly scheduled Board
meeting plus $250 for attending ($500 for chairing) each quarterly Committee
meeting. Additionally, each non-officer Director is granted an option to purchase
5,000 common shares at market value for the first year of service and an option to
purchase 2,500 common shares at market value for each succeeding year of service.
On April 27, 1995, the Board approved a compensation arrangement with the Company's
Chief Executive Officer, who is Chairman of the Board and a shareholder. The
arrangement, effective April 1, 1995, provides for a minimum annual salary of
$100,000, subject to an annual performance bonus which the Board may grant, plus
$12,000 for temporary living expenses for the year ended March 31, 1996.
Additionally, the Board granted the Chief Executive Officer an option to purchase an
aggregate of 144,000 common shares at $4.875, exercisable under certain conditions
in cumulative annual installments and expiring on various dates through April 27,
2005.
The Company's employment agreement with the Chief Operating Officer provides for a
minimum annual salary of $175,000, subject to bonuses and merit increases which may
be granted by the Board's Compensation Committee. Pursuant to the agreement, the
Company would become obligated to pay severance benefits computed based on the
average annual compensation for the latest three years of employment if the Board
were to decline to renew these agreements by January 31, 1995. The Chief Operating
Officer agreed to extend, until completion of a review by the Compensation
Committee, the date by which the Board must renew his employment agreement or
obligate the Company for a severance benefit thereunder.
Item 10. (b) Summary Compensation Table
SUMMARY COMPENSATION TABLE
For the Year Ended March 31, 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long Term Compensation
Annual Compensation (1) Awards Payouts
----------------------- ------ -------
Name Other Securities
and Year Annual Restricted Underlying All Other
Principal Ended Compen- Stock Options/ LTIP Compen-
Position March 31 Salary ($) Bonus ($) sation ($) Awards ($) SARs (#) Payouts ($) sation ($)
(2) (3)
Joseph R. Mallon Jr.,
President and Chief 1996 100,000 127,000 12,000 0 149,000 0 0
Executive Officer
Damon Germanton,
Executive Vice 1996 165,000 51,000 12,120 0 15,000 0 0
President, Chief 1995 188,000 20,000 13,421 0 10,000 0 2,000
Operating Officer 1994 183,000 0 10,048 0 20,000 0 2,000
and Secretary
Mark Cappiello, 1996 115,000 27,000 7,750 0 0 0 0
Vice President of 1995 110,000 25,000 8,953 0 50,000 0 2,000
Sales and Marketing 1994 105,000 20,000 5,989 0 0 0 2,000
Mark A. Shornick,
Chief Financial 1996 107,500 5,000 0 0 0 0 0
Officer, Treasurer 1995 105,000 5,000 0 0 25,000 0 2,000
and Assistant 1994 102,000 5,000 0 0 0 0 2,000
Secretary
(1) Amounts do not include payments of overseas living expenses relating to Mr.
Germanton's Hong Kong assignment.
(2) Perquisites, which did not exceed the lesser of $50,000 or 10 percent of each
officer's salary and bonus, principally consist of payments reimbursing Mr.
Germanton for his personal use of his automobile
and the cost of a Company automobile (excluding insurance) provided for Mr.
Cappiello's personal use. Additionally, the Company paid long-term disability
income insurance premiums for the benefit of Mr.
Germanton ($3,673 for 1996, $3,673 for 1995, and $1,836 for 1994). Mr.
Mallon was provided an interum $12,000 living allowance for 1996 inconnection with
his relocation to the Company's New Jersey headquarters.
(3) All Other Compensation consists of the Company's annual contributions to a
defined contribution plan established under section 401(k) of the Internal Revenue
Code.
Item 10. (c) Option/SAR Grants Table
Option/SAR Grants in Last Fiscal Year
Individual Grants
For the Year Ended March 31, 1996
<S> <C> <C> <C> <C>
(a) (b) (c) (d) (e)
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in or Base
Name Granted (#) Fiscal Year Price ($/Sh) Expiration Date
Joseph R. Mallon Jr. 48,000 (1) 17.36% $4.88 April 27, 2001
24,000 (2) 8.68% $4.88 April 27, 2002
24,000 (3) 8.68% $4.88 April 27, 2003
24,000 (4) 8.68% $4.88 April 27, 2004
24,000 (5) 8.68% $4.88 April 27, 2005
5,000 (6) 1.81% $4.00 June 19, 2001
Damon Germanton 15,000 (7) 5.42% $5.64 October 20, 2000
(1) Exercisable beginning April 27, 1996.
(2) Exercisable beginning April 27, 1997.
(3) Exercisable beginning April 27, 1998.
(4) Exercisable beginning April 27, 1999.
(5) Exercisable beginning April 27, 2000.
(6) Exercisable beginning June 19, 1996.
(7) Exercisable beginning October 20, 1995.
Item 10. (d) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value
Table
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
For the Year Ended March 31, 1996
<S> <C> <C> <C> <C>
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)
(1)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
Joseph R. Mallon Jr. 0 0 5,000 2,500
149,000 0
Damon Germanton 0 0 40,000 30,500
15,000 0
Mark Cappiello 0 0 110,000 136,250
40,000 20,000
Mark A. Shornick 0 0 105,000 133,750
20,000 10,000
(1) Instrinsic value, based on the excess of the closing price of the Company's
common stock at March 31, 1996 ($4.00) over the exercise price of the options.
Item 11.Security Ownership of Certain Beneficial Owners and Management
At May 31, 1996, securities owned by Directors, executive officers and beneficial
owners of more than five percent of each class of the Company's voting securities
were:
<S> <C> <C> <C>
Name and Address Number of Shares Percent of
Title of Class of Beneficial Owner Beneficially Owned Class
Common stock, Joseph R. Mallon Jr. 180,500(1) 5.0 %
no par value Measurement Specialties, Inc.
80 Little Falls Road
Fairfield, NJ 07004
Damon Germanton 405,566(2) 11.4 %
Measurement Specialties, Inc.
80 Little Falls Road
Fairfield, NJ 07004
John D. Arnold 5,000(3) (4)
104 Highland Terrace.
Woodside, CA 94062
Richard S. Betts 102,256(5)(3) 2.9 %
Rich Plan of Lake Plains, Inc.
Box 110
20 South Main Street
Perry, NY 14530
Steven P. Petrucelli 14,000(6) (4)
104 Highland Terrace.
Woodside, CA 94062
The Hon. Dan J. Samuel 9,000(3) (4)
154 Hillspoint Road
Westport, CT 06880
Mark Cappiello 110,000(7) 3.0 %
Measurement Specialties, Inc.
80 Little Falls Road
Fairfield, NJ 07004
Mark A. Shornick 105,000(8) 2.9 %
Measurement Specialties, Inc.
80 Little Falls Road
Fairfield, NJ 07004
Current Officers and Directors
as a group (9 persons) 931,322(9) 24.0 %
(1) Includes ownership of exercisable options to purchase 58,000 common shares.
(2) Includes ownership of exercisable options to purchase 30,000 common shares;
excludes ownership of 12,555 shares by Mr. Germanton's daughter, of which Mr.
Germanton disclaims beneficial ownership.
(3) Includes ownership by each director of exercisable options to purchase 5,000
common shares.
(4) Percentage of shares beneficially owned does not exceed one percent of the
class.
(5) Includes ownership by Mr. Betts and an affiliated company of exercisable options
and common stock purchase warrants for 30,608 shares.
(6) Includes ownership of exercisable options to purchase 14,000 common shares.
(7) Includes ownership of exercisable options to purchase 110,000 common shares.
(8) Includes ownership to purchase 105,000 common shares.
(9) Includes ownership by Messrs. Mallon, Germanton, Arnold, Betts, Petrucelli,
Samuel, Cappiello and Shornick of exercisable options and warrants, mentioned above,
for an aggregate of 362,608 common shares.
Item 12.Certain Relationships and Related Transactions
Since October 1, 1995, JL has sublet a residence used by employees in the PRC from
Damon Germanton, an officer and Director, under a month-to-month arrangement. Rent
expense is not material.
For 1996, John D. Arnold, a nonemployee Director, provided certain legal services to
the Company, fees for which were not material.
Most of the Company's products are obtained from River Display, Ltd., a Hong Kong
company of which M. B. Lee is a principal shareholder. Mr. Lee served on the Board
from April 1, 1992 through October 27, 1994. The Company's purchases from River
Display approximated $4,029,000 from April 1, 1994 through October 27, 1994.
Item 13.Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits marked with an asterisk (*) are included herein. Exhibits marked with an
"x" are filed by amendment. Other exhibits, incorporated by reference, were
previously filed with the Securities and Exchange Commission as indicated.
(3)(I) Articles of incorporation
Certificate of Incorporation and Amendments thereto, incorporated by reference to
Exhibit 3(a) to the Company's Form S-18 Registration Statement (File No. 33-3530-NY)
and to the Company's Annual Report on Form 10-K for the Year Ended March 31, 1987;
Exhibit B to Proxy Statement for Annual Meeting of Shareholders on August 30, 1988
which further amended Certificate of Incorporation upon approval by Shareholders on
August 30, 1988, incorporated by reference to Exhibit 3(a).1 to Annual Report on
Form 10-K for the year ended March 31, 1992
(3)(ii) By-laws
Bylaws, incorporated by reference to Exhibit 3(b) to Registration Statement on Form
S-18 (File No. 33-3530-NY); Amendment to Article XII of the Bylaws, adopted January
14, 1994 by consent of the Board of Directors, pursuant to Certificate of
Incorporation, as amended, incorporated by reference to Exhibit (3)(ii) to Annual
Report on Form 10-KSB for the year ended March 31, 1994
(4) Instruments defining the rights of holders including indentures
Form of Common Stock Certificate, incorporated by reference to Exhibit 4(a) to
Registration Statement on Form S-18 (File No. 33-3530-NY)
Assignment between Onondaga Venture Capital Fund, Inc. and Harvey Investment Group
dated November 15, 1991, Preferred Series C Stock Certificate issued to Jeffrey B.
Harvey dated December 10, 1991 and Common Stock Purchase Warrants issued to Jeffrey
B. Harvey, Thomas Murdock, Arthur Glick and Rich Plan of Lake Plains, Inc. executed
on or about December 10, 1991, incorporated by reference to Exhibit 10(s).1 to
Annual Report on Form 10-K for the year ended March 31, 1992
Assignments between Rand Capital Corporation and Rand SBIC, Inc. and William F.
Nicklin as Nominee, Purchase and Redemption Agreement with William F. Nicklin and
other documents executed on or about November 18, 1992 for the Company's redemption
of debt and common stock purchase warrants issued to Rand Capital Corporation and
Rand SBIC, Inc., incorporated by reference to Exhibit 10(t).1 to Annual Report on
Form 10-KSB for the year ended March 31, 1993
Private Offering Memorandum to Accredited Investors Only, dated September 13, 1993,
incorporated by reference to Exhibit 10.35 to Annual Report on Form 10-KSB for the
year ended March 31, 1993
Consulting Agreement, dated April 1, 1993, and Common Stock Purchase Warrant,
executed on or about May 26, 1993, with Sherleigh Associates, Inc., incorporated by
reference to Exhibit 10.36 to Annual Report on Form 10-KSB for the year ended March
31, 1993
Private Offering Memorandum to Accredited Investors Only, dated March 24, 1993,
incorporated by reference to Exhibit (4) to Annual Report on Form 10-KSB for the
year ended March 31, 1994
Form of Common Stock Purchase Warrants issued to Stephen A. Springer, Feeley &
Wilcox, Inc. and Cameron Towey Central, Inc., incorporated by reference to Exhibit
(4) to Annual Report on Form 10-KSB for the year ended March 31, 1994
(10) Material contracts
Form of Employment Agreements with Don Weiss and with Damon Germanton effective
July 1, 1988, Supplement to Proxy Statement for Annual Meeting of Shareholders on
August 30, 1988 related thereto and Amendment to Employment Agreement dated December
23, 1991, incorporated by reference to Exhibit 10(a).1 to Annual Report on Form 10-K
for the year ended March 31, 1992; Memorandum to Board of Directors form Donald
Weiss dated January 29, 1993, regarding amendments to Employment Agreements with
Donald Weiss and Damon Germanton, adopted by resolution of the Board of Directors on
February 1, 1993, incorporated by reference to Exhibit 10(a).2 to Annual Report on
Form 10-KSB for the year ended March 31, 1993
Restated Measurement Specialties, Inc. Stock Option Plan (1985), as amended pursuant
to Annual Meeting of Shareholders on January 31, 1990, incorporated by reference to
Exhibit 10(i).1 to Annual Report on Form 10-K for the year ended March 31, 1992
Purchase Order from South East Instruments Corporation and related Quotation dated
September 24, 1990, incorporated by reference to Exhibit 10.28 to Annual Report on
Form 10-K for the year ended March 31, 1992.
November 28, 1989 Letter of Intent and July 1, 1990 Manufacturing and Supply
Agreement with B. Braun of America Inc., incorporated by reference to Exhibit 10.29
to Annual Report on Form 10-K for the year ended March 31, 1992
Revised Product Development and License Agreement with the Instrument Division of
Dresser Industries, Inc. dated November 12, 1991, incorporated by reference to
Exhibit 10.31 to Annual Report on Form 10-K for the year ended March 31, 1992
Order from Hauni Elektronik GmbH dated July 20, 1990, incorporated by reference to
Exhibit 10.32 to Annual Report on Form 10-K for the year ended March 31, 1992
Development and Confidentiality Agreement with Reebok International Ltd. executed
March 28, 1991, incorporated by reference to Exhibit 10.33 to Annual Report on Form
10-K for the year ended March 31, 1992
License Agreement with Schrader Automotive, Inc. effective April 24, 1992,
incorporated by reference to Exhibit 10.34 to Annual Report on Form 10-K for the
year ended March 31, 1992
Lease Agreement, executed September 10, 1993, by and between Cascade Properties Ltd.
and Measurement Ltd., incorporated by reference to Exhibit (10) to Annual Report on
Form 10-KSB for the year ended March 31, 1994
Agreement, executed December 27, 1993, by and between Health o meter Products, Inc.
and Measurement Specialties, Inc., incorporated by reference to Exhibit (10) to
Annual Report on Form 10-KSB for the year ended March 31, 1994
Lease Agreement, executed April 20, 1994, by and between Stoneycroft Estates Ltd.
and Measurement Ltd., incorporated by reference to Exhibit (10) to Annual Report on
Form 10-KSB for the year ended March 31, 1994
Lease Agreement, executed May 5, 1994, by and between Transcube Associates and
Measurement Specialties, Inc., incorporated by reference to Exhibit (10) to Annual
Report on Form 10-KSB for the year ended March 31, 1994
Lease Agreement, executed on or about November 2, 1994, by and between Stoneycroft
Estates Ltd. and Measurement Ltd.
Lease Agreement, executed on January 25, 1995, by and between Eastern Bright
Technology Limited in Shenzhen and Jingliang Electronics (Shenzhen) Co. Ltd. (then
doing business as Measurement Limited in China)
Lease Agreement, executed on June 22, 1995, by and between Chu Fung Ming and Amy
Ching Po Yin and Measurement Ltd.
(*) Lease Agreement, executed on May 20, 1996, by and between CMI, Inc. and
Measurement Specialties, Inc.
(11)Statement regarding computation of per share earnings for 1996 and 1995
(21)Subsidiaries of the registrant
The registrant has two subsidiaries: Measurement Limited, organized in Hong Kong,
is a wholly owned subsidiary of the Company. Jingliang Electronics (Shenzhen) Co.
Ltd., organized in the PRC, is a wholly owned subsidiary of Measurement Limited.
(27)Financial data schedule
(b) Reports on Form 8-K
During the three months ended March 31, 1996, the Company did not file any reports
on Form 8-K.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MEASUREMENT SPECIALTIES, INC.
By: s/ Joseph R. Mallon, Jr. June 3, 1996
Chairman of the Board of Directors
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates
indicated.
s/ Joseph R. Mallon, Jr. June 3, 1996
President and Chief Executive Officer
s/ Mark A. Shornick June 3, 1996
Chief Financial Officer and Treasurer
A majority of the Board of Directors:
s/ Joseph R. Mallon, Jr. June 3, 1996
s/ John D. Arnold June 3, 1996
Richard S. Betts - no signature
s/ Theodore J. Coburn June 3, 1996
s/ Damon Germanton June 3, 1996
s/ Steven P. Petrucelli June 3, 1996
s/ Dan J. Samuel June 3, 1996
- - -----------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Measurement Specialties, Inc.
We have audited the accompanying consolidated balance sheet of Measurement
Specialties, Inc. and subsidiaries as of March 31, 1996, and the related
consolidated statements of operations, shareholders' equity, and cash flows for each
of the two years in the period ended March 31, 1996. 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, the consolidated financial statements referred to are presented
fairly, in all material respects, the consolidated financial position of Measurement
Specialties, Inc. and Subsidiaries of March 31, 1996, and the consolidated results
of the operations and their consolidated cash flows for each of the two years in the
period ended March 31, 1996, in conformity with generally accepted accounting
principles.
GRANT THORNTON, LLP
Parsippany, New Jersey
June 14, 1996
CONSOLIDATED BALANCE SHEET
ASSETS
<S> <C>
March 31,
1996
Current assets:
Cash and cash equivalents $ 771,016
Accounts receivable, trade, net of allowance for
doubtful accounts of $22,000 2,019,281
Inventories (Note 3) 2,500,478
Deferred income taxes (Note 16) 54,000
Prepaid expenses and other current assets 193,564
---------
Total current assets 5,538,339
Property and equipment 2,431,526
Less accumulated depreciation and amortization 1,352,642
---------
1,078,884
Other assets:
Intangible assets, net of accumulated amortization
of $62,000 49,587
Deferred income taxes (Note 16) 107,137
Other assets 130,896
-------
287,620
---------
---------
$ 6,904,843
See notes to consolidated financial statements.
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31,
1996
<S> <C>
Current liabilities:
Accounts payable, trade $ 1,032,958
Current taxes payable 78,654
Accrued expenses and other current liabilities (Note 7) 1,953,433
---------
Total current liabilities 3,065,045
Other liabilities (Note 8) 380,409
---------
Total liabilities 3,445,454
Commitments and contingencies (Note 19)
Shareholders' equity (Note 9):
Serial preferred stock; 221,756 shares authorized
and issued; none outstanding -
Common stock, no par; 20,000,000 shares
authorized; issued and outstanding 3,531,987 shares 5,384,950
Additional paid-in capital 25,000
Accumulated Deficit (1,947,953)
Currency translation and other adjustments (2,608)
---------
Total shareholders' equity 3,459,389
---------
---------
$ 6,904,843
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the year ended March 31,
1996 1995
<S> <C> <C>
Net sales $23,059,539 $17,038,659
Cost of goods sold (Note 15) 14,698,002 10,774,890
--------- ---------
Gross profit 8,361,537 6,263,769
Other expenses (income):
Selling, general and administrative 6,226,280 4,911,520
Provision for doubtful accounts 18,010 16,656
Research and development, net of customer funding
of $95,000 for 1996 and $82,000 for 1995 1,237,596 833,258
Interest expense 19,153
Interest and other income (41,552)
(32,354)
Provision for former officer's severance
benefit (Note 6) 194,833
--------- ---------
7,459,487 5,923,913
Income before income taxes 902,050 339,856
Provision (credit) for income taxes (Note 16) (84,981) 6,000
-------- --------
Net income $987,031 $333,856
--------- ---------
--------- ---------
Earnings per common share (Note 17) $0.27 $0.09
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended March 31, 1996, and March 31, 1995
<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
13,500 common shares issued upon
exercise of options and warrants 47,750 47,750
Net income for the year ended
March 31, 1996 987,031 987,031
Currency translation adjustment
and unrealized holding gains
and losses on available-for-sale
marketable securities (7,504) (7,504)
-------------------------------------------------------------------------------------------
Balance, March 31, 1996 $ - $5,384,950 $25,000 ($1,947,953) ($2,608) $3,459,389
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 18)
For the year ended March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $987,031 $ 333,856
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of property and equipment 368,496 260,519
Amortization of intangible assets and deferred
financial fees 57,596 18,995
Provision for doubtful accounts 18,010 16,656
Other adjustments 10,716 28,517
Deferred taxes (161,137)
Net changes in operating assets and liabilities:
Accounts receivable, trade (481,038) (1,015,671)
Inventories (221,776) (546,797)
Prepaid expenses and other current assets (19,844) (96,899)
Other assets 67,894 (81,817)
Accounts payable, trade (370,465) 808,126
Severance benefit payable to former officer (194,833) 194,833
Trade indebtedness to former related party (358,825)
Taxes payable 78,654
Accrued expenses and other current liabilities 658,315 557,756
Other liabilities 82,706 297,703
------- -------
Net cash provided by operating activities 880,325 416,952
Cash flows from investing activities:
Purchases of property and equipment (802,345) (437,489)
Purchases of intangible assets, primarily computer
software (26,257) (19,082)
Proceeds from sale of property and equipment 12,801
--------- ---------
Net cash used in investing activities (828,602) (443,770)
Cash flows from financing activities:
Borrowings under bank line of credit agreement 829,661
Repayments under bank line of credit agreement (829,661)
Payment of deferred financing costs (52,542)
Proceeds from exercise of options and warrants 47,750 22,000
--------- ------
Net cash (used in) provided by financing activities (4,792) 22,000
Effect of exchange rate changes on cash and cash
equivalents (13,724) (6,484)
-------- -------
Net change in cash and cash equivalents 33,207 (11,302)
Cash and cash equivalents, beginning of period 737,809 749,111
------- -------
Cash and cash equivalents, end of period $771,016 $737,809
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies:
Principles of consolidation:
The consolidated financial statements include the accounts of Measurement Specialties,
Inc. (the "Company") and both of its wholly owned subsidiaries (the "Subsidiaries"),
Measurement Limited, organized in Hong Kong on August 8, 1986 ("ML"), and Jingliang
Electronics (Shenzhen) Co. Ltd., organized in the People's Republic of China (the
"PRC") on January 12, 1995 ("JL"). Significant intercompany balances and transactions
have been eliminated.
Use of estimates:
The preparation of the consolidated financial statements in conformity with generally
accepted accounting principles requires management to make estimates and assumptions
which affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Cash equivalents:
The Company considers highly liquid investments with maturities of up to three months,
when purchased, to be cash equivalents.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or market.
Property and equipment:
Property and equipment are stated at cost. Depreciation is computed by the straight-
line method over the estimated useful lives of the assets, generally three to ten
years. Leasehold improvements are amortized over the shorter of the lease terms or the
estimated useful lives of the assets.
Research and development:
Expenditures for the design and development of new products, including expenditures for
property and equipment having no alternative use, are charged to operations as
incurred. Expenditures are reported net of service revenues, derived from customer-
funded development projects. Service revenues generally are recognized upon customers'
acceptance of performance milestones. Provisions for anticipated losses on customer-
funded development projects in progress are made when determined.
Stock based compensation:
The Company accounts for employee stock option grants using the intrinsic value based
method.
Income taxes:
Deferred income taxes, computed using the liability method, are provided on temporary
differences between the income tax bases of assets and liabilities and their values
reported in the financial statements, resulting in taxable or deductible amounts in
future years.
Foreign currency translation and transactions:
ML's functional currency is the Hong Kong dollar and JL's functional currency is the
Chinese renminbi. The Subsidiaries' assets and liabilities are translated into United
States dollars using exchange rates in effect at the balance sheet date and their
operations are translated using weighted average exchange rates for the year then
ended. Translation adjustments resulting from the changes in exchange rates from year
to year are accumulated as a separate component of shareholders' equity. Foreign
currency transaction gains and losses are included in operations.
2. Changes in accounting estimates and impact of recently issued accounting standards:
On October 1, 1995, the Company revised two accounting estimates. The Company revised
estimated product warranty obligations to reflect more recent warranty claims
experience, which decreased 1996 warranty expense by $97,000. Additionally, ML revised
estimated postemployment benefits to give effect to its employee turnover experience,
which decreased 1996 postemployment benefits costs by $47,000.
In March 1995, the FASB issued Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amounts. Statement No.
121 also addresses the accounting for long-lived assets that are expected to be
disposed of. The Company will adopt Statement No. 121 on April 1, 1996. Based on
present circumstances, management believes the effect of this new accounting principle
on the consolidated financial statements will not be material.
In October 1995, the FASB issued Statement No. 123, "Accounting for Stock-Based
Compensation," which provides a choice of accounting methods for transactions in which
employees receive equity instruments of the employer, such as stock options. The
Company will continue to apply the intrinsic value based method of APB Opinion No. 25
and, accordingly, the only effect of adopting Statement No. 123 on employee stock
options will be new disclosure requirements.
3. Inventories:
<S> <C>
Raw materials $ 669,576
Work-in-process 371,112
Finished goods 1,459,790
---------
$2,500,478
The Company provides for estimated losses on inventories which fail to meet its
performance requirements, which are no longer used as a result of improvements in
manufacturing processes or changes to product lines or which are held for repackaging.
The above table reflects write-downs of $324,000 at March 31, 1996.
4. Property and equipment:
<S> <C>
Production machinery and equipment $1,140,719
Tooling costs 764,123
Office furniture and equipment 254,038
Vehicles 76,101
Leasehold improvements 196,545
----------
$2,431,526
5. Credit arrangements:
The Company has a $2 million revolving line of credit agreement extended by a domestic
bank. No indebtedness was outstanding at March 31, 1996. Demand borrowings bear
interest at 1.125 percent above the bank's prime rate (aggregating 9.375 percent at
March 31, 1996) 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, limits the Company's capital expenditures and advances to
Subsidiaries and requires the bank's consent for the payment of dividends. 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.
6. Provision for former officer's severance benefit:
The Company's employment contract with its former Chief Executive Officer was
terminated as of March 31, 1995. The former officer, who is a shareholder, resigned
from the Board on that date. The contract provided for the payment of a $194,833
severance benefit, which was charged to operations for the year ended March 31, 1995.
7. Accrued expenses and other current liabilities:
<S> <C>
Customers' advances $1,019,424
Accrued payrolls and fringe benefits 512,050
Current portion of product warranty
obligations 179,054
Other 242,905
----------
$1,953,433
8. Other liabilities:
<S> <C>
Product warranty obligations, net of
current portion $ 318,536
Accrued postemployment benefits 61,873
-----------
$ 380,409
9. 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. The Board of Directors (the "Board") has not designated
978,244 authorized shares. On November 2, 1994, 21,756 convertible preferred Series C
shares, comprising all shares of the only series of preferred stock then outstanding,
were converted into 18,918 common shares.
JL is subject to certain PRC government regulations, including currency exchange
controls, which limit cash dividends and loans to the Company. At March 31, 1996, JL's
restricted net assets approximated $568,000.
10. Common stock purchase warrants:
<S> <C> <C> <C>
Number of Average price per share
shares exercise market
Outstanding at 336,500 $ 4.93 $ 4.00
March 31, 1994
Exercised (5,500) 4.00 4.74
-------- ---- ----
Outstanding at 331,000 4.95 4.63
March 31, 1995
Exercised (8,500) 4.00 5.05
-------- ---- ----
Outstanding at 322,500 4.97 4.00
March 31, 1996
Summarized information about common stock purchase warrants outstanding at March 31,
1996 follows:
<S> <C> <C> <C> <C> <C>
Average remaining
Number of underlying shares Exercise Average exercise price contractual
outstanding exercisable price range outstanding exercisable life (years)
203,000 203,000 $4.00 $ 4.00 $ 4.00 2.0
119,500 119,500 6.63 6.63 6.63 0.5
- - ------- -------
322,500 322,500
11. Stock option plan:
On October 20, 1995, shareholders ratified the Company's 1995 Stock Option Plan (the
"1995 Plan"). At that date, options to purchase 674,000 shares, granted under the
Company's expired stock option plan, were outstanding. Options to purchase up to
326,000 common shares may be granted under the 1995 Plan, until its expiration on
September 8, 2005. Any shares under 1995 Plan grants which expire or otherwise
terminate without being exercised become available for later issuance. There were
251,000 and 440,000 shares available for grants of options at March 31, 1996 and 1995,
respectively. Options generally vest over service periods of up to five years and
expire no later than ten years from the date of grant. Options may, but need not,
qualify as "incentive stock options" under section 422 of the Internal Revenue Code.
Tax benefits are recognized upon nonqualified exercises and disqualifying dispositions
of shares acquired by qualified exercises. There were no changes in the exercise
prices of outstanding options, through cancellation and reissuance or otherwise, for
1996 and 1995.
Number of Average price per share
shares exercise market
<S> <C> <C> <C>
Outstanding at March 31, 1994 295,000 $ 3.14 $ 3.04
Granted at market 160,000 3.56 3.56
Granted above market 10,000 3.30 3.00
Expired (5,000) 2.69 N/A
------- ---- ----
Outstanding at March 31, 1995 460,000 3.30 3.22
Granted at market 284,000 4.80 4.80
Granted above market 15,000 5.64 5.13
Exercised (5,000) 2.75 4.25
Expired (5,000) 4.88 N/A
------- ---- ----
Outstanding at March 31, 1996 749,000 3.91 3.85
Summarized information about stock options outstanding at March 31, 1996 follows:
<S> <C> <C> <C> <C> <C>
Average remaining
Number of underlying shares Exercise Average exercise price contractual
outstanding exercisable price range outstanding exercisable life (years)
20,000 20,000 $1.65 - $2.29 $ 1.65 $ 1.65 1.6
215,000 215,000 2.30 - $3.19 $ 2.69 $ 2.69 3.6
205,000 63,000 3.20 - $4.44 $ 3.63 $ 3.60 5.9
309,000 40,000 4.45 - $6.19 $ 5.09 $ 6.19 6.5
- - ------- -------
749,000 338,000
12. Defined contribution plan:
The Company has a defined contribution plan under section 401(k) of the Internal
Revenue Code. Substantially all the Company's domestic employees are eligible to
participate after completing one year of service. Participants may elect to contribute
a portion of their compensation to the plan. The Company matches a portion of
participants' contributions and, at the discretion of the Board, may make profit
sharing contributions. Matching participants' contributions cost $15,000 for fiscal
year 1996 and $32,000 for fiscal year 1995. No profit sharing contributions were made
for 1996 or 1995.
13. Foreign operations:
The Subsidiaries' total assets aggregated $3,224,000 at March 31, 1996. Their
operations reflect intercompany transfers of costs and expenses, including interest on
intercompany trade receivables, at amounts established by the Company
<S> <C> <C>
1996 1995
Net sales:
To unrelated customers $14,829,183 $10,724,861
To the Company 921,039 488,438
Net income 206,533 28,314
14. Foreign and major customers:
The percentages of consolidated net sales derived from foreign customers were:
<S> <C> <C>
1996 1995
Germany 36 % 33 %
Other Europe 14 19
Other 5 9
-- --
55 % 61 %
One German customer accounted for 32 percent of net sales for 1996 and 30 percent of
net sales for 1995.
15. Transactions with present and former related parties:
JL rents a residential apartment in the PRC from the Chief Operating Officer, under a
month-to-month operating lease which commenced in 1996. Rent expense is not material.
A non-employee Director provided legal services to the Company for 1996, in amounts
which were not material.
Substantially all consumer products are assembled in the PRC by a company whose
principal shareholder was a non-employee Director through October 27, 1994. Cost of
goods sold for 1995 reflects purchases from this company through that date of
approximately $4,029,000.
16. Income taxes:
Earnings before income taxes were:
<S> <C> <C>
1996 1995
Domestic $ 601,517 $ 311,542
Foreign 300,533 28,314
--------- ---------
$ 902,050 $ 339,856
The provision (credit) for income taxes consisted of:
<S> <C> <C>
1996 1995
Current: Federal $ 1,000 $ 6,000
Foreign 78,000
------ -----
Total current 79,000 6,000
Deferred: Federal (155,000)
Foreign 16,000
State ( 25,000)
-------
Total deferred (164,000)
-------- -----
($ 85,000) $ 6,000
Differences between the federal statutory income tax rate and the effective tax rates
in those years were:
<S> <C> <C>
1996 1995
Statutory tax rate 34.0 % 34.0 %
Operating loss carryforwards (25.8) (30.5)
Change in valuation allowance (20.0)
Lower tax on foreign earnings (12.3) (1.4)
Losses not tax benefited 12.6
Other 2.1 (0.3)
------- -----
( 9.4 %) 1.8 %
The credit for income taxes for 1996 reflects federal and Hong Kong tax benefits of
$201,000 and $32,000, respectively, from the use of net operating loss carryforwards
aggregating $785,000. Additionally, the credit for 1996 reflects a $183,000 reduction
in the 100 percent valuation allowance for deferred tax assets at March 31, 1995. The
reduction in the valuation allowance to 75 percent is based on management's assessment
that federal net operating loss carryforwards approximating $600,000, equivalent to
1996 domestic pretax earnings, are more likely than not to be utilized. The provision
for income taxes for 1995 reflects federal and Hong Kong tax benefits of $99,000 and
$5,000, respectively, from the use of net operating loss carryforwards aggregating
$319,000.
At March 31, 1996, the Company had a net operating loss carryforward for income tax
reporting purposes of $1,039,000 (principally expiring on March 31, 2009) available to
reduce future domestic taxable income. Additionally, the Company had various tax
credit carryforwards aggregating $88,000 available to reduce future federal income tax
liability. Use of these domestic carryforwards may be limited by provisions of the Tax
Reform Act of 1986.
At March 31, 1996, the estimated tax effects of temporary differences and carryforwards
were:
<S> <C>
Deferred tax liabilities:
Depreciation and amortization of
property and equipment $ 34,000
Other temporary differences, net (15,000)
-------
$ 19,000
Deferred tax assets:
Accrued expenses and other
current liabilities $ 220,000
Other temporary differences, net (8,000)
Net operating loss carryforwards 427,000
Tax credit carryforwards 88,000
-------
Total deferred tax assets 727,000
Less valuation allowance for
deferred tax assets (547,000)
-------
180,000
-------
Net deferred tax assets $ 161,000
Net current deferred tax assets aggregate $54,000 and net noncurrent deferred tax
assets aggregate $107,000. Management is unable to predict whether graduated tax
rates will significantly affect the tax benefits from temporary differences and,
accordingly, their tax effects are estimated using marginal rates.
Deferred income taxes are not provided on the Subsidiaries' undistributed earnings,
which approximated $270,000 at March 31, 1996. Because those earnings are expected to
be permanently reinvested, no provision for federal and state income taxes on those
earnings was provided. Upon distribution of those earnings in the form of dividends or
otherwise, the Company would be subject to United States income taxes, subject to an
adjustment for foreign tax credits. Determination of the amount of unrecognized
deferred United States income tax liability is not practicable because of the
complexities associated with its hypothetical calculation. However, unrecognized
foreign tax credit carryforwards would be available to reduce some portion of the
United States liability.
17. Per share information:
Primary per share information is computed based on the weighted average common shares
and dilutive common equivalent shares outstanding during each period, after deducting
preferred dividend requirements from net income and considering the shares that may be
issued upon exercise of stock options and warrants, reduced by the shares that may be
repurchased with the funds received from their exercise. For 1996, dilutive common
equivalent shares were computed using the modified treasury stock method, which assumes
investment of a portion of the exercise proceeds. Fully diluted per share information
is computed as above and assumes conversion of dilutive convertible preferred shares,
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 to compute per share information were
3,894,936 for 1996 and 3,547,340 for 1995.
18. Supplemental disclosures of cash flow information:
In 1996, payments of interest expense approximated $19,000 and payments of income taxes
approximated $14,000.
On November 2, 1994, 21,756 convertible preferred Series C shares, 8% cumulative, $1.75
par, were converted into 18,918 common shares.
19. Commitments and contingencies:
The Company leases certain property and equipment under noncancellable operating leases
expiring on various dates through March 1, 2000. Rent expense, including real estate
taxes, insurance and maintenance expenses associated with net operating leases,
approximated $375,000 for 1996 and $333,000 for 1995, net of minor reimbursements by an
employee. At March 31, 1996, total minimum rentals under operating leases with initial
or remaining noncancellable lease terms of more than one year were:
<S> <C>
Year ending March 31,
1997 $ 186,000
1998 123,000
1999 66,000
2000 36,000
-------
$ 411,000
The Chief Executive Officer and the Chief Operating Officer, who are Directors and
shareholders, are compensated pursuant to agreements which provide for minimum annual
salaries, subject to performance bonuses and merit increases which the Board may grant.
Additionally, the Chief Operating Officer's contract provides for payment of a
severance benefit if the Board were to decline to renew the contract.
Certain compensation of substantially all employees is contingent upon various
performance criteria. Provisions for estimated contingent payments earned were
$344,000 for 1996 and $150,000 for 1995.
The Company manufactures and markets digital tire pressure gauges under license from
the holder and assignee of certain patents. Royalties aggregated $58,000 for 1996 and
$78,000 for 1995.
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.
One of the Company's manufacturing processes requires the use of minute quantities of
chemicals identified by the Environment Protection Agency as hazardous. The Company
uses its best efforts to handle, store and dispose of these materials in a safe and
environmentally sound manner, in accordance with federal, state and local regulations.
20. Financial instruments with concentrations of credit risk or off-balance sheet
risk:
Financial instruments which potentially subject the Company to significant
concentrations of credit risk principally are cash investments and trade accounts
receivable.
The Company generally maintains its cash and cash equivalents (including money market
securities mutual funds, which are not insured by the Securities Investor Protection
Corporation) and short-term investments at major financial institutions in the United
States and Hong Kong. The Company periodically evaluates the relative credit standing
of financial institutions considered in its cash investment strategy.
Accounts receivable, including bills of exchange from foreign customers, are
concentrated in United States retail merchandisers and European distributors of
consumer products. At March 31, 1996, one German customer accounted for 37 percent of
accounts receivable and one United States customer accounted for 20 percent of accounts
receivable. To limit credit risk, the Company evaluates the financial condition and
trade payment experience of customers to whom credit is extended. The Company does not
require customers to furnish collateral. However, the Company generally requires
foreign customers to furnish letters of credit and periodically evaluates the relative
credit standing of these customers' financial institutions.
The Company is potentially subject to off-balance sheet risks of discrepant documents
and customers' nonperformance under letters of credit which are discounted, with
recourse. At March 31, 1996, there were no contingent liabilities for discounted
letters of credit.
21. Other risks and uncertainties:
Revenues for 1996 and 1995 were primarily derived from sales of consumer products,
primarily bath scales, and is marketed in North America, Europe and Asia.
Concentrations of revenues to a German housewares distributor, collectively represented
approximately 32 percent of total revenue. At March 31, 1996 consolidated accounts
receivable concentration resided with two major customers, a German housewares
distributor and, a US chain of retail catalog stores.
Most of the Company's products contain key components, such as its application-specific
integrated circuit, which is currently available from only one supplier. Additionally,
the Company's consumer products are sourced from a single supplier with operations in
the PRC. Industrial products are manufactured in the PRC where JL leases manufacturing
space and employs its own equipment and work force. The Company's dependence on
external and foreign suppliers for most of its production presents risks of
interruption for reasons beyond its control, including possible political developments.
Generally, the Company's revenues are priced in United States dollars and its costs and
expenses are priced in United States dollars, Hong Kong dollars and Chinese renminbi.
Accordingly, the Company is potentially subject to the risks of foreign currency
transaction and translation losses which might result from fluctuations in the values
of the Hong Kong dollar and the renminbi.
22. Subsequent events:
On May 30, 1996, the Company executed an operating lease expiring on June 30, 1999 for
industrial pressure sensors design engineering facilities. On June 3, 1996, ML renewed
its Hong Kong office lease through May 1, 1998. Aggregate minimum rentals under these
lease commitments, executed after March 31, 1996, are:
<S> <C>
Year ending March 31,
1997 $ 96,000
1998 27,000
1999 5,000
--------
$128,000
23. Quarterly results of operations (unaudited):
<S> <C> <C> <C> <C>
Quarters ended June 30, 1995 September 30, 1995 December 31, 1995 March 31, 1996
Q1 Q2 Q3 Q4
Year ended
March 31, 1996
Net sales $5,123,541 $7,121,852 $5,767,915 $5,046,231
Gross profit 1,790,048 2,367,986 2,317,151 1,886,352
Net income 13,531 347,363 471,427 154,710
Earnings per share 0.00 0.09 0.12 0.05
Year ended
March 31, 1995
Net sales $3,325,645 $3,450,101 $6,327,237 $3,935,676
Gross profit 1,219,936 1,176,795 2,453,675 1,413,363
Net income (loss) 21,638 (55,282) 695,808 (328,308)
Earnings (net loss)
per share 0.01 (0.02) 0.20 (0.10)
</TABLE>
<TABLE>
<S><C>
STANDARD LEASE
THIS DEED OF LEASE, hereinafter called lease, made this 20th day of May,
1996 between CMEPI or assigns, Lessor, hereafter called Landlord, and
Measurement Specialties, Inc. Lessee hereinafter called Tenant and CMI,
INC., Rental Agent, hereinafter called Agent.
WITNESSETH: Landlord, in consideration of the rent which Tenant agrees
to pay, doth demise unto Tenant the following property.
PREMISES: Approximately 2,000 sq. ft. located at Suite B105 and B106,
11835 Canon Blvd., Newport News, VA 23606.
TERMS: From the 1st day of July, 1996 for the term of 3 years, 0 months,
0 days, next ensuing, ending on the 30th day of June, 1999.
RENT: Tenant agrees to pay in lawful money the initial monthly rent of
$1583.33 and agrees to pay a total rent which shall be the total of
monthly payments as specified. See RENT ADJUSTMENTS, see paragraph
32.
Rent installments are due on the first day of each and every month, in
ADVANCE, to CMI, Inc., Agent (its successors or assigns), at P.O. Box
120064, Newport News, VA 23612 or hand delivered to 601 Thimble
Shoals Blvd., Newport News, VA 23606, as Agent of the Landlord, without
demand.
SECURITY DEPOSIT: $1583.33. To be held by Agent in a non-interest
bearing account.
USE OF PREMISES: The premises are to be used for the following purpose
and no other: General business office, and research and development,
provided no use of hazardous materials of any kind without Landlord's
written approval.
QUIET ENJOYMENT:
(1) Tenant will not produce any noise, odor, or other condition which
adversely affects the value of the property or affects the other Tenants'
quiet enjoyment of the premises.
CONDITION OF PREMISES:
(2) Tenant has examined and knows the condition of the premises. No
other representation has been made to the Tenant by the Landlord, Agent,
or anyone as to the conditions of the premises or the use to which they
may be legally put.
(3) Tenant will not overload the building.
ASSIGNING/SUBLETTING:
(4) Tenant will not permit the premises to be occupied in whole or in part
by any other person other than Tenant; without the Landlord's written
consent, which shall not be unreasonably withheld, assign or sublet the
premises or any part thereof. Acceptance of rent by Landlord or Agent
from a person other than Tenant shall not constitute such consent. If
premises are sublet or assigned at a rent greater than stated in this Lease,
such greater rent to be paid to Landlord. If premises are assigned or
sublet in conjunction with the sale of a business or corporation or stock,
thereof Landlord has the right to review the terms and conditions of such
sale prior to approval of such assignment or subletting. In any case if
premises are assigned or sublet, Tenant is to remain liable for all
provisions of the lease, including payment of rent.
PRORATA SHARE OF EXPENSES:
(5) (a) Tenant will pay when due all bills for utilities and dumpster used
on or against the premises. Tenant to be responsible for extraordinary
expense attributable to their operation to include but not limited to
dumpster expense and parking lot clean-up or repair.
(b) Tenant will pay property insurance including but not limited to fire
and extended coverage. Tenant will pay all excess insurance premiums
(i.e. premiums in excess of the usual premiums for a non-hazardous risk)
required to be paid by Landlord on the premises by reason of Tenant's
use or occupancy thereof. Tenant is responsible for own contents and
leasehold improvements. Landlord is not to be held responsible for any
damage to Tenant's personal property or contents regardless of the cause.
(c) Landlord to pay when due any real-estate taxes or other property taxes.
Tenant to pay real-estate tax increase over base year of 1996.
(d) Landlord to pay Common Area Maintenance, or condo fees and any
other increases in such fees.
The above listed expenses (utilities, insurance, real-estate taxes, and
common area maintenance) will be paid as additional rent. Tenant's pro-
rata share to be based on square footage of Tenant's premises as a
percentage of the total square footage of the complex.
LIABILITY FOR DAMAGES:
(6) Tenant agrees, during this lease, to save both Landlord and Agent
harmless from any and all liability for any damage, personal or property
to anyone, occasioned by or resulting from any cause whatsoever, on, in,
or about the premises, the sidewalk in front of the same or any place
contiguous to the premises, and neither Landlord or Agent shall be liable
for damages, loss or injury to the person or property of Tenant or any
other person suffered on, in, or about the premises, the sidewalk in front
of the same or any place contiguous thereto by reason of any present or
future latent or other defect in the premises. Tenant will maintain at his
own expense for Landlord's benefit, insurance against injuries to any
person, or property in an amount satisfactory to the Landlord, but not
less than $500,000.00 per person, $1,000,000.00 per occurrence, and
$100,000 property damage, and naming Landlord as an additional
insured. (Policy must stipulate that Landlord be given 30 days notice
prior to any cancellation of insurance regardless of the cause.) All fire
insurance, extended coverage, and policies relating to other casualties,
carried by any party to this Lease covering the demised premises and/or
the contents thereof, shall expressly waive any right on the part of the
insurer against any other party to this Lease, which right, to the extent
not prohibited or violative of any such policy, is hereby expressly waived.
The parties to this Lease agree that their policies will include such waiver
clause and endorsement.
ADVERTISING/SIGNAGE:
(7) Tenant will not, without the written consent of the Landlord, use or
permit the walls, fences, windows, or roof or other portions of the
premises to be used without Landlord's written consent. New signs are to
be approved by Landlord in writing prior to Tenant signing a contract for
their construction.
COMPLIANCE WITH LOCAL CODES:
(8) Tenant will comply with all lawful requirements of the local and state
health boards, police and fire departments, municipal, state, and federal
authorities, and the board of fire underwriters, respecting the use of the
premises and will, at his expense, make any alterations required.
REPAIRS - ALTERATIONS TENANT RESPONSIBLILTY:
(9) Landlord will maintain roof and major structural components. Major
structural components are defined as foundation and load bearing walls
excluding doors and door frames, excluding windows, glass, and window
frames, and excluding electrical, plumbing or mechanical components
mounted on or in such walls. Landlord agrees to put heating and air
conditioning systems in proper operating condition as of possession
date. Tenant must notify Agent or Landlord within 24 hours after taking
possession, of any mechanical problems. Otherwise, it is assumed that all
mechanical systems are in proper operating condition. Tenant will keep
and maintain the remainder of the premises including heating,
ventilation, air conditioning, plumbing, electrical, and mechanical systems
in good working order and turn over the above in good working condition
upon lease expiration. Tenant will not make any alterations of, additions
to, or changes in the premises including but not limited to improvements
of a structural nature except after having the written consent of the
Landlord. Changes and improvements, and any telephone cable installed
in or about the premises shall be the property of the Landlord. Tenant
will use a licensed, bonded, and insured contractor and or subs must be
approved in writing by Landlord prior to construction. All work to be
done in a workmanlike manner with all applicable permits. Tenant will
not do anything that results in mechanic's liens against the property. If
mechanic's liens are placed against the property, Tenant will immediately
remove such liens. Tenant further agrees to have any contractor or
subcontractor execute such releases as may be required by Landlord prior
to construction.
DESTRUCTION OF BUILDING:
(10) If, without fault or negligence of Tenant, the buildings on the
premises are, in whole or in part, destroyed by fire or otherwise, then,
(1) if rendered untenantable, the Lease shall then terminate and Tenant
shall be liable for the rent only up to the time of such destruction,
but (2) if only partially destroyed, and still tenantable, Landlord
shall, within a reasonable time, repair said building with a reasonable
reduction of the rent from the time of such partial destruction until
there is again on the premises buildings of as much value to Tenant as
the buildings partially destroyed; provided, however, that if such
partial destruction shall occur within six months prior to the
termination of this Lease, this Lease, if Landlord so elects, shall then
terminate and Tenant shall be liable for rent only up to the time of
such destruction.
CONDEMNATION PROCEEDINGS:
(11) If the whole or any part of the building, shall be taken and
condemned (or sold pursuant to the threat of such taking) by a competent
authority for any public or quasi-public purpose, then the rent and term
of this lease at the option of Landlord, shall cease and terminate on
the date when possession is delivered to the condemning authority. In
no event shall Tenant have any claim to any award made as the result of
such taking except awards due for his relocation or business disruption,
nor shall Tenant have any claim against Landlord for the value of any
unexpired term of this lease or any damages whatsoever which result from
condemnation (or selling pursuant to the threat of such taking).
NOTICE:
(12) Any notice permitted or required by this Lease may be served by the
sheriff. If such notice is given by Landlord or Rental Agent it may be
given personally or by mailing the notice by certified mail (return
receipt requested) addressed to Tenant at the premises. If the notice
is to be given by Tenant, he much give notice by mailing same by
certified (return receipt requested) mail to agent at its current
address.
NOTICE TO VACATE:
(13) A WRITTEN NOTICE GIVEN AT LEAST THREE MONTHS prior to the
expiration of this lease of the intent of Tenant to vacate the premises
shall be given to Landlord and Agent. Should Landlord desire
possession, a written notice of at least one month prior to the
expiration of this lease shall be given by Landlord or Agent to Tenant.
If written notice is not given, this lease will extend month to month.
HOLDING OVER:
(14) If Tenant holds over or remains in possession or occupancy of the
premises after the expiration of the term, or after any sooner
termination thereof, his occupancy shall be illegal, but nevertheless,
Tenant shall be liable to Landlord, so long as Tenant or any of his
property remains on the premises for the last-named monthly rental for
each month, or any part thereof and also for any damages sustained by
Landlord by such action by Tenant.
SURRENDERING:
(15) Tenant will, upon surrender of possession, leave the premises in
good repair and thoroughly cleaned with all rubbish removed, or pay the
Landlord the actual cost of accomplishing same. Tenant will deliver to
Landlord all keys to the premises.
PLACARDING/SHOWING:
(16) After such written notice has been given, Tenant will permit
Landlord or Agent to placard the premises on glass windows and
elsewhere. Tenant will allow Landlord or Agent to show the premises,
exterior and interior, to any person at any time during business hours
during the term of this Lease or any extension thereof.
REMEDIES FOR TENANT'S BREACH:
(17) In the event of default by Tenant in any obligation hereunder,
including payment of rents when due, owner may proceed in any manner
provided by law for the enforcement of any rights provided herein. In
addition to the other remedies provided by law, or this lease, the
Landlord may re-enter for default in the payment of rent, or for breach
of any obligation contained in this Lease, after 5 days written notice
or in order to protect the Landlord's interests. Notice will be
considered complete if Tenant fails to accept or pick up certified mail.
Re-entry shall not prejudice Landlord's right to recover all accrued or
payable rent.
Landlord may re-rent for the account of the Tenant for the unexpired
portion of the term; or Landlord may, at his option, immediately
terminate the Lease. Landlord's terminating the Lease, or recovering
possession of the premises or re-renting shall not deprive Landlord of
any other action or remedy provided by law. Tenant will pay Landlord
and Agent respectively all expenditures incurred by them in enforcing
the provisions of this lease, including reasonable attorney's fees and
other costs. If any party fails to insist on the strict observance by
the others of any provisions of this lease, such party shall thereby
neither be precluded from enforcing nor be held to have waived any part
thereof.
COMMISSIONS TO AGENT:
(18) In consideration of Agent's services in procuring this lease and as
a covenant running with the land, the Landlord covenants with, and for
the benefit of the Agent, as follows: Agent is to receive a commission
of an amount decided by separate agreement between Landlord and Agent,
as a percentage of the rent received during the term of this lease, and
any renewal or extension thereof or any new lease of the premises
between any person and Tenant, his successors or assigns (including such
person in which Tenant, his successors or assigns, may have an interest
as stockholder, partner, lender, of money or otherwise); and no sale,
transfer, assignment, cancellation, or release (including a sale or
conveyance to Tenant, his successors or assigns (including such persons
as aforesaid)), shall affect Agent's right to such commission which is
hereby made a lien on said premises and has hereinbefore been further
secured by providing for the payment of rent to Agent. Agent shall use
its best efforts to collect rent so that the said commission may be paid
in installments on the installments of rent as received, and retained by
agent before remitting installments of rent (less installments of
commissions); but if any attempt shall be made to deprive Agent of its
rights to collect rent, then the whole amount of the commission then
unpaid shall be at Agent's option, immediately become due and payable.
Upon sale or conveyance to Tenant, his successors or assigns (including
such persons as aforesaid) Agent to receive the greater of a sales
commission equal to normally prevailing rate a the time of such sale or
conveyance, or the full leasing commission per above. Commission to be
payable in cash at closing.
(19) The Landlord hereby authorizes Agent to institute legal proceedings
for the recovery of any rent under this Lease, or any renewal or
extension thereof, or to employ an attorney for that purpose, and to
charge all costs and fees to Landlord.
(20) All rights and liabilities herein given to or imposed upon any
party shall extend to their heirs, executors, administrators,
successors, and assigns.
(21) In connection with any act done or suffered by Agent concerning the
premises the Landlord agrees to save agent harmless from all fines,
judgments, suits, claims, demands, and actions of any kind, and from
liability for injury suffered by employee or contractor engaged by the
Agent for the benefit of the Landlord, and from liability for injury or
damage to any person.
(22) Landlord further agrees that should any of the Tenant's rent checks
be returned to CMI, Inc. for insufficient funds after disbursement has
been made, Landlord agrees to immediately reimburse CMI, Inc.
AGENCY DISCLOSURE:
(23) The parties confirm that in connection with this lease, CMI, Inc.
acted as the Landlord's agent.
SUBORDINATION:
(24) This lease is subject to and is hereby subordinated to all present
and future mortgages, deeds of trust and other encumbrances affecting
the demised premises or the property of which said premises are a part
which may be placed on the premises for the benefit of the Landlord.
The Lessee agrees to execute, at no expense to the Lessor, any
instrument which may be deemed necessary or desirable by the Lessor to
further effect the subordination of the Lease to any such mortgage,
deed, trust, or encumbrance.
HEADINGS:
(25) Paragraph headings are catchwords to indicate the contents of the
paragraphs, and are not to be used in construing this lease.
CONSTRUCTION:
(26) This lease shall be construed in accordance with the laws and
statutes of Virginia.
LATE CHARGE:
(27) A late charge of 10% is due and payable on rent not received by
Agent by the 5th of the month.
RULES AND REGULATIONS:
(28) Landlord reserves the right to institute reasonable rules and
regulations regarding the premises.
TRASNFER FEE:
(29) If Tenant assigns the Lease or subleases the premises, a fee of
$100.00 is due and payable to Agent by Tenant.
ESTOPPEL, ATTORNMENT AND NON-DISTURBANCE AGREEMENTS:
(30) At Landlord's request, Tenant agrees to execute an estoppel,
attornment, or non-disturbance agreement tot he effect that a) this
Lease is in full force and effect; b) there are not defenses thereon; c)
that Tenant has accepted the premises; d) the date to which rent and
other charges are paid; e) that no events of default have occurred by
Landlord or Tenant under the Lease, or if an event of default has
occurred, setting forth in detail such default; f) as to prospective
purchasers, that Tenant shall accept and attorn to such purchaser as
Tenant's direct Landlord, and that such purchaser shall not be
responsible for any prior defaults of Landlord and that thereafter all
notices required or permitted under this lease to be given to Landlord
shall be given to Purchaser. Such certificate shall also include such
other information as may be reasonably required by Landlord.
LIMIT OF LANDLORD LIABILITY:
(31) Notwithstanding anything that may be contained herein to the
contrary, Landlord's obligations hereunder shall be limited to
Landlord's interest in the demised premises and the complex of which the
demised premises are a part.
RENT ADJUSTMENTS:
(32) The rent payable pursuant to this Lease shall be increased annually
on the anniversary date by an amount equal to six percent (6%) of the
previous year's rent. Such rent increase shall be paid in equal monthly
installments in addition to other rents described in this Lease and
shall be subject to all terms and conditions.
HAZARDOUS WASTE:
(33) No oils, pollutants, infectious waste, illegal or hazardous waste
or material are to be disposed of through the drain or sewage systems or
placed in the dumpster. I no case will Tenant contaminate soil or water
table. Landlord may from time to time order a Level1 or Level 2
Hazardous Waste survey. If above mentioned waste is found during such
survey, Tenant will immediately reimburse Landlord for the survey and
comply with the survey recommendations.
ADDITIONAL COVENANTS:
(34) Any conflict between Lease and additional covenants will be settled
in favor of additional covenants.
(34.1) If space is ready prior to July 1, 1996, then Tenant to have
space rent free. If space is not ready on July 1, 1996 then rent to be
prorated.
(34.2) Landlord, at Landlord's expense, to provide the following
buildout: a) paint suites in building standard paint; b) carpet suites
in building standard carpet; c) Install approximately 20 feet of
sheetrock wall per floorplan.
(34.3) Be it known that the principles of Landlord are licensed real
estate brokers in the Commonwealth of Virginia.
(34.4) Tenant, at Tenant's expense, to have the HVAC system serviced and
maintained under a maintenance contract with a licensed HVAC contractor
during the term of this lease. Tenant to provide Landlord with a copy
of the contract.
(34.5) Landlord's consent on a Landlord's Waiver and Consent which may
be required, shall not be unreasonably withheld, in connection with
financing of equipment installed on the premises, provided that such
waiver and consent requires the lender to repair any physical damage to
premises as a result of the lender's enforcement of such waiver and
consent.
COMPLETE ASSIGNMENT
This Lease constitutes the entire contract and understanding of the
parties, all prior negotiations of the parties have been merged with
this Lease and there are no understandings, representations, warranties,
or agreements, either oral or written, other than those set forth
herein, and this Lease shall not be amended or altered in any manner
unless such amendment or alteration shall be in writing and signed by
all parties hereto.
IN WITNESS THEREOF, each individual party hereto has hereunder signed
his or her name and affixed his or her seal, and each corporate party
hereto other than Agent has caused its name to be signed and its seal to
be affixed by its duly authorized officers, and Agent has hereunto
caused its name to be signed by its duly authorized agent of officer.
LANDLORD: CMEPI TENANT: MEASUREMENT SPECIALTIES, INC.
AGENT: CMI, INC. DATE: May 30, 1996
</TABLE>
<TABLE>
MEASUREMENT SPECIALTIES, INC.
EXHIBIT 11 -- STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
March 31, 1996
For the year ended March 31,
1996 1995
<S> <C> <C>
Primary net income per common share:
Weighted average common shares outstanding 3,529,833 3,502,005
Net effect of dilutive common equivalent shares
based on the treasury stock method using
average market price (modified treasury stock
method for 1996) 365,103 45,335
--------- ---------
Total 3,894,936 3,547,340
--------- ---------
Net income $987,031 $333,856
Assumed interest income net of tax effect
under modified treasury stock method 62,642
Preferred dividend requirements (1,802)
--------- ---------
Net income available to common shareholders $1,049,673 $332,054
--------- ---------
Primary net income per common share $0.27 $0.09
Fully diluted net income per common share:
Weighted average common shares outstanding 3,529,833 3,502,005
Net effect of dilutive common equivalent shares
based on the treasury stock method using
period-end market price, if higher than average
market price (modified treasury stock method
for 1996) 365,103 152,807
Assumed conversion of convertible preferred
Series C stock 11,195
--------- ---------
Total 3,894,936 3,666,007
--------- ---------
Net income $987,031 $333,856
Assumed interest income net of tax effect
under modified treasury stock method 62,642
--------- ---------
Net income $1,049,673 $333,856
--------- ---------
Fully diluted net income per common share(a) $0.27 $0.09
(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 March 31, 1996 and for the twelve-month
periods then ended and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000778734
<NAME> MEASUREMENT SPECIALTIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-1-1995
<PERIOD-END> MAR-31-1996
<CASH> 771
<SECURITIES> 0
<RECEIVABLES> 2041
<ALLOWANCES> (22)
<INVENTORY> 2500
<CURRENT-ASSETS> 5538
<PP&E> 2431
<DEPRECIATION> (1353)
<TOTAL-ASSETS> 6905
<CURRENT-LIABILITIES> 3065
<BONDS> 0
<COMMON> 5385
0
0
<OTHER-SE> 22
<TOTAL-LIABILITY-AND-EQUITY> 6905
<SALES> 23060
<TOTAL-REVENUES> 23060
<CGS> 14698
<TOTAL-COSTS> 14698
<OTHER-EXPENSES> 7422
<LOSS-PROVISION> 18
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> 902
<INCOME-TAX> (85)
<INCOME-CONTINUING> 987
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 987
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
