MEASUREMENT SPECIALTIES INC, 10KSB, 1997-07-02

MEASUREMENT SPECIALTIES INC
10KSB, 1997-07-02
MEASURING & CONTROLLING DEVICES, NEC

Previous: BEAR STEARNS COMPANIES INC, 424B3, 1997-07-02

Next: DREYFUS ONE HUNDRED PERCENT US TREASURY MONEY MARKET FUND, 485B24E, 1997-07-02

<TABLE>
MEASUREMENT SPECIALTIES, INC.
80 Little Falls Road
Fairfield, New Jersey 07004

March 31, 1997

INDEX

PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders

PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and disagreements with Accountants on Accounting and Financial
Disclosure

PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions

PART IV
Item 14. Financial Statement Schedules, 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. Business

Certain statements in this report, which discuss the Company's expectations, intentions and
strategies for the future, are "forward looking statements" within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
statements are based on information available to the Company on the date of this report and
the Company assumes no obligation to update them. Actual results could differ materially from
the forward looking statements. Among the important factors that could cause actual results
to differ are the timely development, market acceptance and warranty performance of new
products, the impact of competitive products and pricing, the continuity of bookings trends,
customers' financial condition, the absence of supply interruptions, uncertainties of doing
business in China and Hong Kong and such additional risks and uncertainties as are detailed
from time to time in the Company's reports and filings with the Securities and Exchange
Commission (the "SEC").

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 digital electronic measurement products. The
Company, founded in 1981, has been manufacturing products of its own design since 1986. The
Company's products employ a robust, core technology based on micromachining (the three-
dimensional sculpting of silicon), which permits accurate and efficient measurement,
resolution and display of ranges of distance, motion, force, pressure or temperature in
design-friendly formats. The Company targets high volume, low cost product opportunities in
two principal business segments, consumer products and industrial applications.

The Company's consumer products segment, accounting for more than 90 percent of revenues,
comprises bath scales, kitchen scales, tire pressure gauges and distance measuring devices
which are sold, directly and through manufacturers' representatives, to United States and
European retail merchandisers and distributors. These products feature contemporary designs,
high-contrast liquid crystal displays and factory-installed lithium batteries which are
intended to last for the lives of the products. The Company markets several bath scale models
under its "Thinner" TM brand, kitchen scales under its "Portion Power" TM brand, postal scales
under its "Postal Power" TM brand, tire pressure gauges under its "AccuTire" TM brand and
distance measuring devices under its "AccuTape" TM brand. Products also are sold under private
labels. During the latter part of 1995, the Company released a new bath scale model, designed
with a tempered glass platform and employing its "Sensor Disc" TM technological advance, which
eliminated the levers and other metal parts typically employed in consumer scales. The glass
scale and other "Sensor Disc" line extensions have become the Company's leading products.

The Company's industrial products are sold, directly and through manufacturers'
representatives, principally to industrial customers for pressure instrumentation and process
control applications. The Company produces a line of low cost, high output stainless steel
isolated pressure transducers using its silicon strain gage sensors. These compact pressure
gauges, which transmit measurements to remote monitoring systems by wire, are housed in one-
piece stainless steel castings, making them well-suited for demanding environments, including
pumps and compressors, hydraulic and pneumatic systems, energy and water management.

Revenues are concentrated in United States and European distributors and retailers of consumer
products. Korona Haushaltswaren GmbH, a German distributor of diversified housewares,
accounted for 36 percent, 32 percent and 30 percent of net sales for the years ended March 31,
1997, 1996 and 1995, respectively, and 26 percent of accounts receivable at March 31, 1997.
Signature Brands USA, Inc. (formerly Health o meter Products, Inc.), a United States
manufacturer and distributor of electric housewares, accounted for 16 percent of net sales for
the year ended March 31, 1997 and 17 percent of accounts receivable at that date. Service
Merchandise, Inc., a United States retail merchandiser of jewelry and hard goods, accounted
for 16 percent of accounts receivable at March 31, 1997. To limit credit risk, the Company
evaluates the financial condition of customers to whom credit is extended. The Company
generally does not require customers to furnish collateral, though certain foreign customers
furnish letters of credit.

Orders for consumer products are characterized by short lead times and seasonal effects on
volume. Additionally, production generally slows in February, when ML, JL, and suppliers
suspend operations in China and Hong Kong for the Lunar New Year holiday. Accordingly, the
Company's backlog and revenues ordinarily fluctuate during the year. Backlog, which consists
only of orders believed to be firm, approximated $5,500,000 at March 31, 1997 and $3,300,000
at March 31, 1996. Substantially all the backlog at March 31, 1997 is expected to be filled
within the fiscal year ending March 31, 1998, 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.

Consumer products 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, based on its warranty
claims experience. This estimate is particularly susceptible to changes in the near term
based on introductions of new products, product quality improvements and changes in end user
behavior. On March 21, 1997, JL received certification of its conformity with the
International Standards Organization ("ISO") 9002 Quality System Standard.

The markets for the Company's products are characterized by frequent introductions of
competitive products and pricing pressures. Many of the Company's competitors are larger than
the Company and have achieved market acceptance of their product lines. The Company has
competed successfully on the basis of its product designs, features and value. Accordingly,
great reliance is placed on research and development of new products, line extensions and
technological, quality and other continuous product improvements. There can be no assurance
that the Company will enjoy continued success in these efforts. Research and development
expenses, net of customer funding, aggregated $1,746,000 for 1997, $1,238,000 for 1996 and
$833,000 for 1995.

The Company's core technology employs specialized electronic components known as
micromechanical transducers and application specific integrated circuits ("ASICs").
Transducers transform measurable phenomena into analog electronic signals which the ASICs
convert to digital signals, for processing in proprietary circuitry. Calibration is achieved
using specialized equipment and software developed by the Company. The Company holds patents
for certain applications of its core technology in the measurement of force, pressure,
distance, 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. However, the Company has not
obtained patents for all its innovations, nor does it plan to do so.

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.

The Company manufactures substantially all its industrial products, and substantially all its
proprietary intermediate goods used in its consumer products, in leased premises located in
China. Additionally, certain key manufacturing and support activities are conducted at leased
premises in Hong Kong. The Company's consumer products are assembled in China by a single
supplier, River Display, Ltd. ("RDL"), whose principal shareholder is a former Director of the
Company. 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, though the
Company accounts for a significant portion of RDL's revenues. Additionally, most of the
Company's products contain key components now obtained from a limited number of sources.
These concentrations in external and foreign sources of supply present risks of interruption
for reasons beyond the Company's control, including political and other uncertainties
regarding Hong Kong and China.
From time to time, JL's operations have experienced interruptions of electric power and
telecommunication. China's infrastructure continues to evolve, as does its regulation of
foreign investment. Although the Chinese government has pursued economic reforms hospitable
to foreign investment and free enterprise, the continuation and success of these efforts is
not assured. The Company's operations could be adversely affected by changes in Chinese laws
and regulations, including those relating to taxation and currency exchange controls, by the
imposition of economic austerity measures intended to reduce inflation and by social and
political unrest, such as the 1989 student demonstrations in Tiananmen Square. The United
States has considered revoking China's most favored nation ("MFN") tariff status in connection
with controversies over the protection of human rights and intellectual property rights, among
other things. The loss of MFN could adversely affect the cost of goods imported into the
United States. Additionally, if China does not join the World Trade Organization ("WTO"), the
Company may not benefit from the lower tariffs and other privileges enjoyed by competitors
located in countries which are members of the WTO.

Sovereignty over Hong Kong will revert to China on July 1, 1997. The 1984 Sino-British Joint
Declaration, the 1990 Basic Law of Hong Kong, the 1992 United States-Hong Kong Policy Act and
other agreements provide some indication of the business climate the Company believes will
exist in Hong Kong after the change in sovereignty. Hong Kong will become a Special
Administrative Region ("SAR") of China, with certain autonomies from the Chinese government.
Hong Kong will remain a full member of the WTO. It will be a separate customs territory from
China, with separate tariff rates and export control procedures. It will have a separate
intellectual property registration system. All land leases now in effect will be extended for
50 years, except for those leases without a renewal option expiring after June 30, 1997 and
before June 30, 2047. The Hong Kong dollar will continue to be legal tender in the SAR,
freely convertible and not subject to foreign currency exchange controls. The SAR government
will have sole responsibility for tax policies, though the Chinese government must approve the
SAR's budgets. Notwithstanding the provisions of these international agreements, the
continued stability of political, legal, economic or other conditions in Hong Kong cannot be
assured.

No treaty exists between Hong Kong and the United States providing for the reciprocal
enforcement of foreign judgments. Accordingly, Hong Kong courts might not enforce judgments
predicated on the federal securities laws of the United States, whether arising from actions
brought in the United States or, if permitted, in Hong Kong.

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's revenues may be affected by the performance of the United States
dollar compared with that of its foreign customers' currencies. Foreign sales comprised 51
percent, 55 percent and 61 percent of revenues for the years ended March 31, 1997, 1996 and
1995, respectively. Additionally, the Company is exposed to foreign currency transaction and
translation losses which might result from adverse fluctuations in the values of the Hong Kong
dollar and the renminbi. At March 31, 1997, the Company had net liabilities of $1,649,000
subject to fluctuations in the value of the Hong Kong dollar and net assets of $1,234,000
subject to fluctuations in the value of the renminbi. Fluctuations in the value of the Hong
Kong dollar have not been significant since October 17, 1983, when the Hong Kong government
pegged the value of the Hong Kong dollar to that of the United States dollar. 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. China adopted a floating currency system on January 1, 1994,
unifying the market and official rates of foreign exchange. China approved current account
convertibility of the renminbi on July 1, 1996, followed by formal acceptance of the
International Monetary Fund's Articles of Agreement on December 1, 1996. These regulations
eliminated the requirement for prior government approval to buy foreign exchange for ordinary
trade transactions, though approval is still required to repatriate equity or debt, including
interest thereon. As a result of these actions, the net inflow of capital into China and
government steps to restrict credit for the purpose of controlling inflation, the value of the
renminbi has been fairly stable, although high inflation has persisted. However, there can be
no assurance that these currencies will remain stable or will fluctuate to the Company's
benefit. To manage its exposure to these risks, the Company may, though to date it has not,
purchase currency exchange forward contracts, currency options or other derivative
instruments, provided such instruments can be obtained at suitable prices.

At March 31, 1997, the Company employed 235 persons, compared with 215 persons at March 31,
1996: 41 employees in the United States (27 for 1996), 30 employees in Hong Kong (39 for
1996) and 164 employees in China (149 for 1996). Employees are not represented by collective
bargaining. The Company considers its global labor practices and employee relations to be
good.

Item 2. Properties

MSI's headquarters, United States sales office and distribution warehouse and certain design
engineering facilities are located in a 19,000 square foot facility in Fairfield, New Jersey,
under an operating lease expiring on June 30, 2000. 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, the Special Economic Zone in China's
Guangdong Province, under an operating lease expiring on February 29, 2000. This location
contains the Company's China facilities for production engineering, quality assurance and
certain manufacturing operations. Land in China is owned by the government, which may sell
the right to use the land for a specified period of time.

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. Land
in Hong Kong is owned by the United Kingdom Crown, pursuant to a long-term land lease expiring
after June 30, 1997, and will revert to China no later than June 30, 2047.

These premises are suitable and adequate for the Company's present operations.

Item 3. Legal Proceedings

On January 23, 1997, Dresser Industries, Inc. ("Dresser") filed a complaint against the
Company in United States District Court, District of New Jersey, seeking declaratory judgment
and legal costs. Dresser disputes the extent of certain marketing rights and the magnitude of
certain manufacturing rights that the Company allegedly granted under a 1991 agreement.
Management believes that Dresser's claim is without merit. On February 25, 1997, the Company
filed an answer and counterclaim, requesting a declaration of the parties' rights under the
agreement. The case recently has been stayed, pending its referral to a Court-sponsored
mediation program. If the case cannot be resolved through mediation, management intends to
pursue a vigorous defense of its position.

Discovery on the merits of the action have not yet begun and the Company's potential
liability, if any, is not yet determinable. Based on the information it now possesses,
management believes that this action will not have a material adverse effect on the Company's
consolidated financial statements. Accordingly, no provision has been made for the outcome of
this matter in the accompanying financial statements. However, it is reasonably possible that
management's estimate of the outcome could change in the near term, resulting in a provision
for liability in the future.

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, 1997.

PART II

Item 5. Market for Registrant's 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 April 30, 1997, the Company's transfer agent reported that there were 124
record holders of common shares, excluding beneficial owners whose shares are held in the
names of various dealers and clearing agencies. The Company does not know the number of
beneficial holders of its common shares. High and low sales prices for the last two fiscal
years were:
<S> <C> <C>
Fiscal Quarter Ended High Low
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
June 30, 1996 4.63 3.81
September 30, 1996 4.19 3.13
December 31, 1996 3.63 2.50
March 31, 1997 4.63 2.75

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 future.
Additionally, the payment of dividends is subject to the consent of a bank with which the
Company has a revolving credit agreement.

At present, there are no material restrictions on ML's ability to transfer funds to MSI in the
form of cash dividends, loans, advances or purchases of materials, products or services. JL's
distribution and repatriation of dividends to ML or MSI are restricted by Chinese laws and
regulations.

On September 13, 1996, the Company modified the terms of certain outstanding common stock
purchase warrants, which later expired unexercised, for 82,500 shares.

Item 6. Selected Financial Data

<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993

Years Ended March 31:
Net sales $25,004,499 $23,059,539 $17,038,659 $10,589,436 $10,871,035

Results of operations:
Income (loss) from
continuing operations 1,174,844 987,031 333,856 (964,879) 742,626
Cumulative effect of a new
accounting principle (1) (97,917)
--------- --------- --------- ----------- ---------
Net income (loss) 1,174,844 987,031 333,856 (1,062,796) 777,001

Net cash provided by (used in):
Operating activities (531,186) 880,325 416,952 (587,152) 788,920
Investing activities (756,892) (828,602) (443,770) (360,942) (281,744)
Financing activities 768,000 (4,792) 22,000 1,295,569 (589,911)

Primary earnings (net loss) per common share:
Income (loss) from
continuing operations 0.31 0.27 0.09 (0.28) 0.24
Cumulative effect of a new
accounting principle (1) (0.03)
--------- --------- --------- ----------- ---------
Net income (loss) 0.31 0.27 0.09 (0.31) 0.25

Cash dividends declared per
common share none none none none none

As of March 31
Total assets $9,234,184 $6,919,566 $5,623,189 $3,775,109 $3,669,311
Long-term debt including
obligations under capital
leases, net of current
maturities, and redeemable
preferred stock (2) 778,000 none none none none

(1) Effect of adoption, on April 1, 1993, of Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits." It is not practicable to determine the pro forma effect of this
accounting change on income from continuing operations for the year ended March 31, 1993.

(2) Long-term obligations at March 31, 1997 consist solely of borrowings under a revolving line of credit
agreement extended by a bank.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

RESULTS OF OPERATIONS

The Company's revenues and profits increased year-over-year for both 1997 and 1996, with
record sales achieved for 1997. Net sales for 1997, 1996 and 1995 were $25,004,000,
$23,060,000 and $17,039,000, respectively. Net operating results for 1997, 1996 and 1995 were
$1,175,000 ($.31 per share), $987,000 ($.27 per share) and $334,000 ($.09 per share),
respectively.

Substantially all the revenue growth for these years was derived from new product
introductions. It is not practicable to determine the extent to which revenues from
continuing products were affected by changes in prices or unit volumes for these years. Each
year's increase in revenues was driven by growth in sales of consumer bath scales, the
Company's principal product category, accounting for revenues of $17,820,000, $15,289,000 and
$9,420,000 for 1997, 1996 and 1995, respectively. The Company introduced a tempered glass
platform scale employing its "Sensor Disc" TM technological advance in late 1995, and line
extensions employing this technology were introduced thereafter.

Sales performance of other consumer products was mixed. Sales of tire pressure gauges, which
are affected by the timing of promotional sales campaigns, were $1,792,000, $2,258,000 and
$2,803,000 for 1997, 1996 and 1995, respectively. Kitchen scales accounted for $1,841,000,
$2,314,000 and $2,351,000 of 1997, 1996 and 1995 sales, respectively. The Company plans to
expand the number of models in each category's line in 1998, to broaden the price ranges
offered and include a "Sensor Disc" TM kitchen scale and various mechanical measurement
products.

Sales of the Company's principal industrial product category, industrial pressure transducers,
grew to $1,218,000 for 1997, compared with $551,000 for 1996 and $353,000 for 1995. This is a
relatively new product category for the Company, but one which the Company believes has great
potential. The Company's strategy for this product category depends upon further investment,
including potential acquisitions, to realize substantial growth. During 1997, the Company
launched a new platform with protection against electromagnetic and radio-frequency
interference. These additional features make the product useful in the most difficult
environments, associated with applications such as off-road vehicles, where immunity from
electromagnetic and electrostatic intereference is required. Introduction of this product
significantly broadens the industrial pressure transducer line toward the higher end of the
industrial market.

The Company granted a limited license to manufacture comparable pressure transducer products
to Dresser Industries, Inc. ("Dresser") under a 1991 agreement. Dresser now disputes the
extent of certain marketing rights and the magnitude of certain manufacturing rights that the
Company allegedly granted under that agreement. Management believes that Dresser's claim is
without merit. On January 23, 1997, Dresser filed a complaint against the Company in United
States District Court, District of New Jersey, seeking declaratory judgment and legal costs.
On February 25, 1997, the Company filed an answer and counterclaim, requesting a declaration
of the parties' rights under the agreement. The case recently has been stayed, pending its
referral to a Court-sponsored mediation program. If the case cannot be resolved through
mediation, management intends to pursue a vigorous defense of its position. Discovery on the
merits of the action have not yet begun and the Company's potential liability, if any, is not
yet determinable. Based on the information it now possesses, management believes that this
action will not have a material adverse effect on the Company's consolidated financial
statements. Accordingly, no provision has been made for the outcome of this matter in the
accompanying financial statements. However, it is reasonably possible that management's
estimate of the outcome could change in the near term, resulting in a provision for liability
in the future.

The Company has benefited from the continued expansion of its business with two principal
consumer products customers. Signature Brands USA, Inc. (formerly Health o meter Products,
Inc.), a United States manufacturer and distributor of electric housewares, accounted for 16
percent of net sales for 1997 and less than 10 percent of net sales previously. Korona
Haushaltswaren GmbH, a German distributor of diversified housewares, accounted for 36 percent,
32 percent and 30 percent of net sales for 1997, 1996 and 1995, respectively. Foreign
customers accounted for approximately 51 percent, 55 percent and 61 percent of revenues for
1997, 1996 and 1995, respectively. Substantially all revenues are priced in United States
dollars. Accordingly, the Company's revenues may be affected by the performance of the United
States dollar compared with that of its foreign customers' currencies.

Gross profit increased each year, though the gross profit percentage declined somewhat. Gross
profit was $8,611,000 (34.4 percent of net sales) for 1997, $8,098,000 (35.1 percent) for 1996
and $6,060,000 (35.6 percent) for 1995. These changes were affected primarily by shifts in
the product mix, which became increasingly weighted in favor of bath scales which earn lower
gross profit margins than other consumer products.

Selling, general and administrative ("SG&A") expenses remained flat from 1996 to 1997,
following an increase over 1995. These expenses were $5,983,000 (23.9 percent of net sales)
for 1997, $5,963,000 (25.9 percent) for 1996 and $4,707,000 (27.6 percent) for 1995. From
1996 to 1997, variable SG&A expenses declined slightly as a percentage of net sales,
benefiting from the concentration in the customer mix which resulted in proportionately lower
costs for shipping and sales commissions. From 1995 to 1996, shipping costs declined,
proportionate to net sales, as the Company reduced its use of air shipments as a result of
improvements in its production cycle time. Additionally, the year-over-year provision for
estimated product warranty obligations declined, as a percentage of net sales, for both 1997
and 1996 as the Company revised its estimate in each year to reflect its more recent warranty
claims experience, which benefited from product quality improvements. On March 21, 1997, JL
received certification of its conformity with the ISO 9002 Quality System Standard. The
estimate of product warranty obligations is particularly susceptible to changes in the near
term based on introductions of new products, product quality improvements and changes in end
user behavior. Consumer products are marketed under warranties to end users of up to ten
years.

Total fixed SG&A expenses remained flat from 1996 to 1997 following a substantial increase
over 1995. 1997 saw substantial increases in advertising and promotion expenses, particularly
for packaging and sales literature developed for new consumer product offerings, and for
marketing of the industrial product segment. These expenses are expected to remain
significant, since new product introductions are key to the Company's growth plans. These
increases were offset by a lower provision for estimated bonus awards for 1997. Fixed SG&A
expenses grew in 1996, mainly as a result of staff expansions and increased depreciation
costs. Further increases to the staff and further capital expenditures are likely as the
Company grows.

The provision for doubtful accounts rose in 1997, after remaining at relatively modest levels
in 1996 and 1995, after the Company wrote off $58,000 in connection with a former customer's
bankruptcy. To limit credit risk, the Company evaluates the financial condition of customers
to whom credit is extended. The Company generally does not require customers to furnish
collateral, though certain foreign customers furnish letters of credit.

Research and development expenses were $1,746,000 (7.0 percent of net sales) for 1997,
$1,238,000 (5.4 percent) for 1996 and $833,000 (4.9 percent) for 1995. The Company's revenue
growth has relied on, and is likely to continue to rely on, expansion of its product lines.
Accordingly, research and development expenses will continue to be significant. The Company
established a transducer engineering center in Virginia to develop industrial pressure control
products. Increased engineering resources were used to develop innovative designs and new
technologies to expand the number of product offerings, improve products' performance, appeal
and profitability. A significant innovation was the development of the "Sensor Disc" TM
technology, introduced in the Company's tempered glass bath scale and more recent line
extensions. The Company plans to launch further line extensions and develop a lower cost
"frame" scale incorporating "Sensor Disc" TM technology in a one-piece frame. The Company
expects that its planned "frame" scale will result in a lower cost product with a shorter
production cycle time. The Company also plans to develop a new ASIC to reduce the cost in
substantially all products.

For 1997 and 1996, the Company reported substantial credits for income taxes, which mainly
reflect reductions in the previously-established valuation allowance for deferred tax assets.
These reductions were based on management's annual assessments of the extent to which the
benefits of unused net operating loss carryforwards were more likely than not to be realized.
At March 31, 1997, the Company's unused federal net operating loss carryforward approximated
$949,000. While substantially all deferred tax benefits at March 31, 1997 are expected to be
realized, the amounts realizable could be reduced in the near term if future taxable income is
lower than estimated or if there are differences in the timing or amount of future reversals
of taxable temporary differences. Additionally, provisions of the Tax Reform Act of 1986 may
limit the carryforward's future use. The use of loss carryforwards for 1997, 1996 and 1995
resulted in tax benefits of $73,000, $233,000 and $104,000, respectively.

The income tax credits also reflect lower rates of tax in the jurisdictions in which the
Subsidiaries operate. Deferred income taxes are not provided on the Subsidiaries'
undistributed earnings, which approximated $465,000 at March 31, 1997, because those earnings
are expected to be permanently reinvested. Distribution, in the form of dividends or
otherwise, would subject the Subsidiaries' earnings 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. Pursuant to current Chinese tax policies, JL qualifies for
a special state corporate tax rate of 15 percent. However, because JL has agreed to operate
in China for a minimum of ten years, a full tax holiday (expected to expire on March 31, 1998)
is available for two years, beginning with JL's first profit-making year, and a 50 percent tax
rate reduction to 7.5 percent (expected to expire on March 31, 2001) is available for the
three years thereafter. After the expiration of the tax holiday, JL is expected to qualify
for a reduction of the tax rate to 10 percent, provided it exports a minimum of 70 percent of
its production. The Hong Kong corporate tax rate, at which ML's earnings are taxed, is 16.5
percent. The continuation of favorable tax rates in China and Hong Kong cannot be assured.

Notwithstanding the availability of carryforwards and taxable temporary differences at March
31, 1997, and the recognition of deferred tax benefits for the year then ended, income tax
payments for 1997 aggregated $105,000, principally in Hong Kong. The Company will continue to
pay taxes on its taxable income in Hong Kong, where there are no net operating loss
carryforwards or tax holidays available.

Earnings per share considers 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 1997 and 1996, dilutive common equivalent shares were computed using the
modified treasury stock method, which assumes investment of a portion of the exercise
proceeds. The weighted average number of shares used to compute 1997 earnings per share
included 337,315 dilutive potential common shares from stock options and warrants. The total
number of potential common shares underlying stock options and warrants outstanding at March
31, 1997 was 977,000.

In February 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share," which requires public companies to present
basic earnings per share and, if applicable, diluted earnings per share. Statement No. 128
also eliminates the modified treasury stock method of computing potential common shares. The
Company will adopt Statement No. 128 on October 1, 1997. The Company estimates that basic
earnings per share determined pursuant to Statement No. 128 would have been $0.33 for 1997,
$0.28 for 1996 and $0.09 for 1995. Additionally, had those years' diluted earnings per share
been determined pursuant to Statement No. 128, the Company estimates that the results would
have approximated the amounts reported for primary earnings per share for those years.

The Company manufactures all its industrial products, and all its proprietary subassemblies
used in its consumer products, in leased premises located in China. Substantially all its
consumer products are assembled by a single source, River Display Ltd. ("RDL"), also operating
in China. Additionally, most of the Company's products contain key components now obtained
from a limited number of suppliers. These concentrations in the current sources of supply
present risks of interruption for reasons beyond the Company's control, including, with
respect to China, political, economic and legal uncertainties.

From time to time, JL's operations have experienced interruptions of electric power and
telecommunication. China's infrastructure continues to evolve, as does its regulation of
foreign investment. Although the Chinese government has pursued economic reforms hospitable
to foreign investment and free enterprise, the continuation and success of these efforts is
not assured. The Company's operations could be adversely affected by changes in Chinese laws
and regulations, including those relating to taxation and currency exchange controls, by the
imposition of economic austerity measures intended to reduce inflation and by social and
political unrest. Revocation by the United States of China's most favored nation tariff
status could adversely affect the cost of goods imported into the United States.
Additionally, if China does not join the World Trade Organization ("WTO"), the Company may not
benefit from the lower tariffs and other privileges enjoyed by competitors.

The Company's costs and expenses are priced in United States dollars, Hong Kong dollars and
Chinese renminbi. Accordingly, the Company is exposed to foreign currency transaction and
translation losses which might result from adverse fluctuations in the values of the Hong Kong
dollar and the renminbi. At March 31, 1997, the Company had net liabilities of $1,649,000
subject to fluctuations in the value of the Hong Kong dollar and net assets of $1,234,000
subject to fluctuations in the value of the renminbi. Past fluctuations in the values of
these foreign currencies have not had a material effect on the Company's business. However,
there can be no assurance that these currencies will remain stable or will fluctuate to the
Company's benefit. To manage its exposure to these risks, the Company may, though to date it
has not, purchase currency exchange forward contracts, currency options or other derivative
instruments, provided such instruments can be obtained at suitable prices.

The Company believes that inflation has not had a material effect on its business. The
Company competes on the basis of its product designs, features and value. Accordingly, its
revenues generally have kept pace with inflation, notwithstanding that inflation in the
Subsidiaries' locations have been consistently higher than that in the United States.
Increases in labor costs have not had a significant impact on the Company's business because
most of the Company's employees are in China, where prevailing labor costs are low.
Additionally, the Company believes that any significant increases in materials costs are
likely to affect the entire electronics industry and, accordingly, may not have a significant
adverse effect on the Company's competitive position.

LIQUIDITY AND CAPITAL RESOURCES

The Company continued to have adequate resources for its financing requirements, which have
been concentrated in the working capital needs of its operations, including significant
research and development. For 1997, cash declined by $532,000, as operating activities used
$531,000 and investing activities used $757,000. Financing activities, principally borrowings
under the Company's bank line of credit, net of repayments, provided $778,000 for that year.
For 1996 and 1995, year-end cash levels remained relatively flat, as net cash flows from
operating activities funded substantially all investing activities for those years.

The Company's working capital needs increased considerably in 1997, partly from growth in the
amount of business conducted on open account terms and from expansion of the number of models
in its product lines, leading to generally higher inventories. Inventory levels at March 31,
1997 also reflect atypically strong orders for shipment during the quarter ending June 30,
1997 - ordinarily a seasonally sluggish period for consumer products sales. Revenues usually
peak in the quarters ending September 30 and December 31. However, for the year ended March
31, 1997, revenues were soft for the June and September quarters, recovering for the December
and March quarters. Backlog approximated $5,500,000 at March 31, 1997, compared with
$3,300,000 a year earlier. The dollar amount of backlog orders is not necessarily indicative
of the results that may be expected for an ensuing fiscal period. Orders for consumer
products are characterized by short lead times and, accordingly, revenues and backlog will
continue to fluctuate.

Capital expenditures for 1997 were driven mainly by new product introductions and
technologies. Productive equipment was installed at MSI's engineering center in Virginia and
at JL, to expand their capabilities for development and production of industrial pressure
transducers and consumer product subassemblies. JL also further improved its leasehold. The
growth of consumer product line extensions resulted in additional spending, in Hong Kong, on
new product tooling. MSI and JL purchased computer hardware and software to improve
engineering and office productivity. The Company expects such capital spending to continue,
in line with expansions of its product lines and staff size. Additionally, the future success
of the Company's industrial products segment could necessitate significantly larger
expenditures for productive equipment, especially in China. There were no material
commitments for capital expenditures at March 31, 1997.

The Company continues to finance its requirements with accounts payable and bank borrowings.
RDL, the Company's principal supplier, assembles substantially all the Company's consumer
products. While the Company furnishes RDL with the proprietary subassemblies required in its
products, RDL purchases many other components from third parties on the Company's behalf,
reducing the Company's need to finance certain raw materials through their conversion to
finished inventories. RDL is not required to maintain capacity available for the Company's
benefit, nor is the Company obligated to make minimum payments to RDL.

The Company has a $2 million revolving line of credit agreement extended by a United States
bank. During 1997, as a result of its continued financial strength and favorable market
conditions, the Company obtained amendments to the agreement, which reduced borrowing costs
and extended debt maturities. (At March 31, 1997, the Company had a current ratio of 2.08 and a
debt-to-equity ratio of 0.99.) Advances are payable by September 30, 1998, the date of the
agreement's expiration, and collateralized by a senior security interest in substantially all
assets. Borrowings bear interest at 0.5 percent above the bank's prime rate (aggregating 8.75
percent at March 31, 1997). The agreement requires the Company to maintain certain levels of
working capital and net worth, limits the Company's capital expenditures and advances to its
Subsidiaries and requires the bank's consent for the payment of dividends. Additionally, the
agreement requires payment of an annual facility fee.

From time to time, export letters of credit received from foreign customers are discounted,
with recourse, with ML's banks in Hong Kong. ML is potentially subject to off-balance sheet
risks of discrepant documents and customers' nonperformance under these letters of credit. At
March 31, 1997, ML was contingently liable for $164,000 under discounted letters of credit
pending collection by the banks.

Further expansion of the Company's financing requirements are likely to require additional
resources. The Company believes that suitable resources for expansion of its working capital
requirements would be available, though no assurance can be given. However, significant
expansion of JL's productive capacity might be difficult to finance through the Company's
traditional sources, given the uncertain legal environment in China. Additionally, if the
Company were to pursue potential acquisitions, it would likely require other forms of
financing.

Item 8.Financial Statements and Supplementary Data

The financial statements and supplementary data, together with the report thereon by the
Company's Independent Certified Public Accountants, are listed below in Item 14. Exhibits,
Financial Statement Schedules and Reports on Form 8-K.

Item 9.Changes in and disagreements with Accountants on Accounting and Financial Disclosure

None

PART III

Item 10.Directors and Executive Officers of the Registrant

On October 15, 1996, Directors listed below were elected to serve on the Board of Directors
(the "Board") until the next Annual Meeting of Shareholders.
<S> <C> <C> <C>
Name Age Positions and offices Director since

Joseph R. Mallon Jr. 51 President, Chief Executive Officer April 1, 1992
and Chairman of the Board of
Directors

John D. Arnold 43 Director June 19, 1995

Richard S. Betts 53 Director April 1, 1992

Theodore J. Coburn 43 Director October 20, 1995

Damon Germanton 54 Executive Vice President, Chief March 5, 1981
Operating Officer, Secretary and
Director

Steven P. Petrucelli 44 Director June 15, 1992

The Hon. Dan J. Samuel 72 Director October 27, 1994

Mark W. Cappiello 43 Vice President of Sales and Marketing N/A

Mark A. Shornick 43 Chief Financial Officer, Treasurer and N/A
Assistant Secretary

Joseph R. Mallon Jr. became the Company's President, Chief Executive Officer and Chairman of
the Board on April 1, 1995. Mr. Mallon has thirty years experience in electronic sensor
technology. He is a recognized pioneer in micromachining (the three-dimensional sculpting of
silicon), having published 50 technical papers and having been awarded 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 Ph.D. EE. program at Stanford University. Mr. Mallon serves on the Board's
Operations Committee.

John D. Arnold has been in private law practice since 1989, primarily focusing 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 Compensation Committee.

Richard S. 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.

Theodore J. Coburn has been a Partner of Brown, Coburn & Co., a financial consulting firm,
since 1991. From 1986 until 1991, he was a Managing Director of Global Equity Transactions
and a member of the Board of Directors of Prudential Securities. From 1983 to 1986, Mr.
Coburn served as Managing Director of Merrill Lynch Capital Markets. Mr. Coburn holds a B.S.
from the University of Virginia, an M.B.A. from the Columbia University Graduate School of
Business and masters degrees from Harvard University's Graduate School of Education and its
Divinity School. Mr. Coburn serves as a Director of Nicholas-Applegate Growth Equity Fund,
Nicholas-Applegate Equity Trust, Emerging Germany Fund and Moovies Inc. Mr. Coburn serves on
the Board's Audit and Compensation Committees.

Damon Germanton has been a Director and an Executive Officer since founding the Company.
Previously, Mr. Germanton obtained sixteen years experience in military and aerospace
applications of micromachined sensor technology as an engineer and operations manager for
Kulite Semiconductor Products, Inc. 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 and a B.S. in Engineering from Fairleigh Dickinson
University, serves on the Board's Operations Committee.

Steven P. Petrucelli consults in electronic and medical technology and, since 1979, has been
an Assistant Professor at Rutgers University in the Biomedical and Electrical Engineering
Departments. Dr. Petrucelli joined the Company's staff in 1991 and previously consulted for
the Company. Dr. Petrucelli chairs the Board's Operations Committee.

The Honorable Dan J. Samuel has been a business consultant since his retirement in 1986.
Previously, Mr. Samuel served as President and Chief Executive Officer of Scallop Corporation,
a subsidiary of the Royal Dutch/Shell Group of Companies. Mr. Samuel currently serves on the
Boards of Directors of Canadian Overseas Packaging Industries and, since 1985, Witco
Corporation. Mr. Samuel chairs the Board's Compensation Committee and serves on its Audit
Committee.

Mark W. 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) and Borg-Erickson Corporation. Mr. Cappiello received a B.A. in
Business from the University of Connecticut.

Mark A. Shornick has served as Chief Financial Officer since he joined the Company on July 10,
1989, later adding the duties of Assistant Secretary and Treasurer. Mr. Shornick has twenty
years experience in providing finance and accounting services to emerging companies. Before
joining the Company, he was employed as an audit manager by national and regional accounting
firms Miller, Ellin & Company, Laventhol & Horwath and Brout & Company, where he specialized
in public companies with a multinational presence. A Certified Public Accountant, Mr.
Shornick received a B.A. in Accounting from Queens College of the City University of New York.

Based solely on a review of Forms 3, 4 and 5 and amendments thereto furnished to the Company,
there were no late reports required by Section 16(a) of the Exchange Act, nor were there any
transactions that were not reported on a timely basis, as disclosed in these Forms, during the
year ended March 31, 1997, nor were there known failures to file required Forms, except that
Mr. Betts failed to report one transaction timely.

Item 11. Executive Compensation

The following pages contain the Company's Summary Compensation Table and Aggregated Option/SAR
Exercises and Fiscal Year-End Option/SAR Value Table for the year ended March 31, 1997, and
the Performance Line Graph information for the five years then ended. For the year ended
March 31, 1997, stock options were neither granted to Officers nor repriced, nor were there
any long-term incentive plan ("LTIP") awards. The Company has never granted stock
appreciation rights, nor does it have a defined benefit or actuarial pension plan.

The Performance Line Graph information includes two peer groups of publicly held companies
with standard industrial classifications ("SIC") appropriate for the Company's two business
segments. The peer group for the Company's consumer products segment (SIC 3634) comprises
Beverly Hills Fan Company, Creative Technologies Corporation, Helen of Troy Corporation Ltd.,
Rival Company, Salton/Maxim Housewares Inc., Signature Brands USA Inc., Sunbeam Corporation,
Toastmaster Inc. and Windmere-Durable Holdings. The peer group for the Company's industrial
products segment (SIC 3823) comprises Advanced Machine Vision Corporation, Arizona Instrument
Corporation, Astrosystems Inc., BEI Electronics Inc., Cognex Corporation, Computational
Systems Inc., Daniel Industries, Dionex Corporation, Elsag Bailey Process Automation, Emerson
Electric Company, Engineering Measurements Company, Holometrix Inc., Hurco Companies Inc.,
Impact Systems Inc., Industrial Scientific Corporation, Industrial Technologies Inc., Isco
Inc., K-tron International Inc., Measurex Corporation, Medar Inc., Mesa Laboratories Inc.,
Mikron Instrument Company, Monitek Technologies, Moore Products Company, Orbotech Ltd.,
Pollution Research and Control, PPT Vision Inc., Robotic Vision Systems Inc., SBS Technologies
Inc., Schmitt Industries Inc., Technology 80 Inc., Thermedics Detection Inc., Thermo-mizer
Environmental Corporation, Topro Inc., TSI Inc. and Unit Instruments Inc.

Non-officer Directors receive $1,000 for attendance at each regularly scheduled Board meeting
and, effective January 1, 1997, a $4,000 annual retainer, paid in two equal semi-annual
installments. 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. Effective January 1, 1997,
non-officer Directors are paid $500 for attending ($600 for chairing) each quarterly Committee
meeting. Previously, non-officer Directors were paid $250 for attending ($500 for chairing)
each quarterly Committee meeting. Non-employee Directors do not receive retirement or other
fringe benefits.

Certain non-officer Directors who render other services to the Company receive additional
compensation. The Company provides part-time employment to Dr. Petrucelli for an annual
salary of $52,500. Additionally, the Company provides $20,571 in annual support to the gifts
and grants program of the Biomedical Engineering Department at Rutgers University's College of
Engineering, where Dr. Petrucelli also has part-time employment. The Company also provides
part-time employment to Dr. Petrucelli's colleague at the College of Engineering for an annual
salary of $41,500. Additional compensation paid to Messrs. Arnold and Coburn, who serve on
the Board's Compensation Committee, is described below under "Compensation Committee
Interlocks and Insider Participation."

Mr. Mallon, the Company's Chief Executive Officer, President, Chairman of the Board and a
shareholder, is compensated pursuant to an arrangement approved by the Board on April 27,
1995. The arrangement, effective April 1, 1995, provided for a minimum annual salary of
$100,000 for the year ended March 31, 1996, which the Board increased to $170,000 for the year
ended March 31, 1997. Mr. Mallon's salary is subject to bonuses and merit increases which may
be recommended by the Board's Compensation Committee, and an annual nonaccountable automobile
allowance of $11,000. For 1996, the Company also reimbursed Mr. Mallon for his relocation and
provided a $12,000 allowance for temporary living expenses. Additionally, on April 27, 1995
the Board granted Mr. Mallon 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.

Mr. Germanton, the Company's Chief Operating Officer, Executive Vice President, Secretary and
a shareholder, is compensated pursuant to an employment agreement expiring on March 31, 2000.
The agreement provides for a minimum annual salary of $170,000, subject to bonuses and merit
increases which may be recommended by the Board's Compensation Committee, and an annual
nonaccountable automobile allowance of $11,000. Additionally, the Company reimburses
Mr. Germanton for certain long-term disability income insurance premiums for which the Company
is not a beneficiary and for overseas living expenses relating to his assignments in China and
Hong Kong. Pursuant to the agreement, the Company would become obligated to pay a severance
benefit of approximately one year's salary, computed based on the average annual compensation
for the latest three years of employment, if the Board were to decline to renew the agreement
prior to its expiration.

The Company provides Mr. Cappiello, the Company's Vice President of Sales and Marketing, with
an automobile for his personal use.

Certain additional compensation paid to officers is described below under "Item 13. Certain
Relationships and Related Transactions."

Officers' and Directors' expense reimbursements are reviewed by the Chief Executive Officer,
whose expense reimbursements are reviewed by the Chief Financial Officer. The Company has not
made loans to officers or Directors, nor has the Company guaranteed officers' or Directors'
borrowings.

Officers' retirement benefits consist solely of those provided under the Company's defined
contribution plan, established under section 401(k) of the Internal Revenue Code, which
complies with applicable laws and regulations.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee for the year ended March 31, 1997 were Mr. Samuel
(Chairman), Mr. Arnold and Mr. Coburn. The Company has not employed these Committee members
at any time, nor has any member of the Compensation Committee or the Board been an officer of
any for-profit entity whose compensation committee or board of directors included officers of
the Company. For the year ended March 31, 1997, Mr. Arnold provided legal services to the
Company for fees approximating $13,400 and Mr. Coburn provided consulting services to the
Company for fees approximating $4,500.

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee's policies are intended to attract and retain talented executives,
motivate attainment of strategic objectives and align executives' interests with those of
shareholders. Pursuant to the Committee's recommendations, the Board approves officers' base
salaries, bonuses, stock option grants and, where applicable, employment contracts and
severance payments. A significant amount of an officer's yearly compensation is dependent
upon the Company's performance for the fiscal year and over time.

The Committee seeks to offer competitive compensation packages, in comparison with market
practices, based on input from the Chief Executive Officer with reference to a periodic
surveys of similar-sized companies in similar industries. The 1997 average base compensation
for the Company's officers is intended to be competitive with salaries paid to similarly
situated executives. The 1997 average base salaries of the Company's officers, excluding the
Chief Executive Officer, increased 3 percent in 1997.

Annual bonus maximums are intended to be competitive with those available to similarly
situated executives and provide for a significant performance incentive. The Chief Executive
Officer recommends awards to the Compensation Committee with reference to the level of
achievement of corporate and individual objectives. Corporate objectives are measured by
sales increases, net income, and other goals determined annually. Individual objectives are
intended to be objectives which are under the respective officers' direct control. The Board
retains the right to make discretionary adjustments it deems appropriate. Bonus awards for
1997 have not been determined as of the date of this report. The Company expects to determine
and disclose the amounts of these awards by the publication of its forthcoming Proxy
Statement.

Officers' eligibility for stock option grants, and the frequency and size of such grants, are
intended to be competitive with observed market practices for similarly situated executives
and encourage increased shareholder value. No stock options were granted to officers for the
fiscal year ended March 31, 1997. The Company's stock option plan complies with applicable
laws and regulations, permitting the Company to deduct for federal income tax purposes the
cost of any compensation arising thereunder relating to Internal Revenue Code section 162(m).
At present, the Company has no other compensation programs nor policies which could give rise
to compensation to an officer in excess of $1 million a year.

With the exception of Mr. Germanton, the Company has no formal executive severance pay policy.
Severance pay and non-monetary severance benefits are determined as appropriate with reference
to observed market practice, length of service and reason for termination. The Company's
employment contract with its former Chief Executive Officer, terminated as of March 31, 1995,
provided for the payment of a $194,833 severance benefit, the extension of stock option
exercise terms and the execution of a sales representative agreement.

The Committee's policies for compensating the Chief Executive Officer are intended to provide
significant annual and long-term performance incentives. The Committee seeks to provide the
Chief Executive Officer with a base salary which is intended to be competitive with salaries
paid to similarly situated chief executives. Following an initial year of employment in which
the Chief Executive Officer's base salary was $100,000, the Committee recommended that his
base salary for 1997 be increased by 70 percent to equal the base salary paid to the Company's
Chief Operating Officer. The Chief Executive Officer's annual bonus maximum is set at 40
percent of his base salary, which is intended to provide a significant annual performance
incentive to attain corporate and individual objectives. While the Committee did not
recommend any stock option grants to officers for 1997, the Chief Executive Officer received
an option to purchase an aggregate of 144,000 common shares at market, shortly after his
employment commenced on April 1, 1995. The Committee believes that this option grant is a
significant incentive for long-term enhancement of shareholder value.

The Board neither rejected, nor did it materially modify, any action or recommendation of the
Committee.

The Honorable Dan J. Samuel, Chairman
John D. Arnold, Member
Theodore J. Coburn, Member

Item 11(b). Summary Compensation Table for the year ended March 31, 1997.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Compensation (1) Long Term Compensation

Awards Payouts
Name Securities
and Year Other Restricted Underlying
Principal Ended Annual Stock Options/ LTIP All Other
Position March 31 Salary($) Bonus($) Compensation($) Awards($) SARs(#) Payouts($) Compensation($)
(2) (3) (4)

Joseph R. Mallon Jr.,
President and Chief 1997 170,000 - 11,000 0 0 0 2,000
Executive Officer 1996 100,000 116,000 23,000 0 149,000 0 0

Damon Germanton,
Executive Vice President, 1997 170,000 - 14,673 0 0 0 2,000
Chief Operating Officer 1996 165,000 51,000 12,120 0 15,000 0 0
and Secretary 1995 188,000 20,000 13,421 0 10,000 0 2,000

Mark W. Cappiello, 1997 120,000 - 6,830 0 0 0 2,000
Vice President of 1996 115,000 27,000 7,750 0 0 0 0
Sales and Marketing 1995 110,000 25,000 8,953 0 50,000 0 2,000

Mark A. Shornick,
Chief Financial Officer, 1997 110,000 - 0 0 0 0 2,000
Treasurer and Assistant 1996 107,500 5,000 0 0 0 0 0
Secretary 1995 105,000 5,000 0 0 25,000 0 2,000

(1) Amounts exclude payments of overseas living expenses, relating to Mr. Germanton's China and Hong Kong assignments, and
Mr. Mallon's relocation expenses.

(2) The Company expects to disclose bonuses earned for 1997, which will be based on criteria in the Compensation Committee
Report, in its forthcoming Proxy Statement.

(3) Perquisites did not exceed the lesser of $50,000 or 10 percent of each officer's salary and bonus, except for Mr. Mallon
for the year ended March 31, 1996. Mr. Mallon's perquisites consist of a nonaccountable automobile payments for the
personal use of his automobile for previous years ($8,447 for 1996 and $9,748 for 1995), and long-term disability income
insurance premiums for Mr. Germanton's benefit ($3,673 for each year). Mr. Cappiello's perquisites consist of the cost
of providing an automobile (excluding Company-paid insurance) for Mr. Cappiello's personal use.

(4) 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 11(d). Aggregated Option/SAR Exercises in last fiscal year and Fiscal Year-end Option/SAR values
for the year ended March 31, 1997
<S> <C> <C> <C> <C> <C> <C>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)
(1)
Shares Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable

Joseph R. Mallon Jr. 0 0 58,000 96,000 2,500 0

Damon Germanton 0 0 55,000 0 30,500 0

Mark W. Cappiello 0 0 120,000 30,000 141,250 15,000

Mark A. Shornick 0 0 110,000 15,000 136,250 7,500

(1) Instrinsic value, if any, based on the excess of the closing price of the Company's common stock at March 31, 1997 ($4.00)
over the exercise price of the options.

Item 11(l). Performance Line Graph Information
<S> <C> <C> <C> <C> <C> <C>
ANNUAL RETURN PERCENTAGE
Years Ending

Company Name / Index Mar93 Mar94 Mar95 Mar96 Mar97
MEASUREMENT SPECIALTIES INC 130.77 6.67 15.63 -13.51 0.00
AMEX COMPOSITE INDEX 7.19 7.19 4.81 23.03 -0.47
PEER GROUP -SIC 3823 10.68 4.42 15.53 25.74 10.10
PEER GROUP -SIC 3634 -15.34 6.31 16.00 -15.18 62.60

INDEXED RETURNS
Base Years Ending
Period
Company Name / Index Mar92 Mar93 Mar94 Mar95 Mar96 Mar97
MEASUREMENT SPECIALTIES INC 100 230.77 246.15 284.62 246.15 246.15
AMEX COMPOSITE INDEX 100 107.19 114.89 120.41 148.15 147.46
PEER GROUP -SIC 3823 100 110.68 115.57 133.52 167.89 184.84
PEER GROUP -SIC 3634 100 84.66 90.01 104.41 88.56 144.00

Item 12. Security Ownership of Certain Beneficial Owners and Management

At April 30, 1997, securities owned by Directors, executive officers and beneficial owners of
more than five percent of each class of the Company's voting securities were:

Name and Address Number of Shares
Title of Class of Beneficial Owner Beneficially Owned Percent of Class

Common stock, Joseph R. Mallon Jr. 226,500 ( 1) 6.3 %
no par value Measurement Specialties, Inc.
80 Little Falls Road
Fairfield, NJ 07004

John D. Arnold 7,500 ( 2) ( 3)
104 Highland Terrace
Woodside, CA 94062

Richard S. Betts 82,048 ( 4) 2.3 %
Rich Plan of Lake Plains, Inc.
Box 110
20 South Main Street
Perry, NY 14530

Theodore J. Coburn 5,000 ( 5) ( 3)
17 Cotswold Road
Brookline, MA 02146

Damon Germanton 419,661 ( 6) 11.7 %
Measurement Specialties, Inc.
80 Little Falls Road
Fairfield, NJ 07004

Steven P. Petrucelli 23,500 ( 7) ( 3)
26 North Main Street
Cranbury, NJ 08512

The Hon. Dan J. Samuel 11,500 ( 2) ( 3)
154 Hillspoint Road
Westport, CT 06880

Mark W. Cappiello 120,000 ( 8) 3.3 %
Measurement Specialties, Inc.
80 Little Falls Road
Fairfield, NJ 07004

Mark A. Shornick 110,000 ( 9) 3.0 %
Measurement Specialties, Inc.
80 Little Falls Road
Fairfield, NJ 07004
-------------- -------
Current Officers and Directors
as a group (9 persons) 1,005,709 (10) 25.4 %

Donald P. Weiss 265,518 (11) 7.5 %
116 West Clinton Avenue
Tenafly, NJ 07670

(1) Includes ownership of options, exercisable within 60 days of April 30, 1997, to purchase
82,000 common shares.
(2) Includes ownership, by each director, of exercisable options to purchase 7,500 common
shares.
(3) Percentage of shares beneficially owned does not exceed one percent of the class.
(4) Includes ownership of exercisable options and common stock purchase warrants for 14,500
common shares; includes ownership of 39,448 common shares by a company with which Mr. Betts is
affiliated; includes ownership of 10,900 common shares by an employee benefit trust sponsored
by a company with which Mr. Betts is affiliated; includes ownership of 2,200 common shares by
Mr. Betts' children.
(5) Includes ownership of exercisable options to purchase 5,000 common shares.
(6) Includes ownership of exercisable options to purchase 55,000 common shares; excludes
ownership by Mr. Germanton's daughter of 18,545 common shares, of which Mr. Germanton
disclaims beneficial ownership.
(7) Includes ownership of exercisable options to purchase 23,500 common shares.
(8) Includes ownership of exercisable options to purchase 120,000 common shares.
(9) Includes ownership to exercisable options to purchase 110,000 common shares.
(10) Includes ownership by Messrs. Mallon, Arnold, Betts, Coburn, Germanton, Petrucelli,
Samuel, Cappiello and Shornick of exercisable options and common stock purchase warrants,
mentioned above, for an aggregate of 425,000 common shares.
(11) Includes ownership of exercisable options to purchase 30,000 common shares.

Item 13.Certain Relationships and Related Transactions

The Company engages the son of Joseph R. Mallon Jr., an officer and Director, to assist with
its electronic filings with the SEC. Fees for 1997 approximated $300.

JL sublets a residence used by employees in China from Damon Germanton, an officer and
Director, under a month-to-month arrangement. Rent expense for 1997 approximated $6,700.

The Company paid Donald P. Weiss, a holder of more than five percent of the Company's common
stock and a former officer and Director, sales commissions for 1997 approximating $3,300.
Additionally, the Company employs Mr. Weiss' son as a materials and resource planner.

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

The following financial statements and schedules are filed at the end of this report. Other
schedules are omitted because they are not required, not applicable or the required
information is shown in the consolidated financial statements or notes thereto.

i. Report of Independent Certified Public Accountants
ii. Consolidated Balance Sheets, As of March 31, 1997 and 1996
iii. Consolidated Statements of Operations, For the Years Ended March 31,
1997, 1996 and 1995
iv. Consolidated Statements of Shareholders' Equity, For the Years Ended
March 31, 1997, 1996 and 1995
v. Consolidated Statements of Cash Flows, For the Years Ended March 31,
1997, 1996 and 1995
vi. Notes to Consolidated Financial Statements
vii. Schedule II - Valuation and Qualifying Accounts, For the Years Ended
March 31, 1997, 1996 and 1995

REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
Measurement Specialties, Inc.

We have audited the accompanying consolidated balance sheets of Measurement
Specialties, Inc. and Subsidiaries as of March 31, 1997 and 1996, and the related
consolidated statements of income, shareholders' equity, and cash flows for each of
the three years in the period ended March 31, 1997. 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 above present
fairly, in all material respects, the consolidated financial position of Measurement
Specialties, Inc. and Subsidiaries as of March 31, 1997 and 1996, and the
consolidated results of their operations and their consolidated cash flows for each
of the three years in the period ended March 31, 1997, in conformity with generally
accepted accounting principles.

We have also audited Schedule II for each of the years ended March 31, 1997, 1996,
and 1995. In our opinion, this schedule presents fairly, in all material respects,
the information required to be set forth therein.

GRANT THORNTON LLP

Parsippany, New Jersey

CONSOLIDATED BALANCE SHEETS

ASSETS
<S> <C> <C>
March 31, March 31,
1997 1996

Current assets:
Cash and cash equivalents $ 238,787 $ 771,016
Accounts receivable, trade, net of
allowance for doubtful accounts of
$32,000 (1997) and $22,000 (1996) 2,811,756 2,019,281
Inventories (Note 3) 3,675,870 2,500,478
Deferred income taxes 159,190 56,842
Prepaid expenses and other current assets 239,566 186,582
--------- ---------
Total current assets 7,125,169 5,534,199

Property and equipment (Note 4) 3,030,387 2,431,526
Less accumulated depreciation and amortization 1,643,976 1,352,642
--------- ---------
1,386,411 1,078,884

Other assets:
Intangible assets, net of accumulated
amortization of $101,000 (1997) and
$62,000 (1996) 108,316 49,587
Deferred income taxes 385,071 126,000
Other assets 229,217 130,896
--------- ---------
722,604 306,483
--------- ---------
--------- ---------
$9,234,184 $6,919,566

See notes to consolidated financial statements.

LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
March 31, March 31,
1997 1996

Current liabilities:
Accounts payable, trade $2,319,840 $1,032,958
Customers' advances 194,143 1,019,424
Accrued payrolls and fringe benefits 337,787 512,050
Current portion of product warranty obligations 218,000 179,054
Income taxes 641 74,514
Deferred income taxes 10,953
Accrued expenses and other current liabilities 339,285 242,905
--------- ---------
Total current liabilities 3,420,649 3,060,905

Other liabilities:
Borrowings under bank line of credit
agreement (Note 5) 778,000
Product warranty obligations, net of
current portion 278,000 318,536
Other liabilities 114,195 80,736
--------- ---------
1,170,195 399,272
--------- ---------
Total liabilities 4,590,844 3,460,177

Commitments and contingencies (Notes 16 and 17)

Shareholders' equity (Notes 6, 7, 8):
Serial preferred stock; 221,756 shares
authorized; none outstanding
Common stock, no par; 20,000,000 shares
authorized; 3,531,987 shares issued and
outstanding (1997 and 1996) 5,384,950 5,384,950
Additional paid-in capital 47,141 25,000
Deficit (773,109) (1,947,953)
Currency translation and other adjustments (15,642) (2,608)
--------- ---------
Total shareholders' equity 4,643,340 3,459,389
--------- ---------
--------- ---------
$9,234,184 $6,919,566

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF OPERATIONS
<S> <C> <C> <C>
For the year ended March 31,
1997 1996 1995

Net sales $25,004,499 $23,059,539 $17,038,659

Cost of goods sold (Note 12) 16,393,526 14,961,506 10,979,119
---------- ---------- ----------
Gross profit 8,610,973 8,098,033 6,059,540

Other expenses (income):
Selling, general and administrative 5,983,449 5,962,776 4,707,291
Provision for doubtful accounts 73,639 18,010 16,656
Research and development, net of customer funding of
$54,000 for 1997, $95,000 for 1996 and $82,000 for 1995 1,746,293 1,237,596 833,258
Interest expense 19,292 19,153
Interest and other income (36,199) (41,552) (32,354)
Provision for former officer's severance benefit 194,833
---------- ---------- ----------
7,786,474 7,195,983 5,719,684

Income before income taxes 824,499 902,050 339,856
Income tax provision (benefit) (Note 13) (350,345) (84,981) 6,000
---------- ---------- ----------
Net income $1,174,844 $987,031 $333,856

Earnings per common share (Note 14) $0.31 $0.27 $0.09

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended March 31, 1997, 1996 and 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 0

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

Fair value of nonemployee common stock
purchase warrants and nonemployee
options issued for services 22,141 22,141

Net income for the year ended
March 31, 1997 1,174,844 1,174,844

Currency translation adjustment and
unrealized holding gains and losses
on available-for-sale marketable
securities (13,034) (13,034)
--------- ------ ----------- -------- ---------
Balance, March 31, 1997 $5,384,950 $47,141 ($773,109) ($15,642) $4,643,340

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 15)
<S> <C> <C> <C>
For the year ended March 31,
1997 1996 1995

Cash flows from operating activities:

Net income $1,174,844 $987,031 $333,856
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization of property and equipment 343,836 368,496 260,519
Amortization of intangible assets and deferred financing costs 70,636 57,596 18,995
Provision for doubtful accounts 73,639 18,010 16,656
Deferred income taxes (344,690) (161,137)
Fair value of nonemployee common stock purchase warrants
and nonemployee options issued for services 22,141
Other adjustments 8,972 10,716 28,517
Net changes in operating assets and liabilities:
Accounts receivable, trade (868,491) (481,038) (1,374,496)
Inventories (1,175,392) (221,776) (546,797)
Prepaid expenses and other current assets (74,300) (19,844) (96,899)
Other assets (98,321) 67,894 (81,817)
Accounts payable, trade 1,286,882 (370,465) 808,126
Income taxes (73,873) 78,654
Severance benefit payable to former officer (194,833) 194,833
Accrued expenses and other current liabilities (864,218) 658,315 557,756
Other liabilities (12,851) 82,706 297,703
--------- -------- --------
Net cash provided by (used in) operating activities (531,186) 880,325 416,952

Cash flows from investing activities:

Purchases of property and equipment (658,883) (802,345) (437,489)
Purchases of intangible assets (98,138) (26,257) (19,082)
Proceeds from sale of property and equipment 129 12,801
--------- -------- --------
Net cash used in investing activities (756,892) (828,602) (443,770)

Cash flows from financing activities:

Borrowings under bank line of credit agreement 6,026,360 979,661
Repayments under bank line of credit agreement (5,248,360) (979,661)
Payment of deferred financing costs (10,000) (52,542)
Proceeds from exercise of options and warrants 47,750 22,000
--------- -------- --------
Net cash provided by (used in) financing activities 768,000 (4,792) 22,000

Effect of exchange rate changes on cash and cash equivalents (12,151) (13,724) (6,484)

Net change in cash and cash equivalents (532,229) 33,207 (11,302)
Cash and cash equivalents, beginning of year 771,016 737,809 749,111
--------- -------- --------
--------- -------- --------
Cash and cash equivalents, end of year $238,787 $771,016 $737,809

See notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of significant accounting policies and description of business:

Description of business:

Measurement Specialties, Inc. ("MSI") designs, develops, produces and sells low cost
electronic products which measure and display distance, motion, force, pressure and
temperature. Substantially all revenues for 1997, 1996 and 1995 were derived from sales of
consumer products, mainly bathroom scales, marketed in North America, Europe and Asia.

Principles of consolidation:

The consolidated financial statements include the accounts of MSI and 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 ("China") on January 12, 1995 ("JL") - collectively, referred to as the
"Company." 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.

Marketable securities:

Unrealized gains and losses on trading securities are included in operations. Unrealized
gains and losses on available-for-sale securities are accumulated as a separate component of
shareholders' equity.

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.

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.

Reclassifications:

The Company reclassified certain amounts on April 1, 1996. Prior periods' amounts were
reclassified to conform with the 1997 classifications. Net operating results were not
affected by these reclassifications.

2. Changes in accounting estimates and impact of recently issued accounting standard:

The Company revised its estimated product warranty obligations in 1997 and 1996 to reflect
more recent warranty claims experience which benefited from product quality improvements.
These revisions decreased warranty expense for 1997 and 1996 by $253,000 and $97,000,
respectively. Additionally, ML revised estimated postemployment benefits in 1996 to give
effect to its employee turnover experience, which decreased 1996 postemployment benefits costs
by $47,000.

In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share," which requires public companies
to present basic earnings per share and, if applicable, diluted earnings per share. Statement
No. 128 also eliminates the modified treasury stock method of computing potential common
shares. The Company will adopt Statement No. 128 on October 1, 1997. The Company estimates
that basic earnings per share determined pursuant to Statement No. 128 would have been $0.33
for 1997, $0.28 for 1996 and $0.09 for 1995. Additionally, had those years' diluted earnings
per share been determined pursuant to Statement No. 128, the Company estimates that the
results would have approximated the amounts reported for primary earnings per share for those
years.

3. Inventories:
<S> <C> <C>
1997 1996

Raw materials $ 584,970 $ 669,576
Work-in-process 734,010 371,112
Finished goods 2,356,890 1,459,790
--------- ---------
$ 3,675,870 $ 2,500,478

4. Property and equipment:
<S> <C> <C>
1997 1996

Production machinery and equipment $ 1,295,930 $ 1,140,719
Tooling costs 973,384 764,123
Furniture and equipment 539,637 330,139
Leasehold improvements 221,436 196,545
--------- ---------
$ 3,030,387 $ 2,431,526

5. Borrowings under bank line of credit agreement:

At March 31, 1997, $778,000 was outstanding under a $2 million revolving line of credit
agreement, extended by a domestic bank. Advances are payable by September 30, 1998, the date
of the agreement's expiration, and collateralized by a senior security interest in
substantially all assets. Borrowings bear interest at 0.5 percent above the bank's prime rate
(aggregating 8.75 percent at March 31, 1997). The agreement requires the Company to maintain
certain levels of working capital and net worth, limits the Company's capital expenditures and
advances to its Subsidiaries and requires the bank's consent for the payment of dividends.
Additionally, the agreement requires payment of an annual facility fee. The carrying amount
of outstanding indebtedness approximates its fair value because, in the opinion of management,
the borrowing rate approximates market.

6. 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.

JL is subject to certain China government regulations, including currency exchange controls,
which limit cash dividends and loans to ML and MSI. At March 31, 1997, JL's restricted net
assets approximated $569,000.

7. Common stock purchase warrants:
<S> <C> <C> <C>
Number of Average price per share
shares exercise market

Outstanding at March 31, 1994 336,500 $ 4.93 $ 4.00
Exercised (5,500) 4.00 4.74
-------
Outstanding at March 31, 1995 331,000 4.95 4.63
Exercised (8,500) 4.00 5.05
-------
Outstanding at March 31, 1996 322,500 4.97 4.00
Expired (119,500) 6.63 N/A
-------
Outstanding at March 31, 1997 203,000 4.00 3.69

Summarized information about common stock purchase warrants outstanding at March 31, 1997
follows:

<S> <C> <C> <C> <C> <C>
Number of underlying shares Exercise Average exercise price Average remaining
outstanding exercisable price range outstanding exercisable contractual life (years)
203,000 203,000 $4.00 $ 4.00 $ 4.00 1.0

8. Stock option plans:

Options are outstanding under two fixed stock option plans. Options to purchase up to 326,000
common shares may be granted under MSI's 1995 Stock Option Plan (the "1995 Plan"), until its
expiration on September 8, 2005. Shares under 1995 Plan grants which expire or otherwise
terminate without being exercised become available for later issuance. Shareholders ratified
the 1995 Plan on October 20, 1995, when options to purchase 674,000 shares were outstanding
under MSI's expired stock option plan. The aggregate numbers of shares available for grants
of options under both plans were 196,000 at March 31, 1997, 251,000 at March 31, 1996 and
440,000 at March 31, 1995.

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 1997, 1996 or 1995.
<S> <C> <C> <C> <C>
Number of shares Average price per share
outstanding exercisable exercise market

March 31, 1994 295,000 245,000 $ 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
-------
March 31, 1995 460,000 290,000 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
-------
March 31, 1996 749,000 338,000 3.91 3.85
Granted at market 50,000 3.79 3.79
Forfeited (25,000) 3.88 N/A
-------
March 31, 1997 774,000 495,000 3.89 3.87

Summarized information about stock options outstanding at March 31, 1997 follows:
<S> <C> <C> <C> <C> <C>
Number of underlying shares Exercise Average exercise price Average remaining
outstanding exercisable price range outstanding exercisable contractual life (years)
20,000 20,000 $1.65 -- $2.29 $ 1.65 $ 1.65 0.6
227,500 215,000 2.30 -- 3.19 2.70 2.69 2.7
227,500 125,000 3.20 -- 4.44 3.71 3.69 5.2
299,000 135,000 4.45 -- 6.19 5.10 5.38 5.3
------- -------
774,000 495,000

The Company accounts for transactions in which employees receive equity instruments of the
employer using the intrinsic value based method. Accordingly, no compensation cost has been
recognized for employee stock option grants. Had the Company adopted the fair value based
method for employee stock option grants on April 1, 1995, the Company's net income for 1997
and 1996 would have been reduced to $1,136,621 ($0.30 per share) and $830,875 ($0.23 per
share), respectively. The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model (single grant assumption with straight-line
amortization) with the following weighted average assumptions for each year: expected
volatility of 41 percent; risk-free interest rate of 6.3 percent; no dividend yield; expected
lives of five years.

9. Defined contribution plan:

MSI has a defined contribution plan under section 401(k) of the Internal Revenue Code.
Substantially all its employees are eligible to participate after completing three months of
service. Participants may elect to contribute a portion of their compensation to the plan.
MSI matches a portion of participants' contributions and, at the discretion of the Board, may
make profit sharing contributions. Matching participants' contributions cost $39,000 for
1997, $15,000 for 1996 and $32,000 for 1995. No profit sharing contributions were made for
1997, 1996 or 1995.

10. Foreign operations:

At March 31, 1997, the Subsidiaries' total assets aggregated $4,411,000, of which $2,560,000
were in Hong Kong and $1,851,000 were in China. 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 Chinese renminbi. At March 31,
1997, the Subsidiaries had net liabilities of $1,649,000 subject to fluctuation in the value
of the Hong Kong dollar and net assets of $1,234,000 subject to fluctuation in the value of
the Chinese renminbi.

The Subsidiaries' operations reflect intercompany transfers of costs and expenses, including
interest on intercompany trade receivables, at amounts established by the Company.
<S> <C> <C> <C>
1997 1996 1995
Subsidiaries' net sales:
To unaffiliated customers $ 16,640,258 $ 14,829,183 $ 10,724,861
To consolidated affiliates 4,244,583 921,039 488,438

Subsidiaries' net income 562,462 206,533 28,314

11. Foreign and major customers:

A United States manufacturer and distributor of electric housewares accounted for 16 percent
of net sales for 1997. A German distributor of diversified housewares accounted for 36
percent, 32 percent and 30 percent of net sales for 1997, 1996 and 1995, respectively. The
percentages of net sales derived from all foreign customers for those years were:
<S> <C> <C> <C>
1997 1996 1995

Germany 39 % 36 % 33 %
Other Europe 9 14 19
Other 3 5 9
-- -- --
51 % 55 % 61 %

Substantially all the Company's revenues are priced in United States dollars.

12. Transactions with former related party:

Substantially all consumer products are assembled 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. Purchases since
that date have been consummated on terms equivalent to those in effect before that date.

13. Income taxes:

Earnings before income taxes were:
<S> <C> <C> <C>
1997 1996 1995

Domestic $ 259,141 $ 601,517 $ 311,542
Foreign 565,359 300,533 28,314
------- ------- -------
$ 824,500 $ 902,050 $ 339,856

The income tax provision (benefit) consisted of:
<S> <C> <C> <C>
1997 1996 1995

Current:
Federal $ 2,897 $ 1,036 $ 6,000
Foreign (10,601) 78,025
State 691 137
-------- ------ -----
Total current (7,013) 79,198 6,000

Deferred:
Federal (307,418) (155,000)
Foreign 13,496 15,821
State (49,410) (25,000)
--------- ---------
Total deferred (343,332) (164,179)
---------- --------- -----
($350,345) ($84,981) $6,000

Differences between the federal statutory income tax rate and the effective tax rates in those
years were:
<S> <C> <C> <C>
1997 1996 1995

Statutory tax rate 34.0 % 34.0 % 34.0 %
Reduction in valuation allowance
for deferred tax assets (65.3) (20.0)
Lower tax on foreign earnings (15.6) (12.3) (1.4)
Operating loss carryforwards (8.9) (25.8) (30.5)
Other 13.3 14.7 (0.3)
------ ------ ------
(42.5 %) (9.4 %) 1.8 %

Income taxes for 1997 and 1996 reflect reductions in the valuation allowance for deferred
taxes of $539,000 and $180,000, respectively. These reductions, reflected in operating
results for the quarters ended March 31, 1997 and March 31, 1996, respectively, were based on
management's annual assessments of the extent to which the benefits of federal net operating
loss carryforwards were more likely than not to be realized. The amounts realizable, however,
could be reduced in the near term if future taxable income is lower than estimated or if there
are differences in the timing or amount of future reversals of existing taxable temporary
differences.

At March 31, 1997, the Company had a net operating loss carryforward for income tax reporting
purposes of $949,000 (principally expiring on March 31, 2009) available to reduce future
domestic taxable income. Use of this carryforward may be limited by provisions of the Tax
Reform Act of 1986.

Income taxes for 1997 reflect federal tax benefits of $73,000 from the use of net operating
loss carryforwards of $216,000. Income taxes for 1996 reflect federal and Hong Kong tax
benefits of $201,000 and $32,000, respectively, from the use of net operating loss
carryforwards aggregating $785,000. Income taxes for 1995 reflect federal and Hong Kong tax
benefits of $99,000 and $5,000, respectively, from the use of net operating loss carryforwards
aggregating $319,000.

Deferred income taxes are not provided on the Subsidiaries' undistributed earnings, which
approximated $465,000 at March 31, 1997. 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.

Pursuant to current Chinese tax policies, JL qualifies for a special state corporate tax rate
of 15 percent. Additionally, because JL has agreed to operate in China for a minimum of ten
years, a full tax holiday (expected to expire on March 31, 1998) is available for two years,
beginning with JL's first profit-making year, and a 50 percent tax rate reduction to 7.5
percent (expected to expire on March 31, 2001) is available for the three years thereafter.
After the expiration of the tax holiday, JL is expected to qualify for a reduction of the tax
rate to 10 percent, provided it exports a minimum of 70 percent of its production.
Furthermore, if JL's profits are reinvested in qualified activities in China for a minimum of
five years, it may obtain a rebate of 40 percent of the taxes paid on the reinvested profits.
Although JL's undistributed earnings are expected to be permanently reinvested, the Company
does not intend to recognize the potential rebate until it is realized. The Hong Kong
corporate tax rate, at which ML's earnings are taxed, is 16.5 percent.

The estimated tax effects of temporary differences and carryforwards were:
<S> <C> <C>
1997 1996

Deferred tax assets:
Accrued expenses and other current liabilities $ 108,140 $ 220,283
Net operating loss carryforwards 380,039 426,650
Other, net 56,082 75,044
-------- -------
Total deferred tax assets 544,261 721,977
Less, valuation allowance for deferred tax assets 539,135
-------- -------
Net deferred tax assets $ 544,261 $ 182,842

Deferred tax liabilities:
Depreciation and amortization of property
and equipment ($ 35,322) ($ 33,922)
Other, net (268) 15,059
-------- -------
Total deferred tax liabilities (35,590) (18,863)

Net current deferred tax assets aggregated $159,190 and $56,842 at March 31, 1997 and 1996,
respectively. Net noncurrent deferred tax assets aggregated $385,071 and $126,000, at March
31, 1997 and 1996, respectively. Current deferred tax liabilities aggregated $10,953 at March
31, 1997 (none at March 31, 1996). Noncurrent deferred tax liabilities aggregated $24,637 and
$18,863 at March 31, 1997 and 1996, respectively. 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.

14. 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 1997 and 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 3,869,302 for 1997, 3,894,935 for 1996 and 3,547,340 for
1995.

15. Supplemental disclosures of cash flow information:

For 1997, payments of interest expense approximated $11,000 and payments of income taxes
approximated $105,000. For 1996, payments of interest expense approximated $19,000 and
payments of income taxes approximated $14,000.

For 1995, 21,756 convertible preferred Series C shares, 8% cumulative, $1.75 par, were
converted into 18,918 common shares.

16. Commitments and contingencies:

The Company leases certain property and equipment under noncancellable operating leases
expiring on various dates through June 30, 2000. Rent expense, including real estate taxes,
insurance and maintenance expenses associated with net operating leases, approximated $282,000
for 1997, $375,000 for 1996 and $333,000 for 1995. At March 31, 1997, 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,
1998 $ 297,000
1999 188,000
2000 160,000
2001 27,000
---------
$ 672,000

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. Each
officer's base salary was $170,000 for 1997. 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 $220,000 for 1997,
$344,000 for 1996 and $150,000 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, based on
its warranty claims experience. This estimate is particularly susceptible to changes in the
near term based on introductions of new products, product quality improvements and changes in
end user behavior.

On January 23, 1997, a licensee of the Company's technology filed a civil action, seeking
declaratory judgment and legal costs. The licensee disputes the extent of marketing rights
and the magnitude of certain manufacturing rights that the Company allegedly granted under a
1991 agreement. Management believes the claim is without merit. On February 25, 1997, the
Company filed an answer and counterclaim, requesting a declaration of the parties' rights
under the agreement. The case recently has been stayed, pending its referral to a Court-
sponsored mediation program. If the case cannot be resolved through mediation, management
intends to pursue a vigorous defense of its position. Discovery on the merits of the action
have not yet begun and the Company's potential liability, if any, is not yet determinable.
Based on the information it now possesses, management believes that this action will not have
a material adverse effect on the Company's consolidated financial statements. Accordingly, no
provision has been made for the outcome of this matter in the accompanying financial
statements. However, it is reasonably possible that management's estimate of the outcome
could change in the near term, resulting in a provision for liability in the future.

The Company manufactures all its industrial products, and all its proprietary intermediate
goods used in its consumer products, in leased premises located in China. Substantially all
its consumer products are assembled by a single source also operating in China. Additionally,
most of the Company's products contain key components now obtained from a limited number of
suppliers. These concentrations in the current sources of supply present risks of
interruption for reasons beyond the Company's control, including, with respect to China,
political, economic and legal uncertainties.

17. 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 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 are concentrated in United States and European distributors and retailers
of consumer products. At March 31, 1997, a German distributor of diversified housewares, a
United States manufacturer and distributor of electric housewares and a United States retail
merchandiser of jewelry and hard goods accounted for 26 percent, 17 and 16 percent of accounts
receivable, respectively. To limit credit risk, the Company evaluates the financial condition
and trade payment experience of customers to whom credit is extended. The Company generally
does not require customers to furnish collateral, though certain foreign customers furnish
letters of credit. The Company periodically evaluates the relative credit standing of these
customers' financial institutions.

At March 31, 1997, ML was contingently liable for $164,000 under customers' letters of credit
discounted, with recourse.

18. Quarterly results of operations (unaudited):
<S> <C> <C> <C> <C>
First fiscal Second fiscal Third fiscal Fourth fiscal
quarter ended quarter ended quarter ended quarter ended
June 30 September 30 December 31 March 31

Year ended March 31, 1997
Net sales $4,701,404 $4,878,375 $8,810,193 $6,614,527
Gross profit 1,616,701 1,700,310 3,168,912 2,125,050
Net income (loss) (212,168) (160,085) 1,145,073 402,024
Earnings (net loss) per share (0.06) (0.05) 0.30 0.11

Year ended March 31, 1996
Net sales $5,123,541 $7,121,852 $5,767,915 $5,046,231
Gross profit 1,717,779 2,303,541 2,248,335 1,828,378
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 1,175,840 1,129,759 2,401,627 1,352,314
Net income (loss) 21,638 (55,282) 695,808 (328,308)
Earnings (net loss) per share 0.01 (0.02) 0.20 (0.10)

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<S> <C> <C> <C> <C> <C>
Col. A Col. B Col. C Col. D Col. E
Additions
(1) (2)
Charged
Balance at Charged to to Other Balance at
Beginning Costs and Accounts -- Deductions -- End of
Description of Period Expenses Describe Describe Period

Year ended March 31, 1997:

Deducted from asset accounts:
Allowance for doubtful accounts $ 22,004 $ 73,639 $ 63,643(a) $ 32,000
Write-downs of inventories 323,717 130,983 218,620(b) 236,080
Totals $ 345,721 $ 204,622 $ 282,263 $ 268,080
--------- --------- ------------ ---------
Product warranty obligations $ 497,590 $ 496,944 $ 498,534(c) $ 496,000

Year ended March 31, 1996:

Deducted from asset accounts:
Allowance for doubtful accounts $ 22,330 $ 18,010 $ 18,336(a) $ 22,004
Write-downs of inventories 147,696 185,482 9,461(b) 323,717
--------- --------- ------------ ---------
Totals $ 170,026 $ 203,492 $ 27,797 $ 345,721

Product warranty obligations $ 364,779 $ 485,252 $ 352,441(c) $ 497,590

Year ended March 31, 1995:

Deducted from asset accounts:
Allowance for doubtful accounts $ 12,630 $ 16,656 $ 6,956(a) $ 22,330
Write-downs of inventories 157,696 97,658 107,658(b) 147,696
--------- --------- ------------ ---------
Totals $ 170,326 $ 114,314 $ 114,614 $ 170,026

Product warranty obligations $ 230,672 $ 397,298 $ 263,191(c) $ 364,779

(a) Bad debts written-off, net of recoveries
(b) Cost of inventories scrapped
(c) Cost of warranty claims

Exhibits

Exhibits listed below marked with an asterisk (*) are included herein. Other listed exhibits,
incorporated by reference, were previously filed with the SEC as indicated. Other exhibits
are omitted because they are not required, not applicable or the required information is shown
in the consolidated financial statements or notes thereto.

(3)(i)Articles of incorporation

Certificate of Incorporation and Amendments thereto, 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, 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 security 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)

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

Revolving Loan and Security Agreement between Midlantic Bank, N.A. and Measurement Specialties
Inc., executed on or about July 17, 1995, incorporated by reference to Exhibit 10 to Quarterly
Report on Form 10-QSB for the quarterly period ended September 30, 1995

(*) First Amendment to Revolving Loan and Security Agreement by and between Measurement
Specialties, Inc. and PNC Bank, National Association, successor by merger to Midlantic Bank,
N.A., dated November 11, 1996

(10)Material contracts

Form of Employment Agreement with Damon Germanton effective July 1, 1988, as amended,
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

Measurement Specialties, Inc. 1995 Stock Option Plan, incorporated by reference to Exhibit A
to Proxy Statement for Annual Meeting of Shareholders To Be Held on October 30, 1995

Lease Agreement, executed on May 20, 1996, by and between CMI, Inc. and Measurement
Specialties, Inc., incorporated by reference to Exhibit (10) to Annual Report on Form 10-KSB
for the year ended March 31, 1996

(*) Tenancy Agreement in respect of All Those Units A to B on the 12th Floor of Wo Kee Hong
Building Kwai Chung New Territories for a term of Two Years, Dated the 3rd day of June, 1996,
by and between Stoneycroft Estates Limited and Measurement Limited

(*) Building Lease by and between Beijing Qinglian Leather Group Company and Jingliang
Electronics (Shenzhen) Co., Ltd., dated January 17, 1997

(*) First Amendment to Lease by and between Transcube Associates and Measurement Specialties,
Inc., dated February 24, 1997

(*) Building Lease by and between Shenzhen Dongming Technology Co., Ltd. and Jingliang
Electronics (Shenzhen) Co., Ltd., as amended March 18, 1997

(*) (11)Statements regarding computation of per share earnings for the years ended March 31,
1997, 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 People's Republic of China, is a wholly
owned subsidiary of Measurement Limited.

(*) (27)Financial Data Schedule

Reports on Form 8-K

During the three months ended March 31, 1997, the Company did not file any reports on Form 8-
K.

The SEC maintains a site on the world wide web, at <http://www.sec.gov>, which contains
reports, proxy and information statements and other information regarding registrants which
file electronically with the SEC, pursuant to its Electronic Data Gathering And Retrieval
("EDGAR") program. EDGAR filings generally are made available within 24 hours of filing. The
Company's electronic filings may be found at <http://www.sec.gov/cgi-bin/srch-
edgar?0000778734>.

SIGNATURES

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

MEASUREMENT SPECIALTIES, INC.

By: s/ Joseph R. Mallon, Jr. June 27, 1997
President, Chief Executive
Officer and Chairman of
the Board of Directors

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

s/ Joseph R. Mallon, Jr. June 27, 1997
Principal executive officer

s/ Mark A. Shornick June 27, 1997
Principal financial and
accounting officer

A majority of the Board of Directors:

s/ Joseph R. Mallon, Jr. June 27, 1997
Chairman

s/ John D. Arnold June 27, 1997
Director

s/ Richard S. Betts June 27, 1997
Director

s/ Theodore J. Coburn June 30, 1997
Director

s/ Damon Germanton June 27, 1997
Director

s/ Steven P. Petrucelli June 30, 1997
Director

s/ Dan J. Samuel June 27, 1997
Director
</TABLE>

<TABLE>
<S><C>
EXHIBIT 4 - INSTRUMENT DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES:
FIRST AMENDMENT TO REVOLVING LOAN AND SECURITY AGREEMENT

THIS FIRST AMENDMENT made this eleventh day of November, 1996 ("First Amendment") to the
Revolving Loan and Security Agreement dated August 28, 1995 by and between MEASUREMENT
SPECIALTIES, INC., a corporation organized under the laws of the State of New Jersey ("Borrower"),
having its principal place of business at 80 Little Falls Road, Fairfield, New Jersey 07004, and PNC BANK,
NATIONAL ASSOCIATION, successor by merger to Midlantic Bank, N.A. ("Lender"), having offices at 2
Tower Center Boulevard, East Brunswick, New Jersey 08816.

WHEREAS, Lender and Borrower have previously entered into a commercial lending arrangement in
accordance with the terms and conditions of a certain Revolving Loan and Security Agreement dated
August 28, 1995, as such may be amended and/or supplemented from time to time, ("Loan Agreement"),
pursuant to which Lender has advanced funds to Borrower on a secured basis and Borrower has agreed to
repay same; and

WHEREAS, Lender and Borrower seek to amend certain terms and conditions of the Loan Agreement as
hereinafter set forth; and

WHEREAS, Lender and Borrower seek to memorialize the amendments to the Loan Agreement by this
writing,

NOW THEREFORE, for and in consideration of the mutual covenants and agreements herein contained
and other good and valuable consideration, receipt of which is hereby acknowledged, the parties agree as
follows:

1. Subsection 2A.l(a) Amount and Certain Definitions in the Loan Agreement is hereby deleted and a new
Subsection 2A.l(a) is substituted therefore to read as follows:

2A.1 Amount and Certain Definitions.

(a) Lender will, upon the request of Borrower, make loans or issue letters of credit hereunder to Borrower (a
"Revolving Loan" or the "Revolving Loans") from time to time on a revolving loan basis in an aggregate
principal amount not in excess at any time outstanding of the Borrower's Revolving Loan Limit; provided
that, if the outstanding amount of the Revolving Loans should exceed the Revolving Loan Limit at any time,
such excess (i) shall nevertheless be secured by the Collateral and be subject to the terms of this
agreement, and (ii) shall be payable on September 30, 1998, or (iii) at such other time as provided in
Section 9, Section 11 or elsewhere in this Agreement, whichever of (ii) or (iii) shall first occur. The
Revolving Loans may, but need not, be evidenced by one or more promissory notes (referred to collectively
as the "Revolving Note" in the form of Exhibit A annexed to this Agreement; except as may be otherwise
provided in a Revolving Note, the Revolving Loans shall be payable in accordance with the terms of this
Agreement.

2. Subsection 2A.2 Interest Rate in the Loan Agreement is hereby deleted and a new Subsection 2A.2 is
substituted therefore to read as follows:

2A.2 Interest Rate.

The Revolving Loans shall bear interest at a fluctuating interest rate per annum equal at all times to One-
half of One percent (.50%) above Lender's Prime Rate in effect from time to time, each change in such
fluctuating rate to take effect simultaneously with the corresponding change in the Prime Rate, without
notice to Borrower.

3. Subsection 2B.5 Facility Fee and Costs in the Loan Agreement is hereby deleted and a new Subsection
2.5 is substituted therefore to read as follows:

2B.5 Facility Fee and Costs.

In addition to interest and other charges herein provided, Borrower agrees that it shall pay to the Lender a
Facility Fee of (a) One-quarter of One percent (1/4%) of the Revolving Loan on July 17, 1997, and (b)
Three-eighths of One percent (3/8%) of the Revolving Loan on July 17, 1998.

4. Subsection 6.19 (b)(i) in the Loan Agreement is hereby deleted and a new Subsection 6.19(b)(i) Is
substituted therefore to read as follows:

(i) One Million Seven Hundred Thousand ($1,700,000.00) Dollars at any time during any fiscal year, measured
quarterly at fiscal quarter end dates, and

5. Subsections 6.18 Working Capital and 6.20 Capital Expenditures in the Loan Agreement are hereby
deleted and new Subsections 6.18 and 6.20 are substituted therefore to read as follows:

6.18 Working Capital.

Cause or permit its consolidated Working Capital to be less than (a) Two Million Three Hundred Thousand
($2,300,000.00) Dollars as of March 31, 1997, and (b) one hundred five (105%) percent of its consolidated
Working Capital reported for the immediately preceding fiscal year-end, commencing with the fiscal year
ending March 31, 1998 and thereafter, measured annually at fiscal year-end, and (c) less than One Million
Four Hundred Thousand ($1,400,000.00) Dollars at any time during any fiscal year measured quarterly at
fiscal quarter end dates. The term Working Capital means, as of the time of any determination thereof, the
amount determined in accordance with generally accepted accounting principles, applied on a consistent
basis, by which the current assets of Borrower exceed its current liabilities.

6.20 Capital Expenditures.

Enter into any agreement to purchase or pay for, or become obligated to pay for, capital expenditures, long
term leases, capital leases or sale lease-backs (all determined in accordance with generally accepted
accounting principles consistently applied) during each fiscal year in an amount aggregating in excess of
One Million One Hundred Thousand ($1,100,000.00) Dollars.

6. Subsections 6.20 (a) and (b) in the Loan Agreement are hereby deleted in their entirety.

7. Subsection 11.1 Termination by Lender in the Loan Agreement is hereby deleted and a new Subsection
11.1 is substituted therefore to read as follows:

11.1 Termination by Lender.

Lender shall have the right, at any time and in its sole and absolute discretion, to terminate this Agreement
upon the occurrence of an Event of Default or on or after September 30, 1998, insofar as it relates to
Revolving Loans. Upon the termination date (a) all provisions for additional Revolving Loans under this
Agreement shall terminate, (b) the principal and interest of the Revolving Loans, and all other
Obligations under this Agreement and the Relevant Documents related to the Revolving Loans, shall
become and be immediately due and payable, without presentment, demand, protest, or further notice of
any kind, all of which are hereby expressly waived by Borrower, and (c) Lender shall be entitled to exercise
forthwith (to the extent and in such order as Lender may elect, in its sole and absolute discretion) and or all
of the rights and remedies referred to in Section 9 of this Agreement for the collection of such amounts.

8. MODIFICATION TO PROMISSORY NOTES. Simultaneously with the execution of this First Amendment,
Borrower shall execute and deliver to Lender a First Amended and Restated Secured Revolving Loan Note
in the sum of $2,000,000.00 ("1996 Note"), which 1996 Note shall be deemed to be in substitution of the
Secured Revolving Loan Note in the sum of $2,000,000.00 dated July 17, 1995. The form and execution of
the 1996 Note is to be, in all respects, acceptable to Lender.

9. RATIFICATION OF AGREEMENT. Subject to the amendments to the Loan Agreement as set forth herein,
as of this day, the parties hereto hereby ratify and confirm, in full, each and every term, condition,
agreement, representation, warranty and covenant set forth in the Loan Agreement.

10. SURVIVAL. All representations and warranties, whether ratified hereby or made in any instrument or
certificate contemplated hereby, shall survive any independent investigation made by Lender and the
execution and delivery of the Loan Agreement, together with this First Amendment to the Loan Agreement,
the First Amended and Restated Secured Revolving Loan Note, and the relevant documents and said
certificates or instruments shall continue so long as any of the Borrower's obligations are outstanding and
unsatisfied, applicable Statutes of Limitations to the contrary notwithstanding.

11. AMENDMENT ONLY. This is intended as an amendment only to the Loan Agreement and is not a new
loan agreement, therefore all of the remaining terms and conditions of the Loan Agreement (including any
amendments or supplements thereto), shall remain in full force and effect as though set forth herein at
length to the extent not inconsistent with the terms of this First Amendment, and any term in initial capitals
and not otherwise defined herein shall have the meaning ascribed thereto in the Loan Agreement.

12. HEADINGS. The headings as used in this First Amendment are inserted solely for convenience of
reference and shall not constitute a part of this First amendment nor affect its meaning, construction or
effect.

13. NO DEFENSES TO PAYMENT. Borrower waives and forever releases and discharges Lender, its
officers, directors, agents and employees, successors and assigns from any and all claims, actions, causes
of action, suits, counterclaims, set-offs, rights and defenses which against Lender (its officers, directors,
agents and employees, successors and assigns), Borrower its successors or assigns have or hereafter can,
shall or may have, for, upon, or by reason of any matter, cause or thing whatsoever up to and including the
date of this Amendment; and Borrower represents and warrants to Lender that Borrower has no defenses to
the repayment of any or all of the Obligations and has no claims, rights of set-off or causes of action against
Lender.

(SEAL) MEASUREMENT SPECIALTIES, INC.
Attest:

By: Mark A. Shornick Joseph R. Mallon Jr.
Asst. Secretary President

PNC BANK, NATIONAL ASSOCIATION

By: David Raphaels
Vice President
</TABLE>

<TABLE>
<S><C>
EXHIBIT 10 - MATERIAL CONTRACT: TENANCY AGREEMENT

Dated the 3rd day of June, 1996
STONEYCROFT ESTATES
and
MEASUREMENT LIMITED
TENANCY AGREEMENT
in respect of
All Those Units A to B on the 12th Floor of
Wo Kee Hong Building Kwai Chung New
Territories for a term of Two Years.

THIS AGREEMENT is made the 3rd day of June, one thousand nine hundred and ninety
six BETWEEN the parties more particularly described and set out in the First
Schedule hereto.

WHEREBY IT IS AGREED as follows:-

1. The Landlord shall let and the Tenant shall take ALL THAT the premises more
particularly described and set out in the Second Schedule hereto (hereinafter
referred to as "the said premises") TOGETHER with (a) a right of way for the
Tenant his servants and agents (in common with the Landlord and all others
having the like right) from time to time to pass and repass over and along the
entrance halls, staircases and landings erected in thin said building and (b)
the right (in common as aforesaid) to use the lifts installed in the said
building for the purpose of access to and egress from than said premises and (c)
the right for the Tenant his servants and agents (in common as aforesaid) to use
the loading and unloading spaces on the ground floor of the said building for
the loading and unloading of his vehicle or vehicles provided always that the
Tenant shall not park his vehicle or vehicles thereon for such period as may
unreasonably obstruct others in the use of the said loading and unloading spaces
for such loading and unloading purposes and (d) the right for the Tenant (in
common as aforesaid) to use the meter room (if any) on the ground floor of the
said building for the installation of meters only (e) the right for the Tenant
(in common as aforesaid) to use the utility conducting in the said building for
the passage of services to and from the said premises for the term and at the
rent more particularly described and set out in the Third Schedule hereto.

2. The Tenant to the intent that the obligations hereunder shall continue
throughout the said term of tenancy hereby agrees with the Landlord as follows:-
(a) to pay the said rent at the times and in manner aforesaid;
(b) to pay the due proportion each and every calendar month for the management
and general services (including the central cooling and air-conditioning
systems) in respect of the said premises;
(c) to pay the rates which are now or may hereafter during the said period be
imposed by the Government of Hong Kong upon the said premises;
(d) to pay the electricity, gas, water and other utility charges in respect of
the said premises and to make all necessary deposits for the supply of
electricity, gas, water and other utilities to the said premises when required,
and to comply with all requirements of the electricity, gas, water and other
utility authorities or suppliers (including rewiring the said premises if so
required);
(e) to be responsible for any damage caused to the lifts by the Tenant his
servants agents workmen or licensees other than the Landlord or its other
tenants of the said building and where the lifts are damaged to such extent that
the same or any part thereof have to be replaced to pay for the costs of the
replacement;
(f) to pay and discharge all taxes and assessments of an annual or recurring
nature now or hereafter to be assessed, imposed or charged by the Government of
Hong Kong or other lawful authority upon the said premises or upon the owner or
occupier thereof (Crown Rent Property Tax excepted);
(g) to repair and keep in good and substantial repair and condition using
suitable material of good quality all the interior of the said premises and
every part thereof including the flooring and interior plaster and other
finishes or rendering to walls floors and ceilings and the Landlord's fixtures
and fittings therein including all doors windows electrical installations and
wiring sanitary equipments drains and pipes as are situated within the said
premises (save and except for the structural parts of the said premises) in good
clean proper and tenantable repair and condition (fair wear and tear structural
inherent defects damage by fire flood tempest storm and other risks insured
against by the Landlord excepted) at the expenses of the Tenant and to deliver
up the same to the Landlord at the expiration or sooner determination of the
said term in like state and condition;
(h) to permit the Landlord and all persons authorised by it at all reasonable times
upon prior appointment (except in an emergency) to enter into the said premises
to view the condition thereof and to give or leave notice in writing upon the
said premises for the Tenant of all defects and want of repair there found and
for which the Tenant shall be liable hereunder and within 14 days after every
such notice well and sufficiently to repair and make good such defects and wants
of repair whereof any such notice shall have been so given or left;
(i) not without the previous written consent of the Landlord (such consent not to be
unreasonably withheld) to erect, install or alter any fixtures, partitioning or
other erection or installation in the said premises or any part thereof;
(j) not without the previous written consent of the Landlord (such consent not to be
unreasonably withheld) not to cut, maim or injure or permit or suffer to be cut,
maimed or injured any doors, windows, walls, beams, structural members or any
part of the fabric of the said premises nor any of the plumbing or sanitary
apparatus or installations included therein;
(k) not without the prior written consent of the Landlord to transfer assign
underlet or otherwise part with the possession of the said premises or any part
thereof either by way of subletting lending sharing or other means whereby any
person or persons not party to this Agreement obtains the use or possession of
the said premises or any part thereof irrespective of whether any rental or
other consideration is given for such use or possession and in the event of any
such transfer subletting sharing assignment or parting with the possession of
the said premises (whether for monetary consideration or not) this Agreement
shall at the discretion of the Landlord determine and the Tenant shall forthwith
surrender the said premises to the Landlord;
(l) not do or permit or suffer to be done anything in or upon the said premises or
any part thereof which may at any time be or become a nuisance or annoyance to
the Landlord or the tenants or occupiers of the other portions of the said
building or of the neighbouring premises or which may produce an offensive odour
and to take all such precautions as the Landlord shall reasonably require to
prevent or minimise damage to the said premises from the Tenant's operations;
(m) not to store any unlawful or dangerous or hazardous goods or any explosive or
combustible substance on or in any part of the said premises;
(n) not to use the said premises or any part thereof for any illegal or immoral
purposes or for any purpose which is in contravention of the terms and
conditions contained in the Crown Lease or the Conditions under which the said
premises (inter alia) are held from the Crown;
(o) not to do or cause or permit or suffer to be done anything whereby the insurance
of the said premises or of the said building against fire explosion storm or
tempest may be rendered void or voidable or whereby the premium for such
insurance may be liable to be increased and to indemnify the Landlord against
any such increased or additional premium as shall have been brought about or
caused by his act or default;
(p) not to use the said premises for any purpose other than for factories and/or
godown and ancillary offices purposes and not to carry on any trade or business
thereon which is now or may hereafter be declared to be an offensive trade under
the Public Health and Urban Services Ordinance or any enactment amending the
same or substituted therefor and not to permit or suffer any sale by auction to
be held upon the said premises and not to permit any person to remain in the
premises overnight;
(q) to cushion the machinery placed on or affixed to the said premises and to
restrict the number of workers working or staying in the said premises in
accordance with Government Regulations;
(r) not to store or place any goods machinery or other things on or in any part of
the said premises the load of which exceeds the loading capacity of the said
premises;
(s) not to overload the lifts in the said building in excess of their maximum
capacity;
(t) not to install any furnace, boiler or other plant or equipment in the said
premises or use any fuel that might in any circumstance produce smoke without
first obtaining permission in writing from the Landlord and the Commissioner of
Labour;
(u) not to put or place any dust bins, garbage cans, furniture chattels or refuse or
store any goods or any other things in the common entrance-hall, staircases,
landings, passages, corridors, lifts, lobbies and other common parts of and in
the said building other than in the place designated therefor from time to time
by the Landlord and not to leave any article or thing or obstruction of arty
kind or nature in any part of the said building other than the said premises;
(v) not to permit any vehicles chattels and goods belonging to the Tenant to cause
an obstruction on the loading and unloading spaces on the ground floor of the
said building and to use his reasonable endeavours to ensure that persons doing
business with the Tenant and their servants and workmen shall not permit any
vehicles chattels and goods to cause such obstruction as aforesaid and to use
his reasonable endeavours to ensure that vehicles chattels and goods belonging
to the Tenant or to persons doing business with the Tenant shall observe any
regulations and instructions made or given by the Landlord with regard to the
use of the loading and unloading spaces on the ground floor of the said
building;
(w) not to affix exhibit or paint on any part of the common entrance halls
staircases landings lifts or passages in the said building or in the windows of
the said premises any trade, professional or business signboard notice or
advertisement whatsoever save and except in such space at the staircase entrance
on the ground floor of the said building and/or on the parapet wall outside the
said premises as the Landlord shall designate and approve for such purpose such
designation and approval not to be unreasonably withheld;
(x) not to carry on business of a weaving or dyeing factory, or the business of film
processing or developing, or any business involving the use, manufacture or
storage of foamed rubber which shall include (inter alia) foamed and expended
plastic or nitrocellulose base plastic, polystyrene, polyvinyl chloride or
polypropylene; or the business of adhesive manufacturers, artificial flower
works, asphalt roofing manufacturers, bamboo, cane, willow and rattanware works,
boot, shoe and leather goods makers, camphor works, candle works, confectionery
and sugar boiling works, detergent factories, soap and soap manufacturers, ether
works, fat and tallow boiling works, flocking works, flour mills, ginning,
scotching, and waster cotton works, glass and vaccum [sic] flask works and lens
manufacturers, jute mills, lacquerware manufacturers, match factories, mattress
makers and upholsterers, metallic powder works, paint and varnish works, plastic
goods fabricators, plastic goods manufacturers, saw mills, rubber, foamed
manufacturers, starch factories, toothpick works, wax products manufacturers,
woodworkers, carpenters, joiners and cabinet makers and yeast factories;
(y) not to install any supports or erect any iron brackets on any part of the
exterior walls or the said building for any purpose including the installation
of air-conditioners and if the Tenant wishes to install any air-conditioners he
shall obtain the prior written consent of the Landlord (which consent shall not
be unreasonably withheld) and shall ensure that the air-conditioners are safely
installed without damaging any part of or protruding from the exterior walls or
windows of the said building;
(z) not to fix or erect any venetian blinds or sun blinds of any description to or
on the part of the exterior wall of the said building (other than the interior
of the said premises);
(aa) not to make any openings on any part of the exterior walls of the said building;
(bb) not to alter the position of the Smoke Lobby Doors or to make any additions to
such doors;
(cc) not to erect or hang any wire or aerial wirings from the windows or outside the
exterior walls of the said building;
(dd) not to use or cause or permit the use of the corridors, staircases or other
common passages of the said building for the purpose of drying laundry or
hanging or placing or storing any article or thing thereon or therein and not to
permit the Tenant's employees to use the same for loitering or eating;
(ee) not to use the roof or any part thereof of the said building;
(ff) to observe and perform all regulations imposed by any Department of Government
in relation to or in respect of the carrying on of a factory or a godown or of
the trade or business on the said premises;
(gg) to be wholly responsible for any loss, damage or injury caused to any person
whomsoever directly or indirectly through the defective or damaged condition of
any part of the interior of the said premises the repair of which is the
Tenant's liability hereunder and to make good the same by payment or otherwise
and to indemnify the Landlord against all actions proceedings, claims and
demands made upon the Landlord in respect of any such loss, damage or injury and
all costs and expenses incidental thereto;
(hh) to use the A/C Plant Room (if any) in the said premises for and in connection
with air-conditioning purpose only;
(ii) to pay to the Landlord on demand all costs incurred by the Landlord in cleansing
or clearing any of the drains, pipes or sanitary or plumbing apparatus choked or
stopped up owing to the careless or improper use or neglect by the Tenant or any
employee, agent or licensee or workmen of the Tenant;
(jj) to obey and comply with and to indemnify the Landlord against the breach of all
ordinances, regulations, bye-laws, rules and requirements of any Governmental or
other competent authority relating to the use and occupation of the said
premises or any other act, deed, matter or thing done, permitted, suffered or
omitted therein or thereon by the Tenant or any employee, agent or licensee of
the Tenant;
(kk) to take all precautions to protect the interior of the said premises including
the windows and glass thereof against damage by storm or typhoon or the like;
(ll) quietly to yield up the said premises together with all fixtures fittings and
additions therein and thereto at the expiration or sooner determination of this
tenancy in good clean and tenantable repair and condition fair wear and tear
structural inherent defects damage by fire flood tempest storm and other risks
insured against by the Landlord excepted in accordance with the stipulations
herein contained, provided that where the Tenant has made any alterations or
installed any fixtures or additions to the said premises with or without the
Landlord's written consent, and whether pursuant to the terms of any previous
tenancy agreement with the Landlord or its predecessor-in-title or at any time
hereafter, the Landlord may, at its discretion, require the Tenant to reinstate,
remove or do away with such alterations, fixtures or additions or such part or
portion thereof as the Landlord may require and make good and repair in a proper
and workmanlike n-tanner any damage to the said premises and the Landlord's
fixtures, fittings and additions as a result thereof before delivering up the
said premises to the Landlord, provided further that the Tenant shall be
entitled to remove its own fixtures and equipment subject to the Tenant making
good all damage to the said premises including damage to the fittings and
decoration within the said premises and the said building caused by such removal
to the satisfaction of the Landlord.

3. The Landlord agrees with the Tenant as follows:-
(a) that the Tenant paying the rent hereby reserved and performing and observing the
agreements by the Tenant herein contained may peaceably hold and enjoy the said
premises during the said period without any interruption by the Landlord or any
person lawfully entitled or claiming through or under it;
(b) to pay the Crown Rent and Property Tax in respect of the said premises.
(c) to use its best endeavours to provide lifts and refuse disposal services at the
said building.

4. PROVIDED ALWAYS and it is mutually agreed as follows:-
(a) that if and whenever any part of the rent hereby reserved shall be in arrear for
15 days (whether the same shall have been formally demanded or not) or if and
whenever there shall be a breach of any of the agreements by the Tenant
hereinbefore contained or if the Tenant shall become bankrupt or have its
Business Registration cancelled or in the case of a limited company shall be
wound up (save for the purpose of amalgamation or reconstruction) or shall enter
into any composition or arrangement with its creditors or shall suffer execution
to be levied upon any of the Tenant's goods or effects the Landlord shall upon
the happening of any such event be entitled to re-enter upon the said premises
or any part thereof in the name of the whole and thereupon this Agreement shall
absolutely determine but without prejudice to any rights which may have accrued
to the Landlord by reason of any antecedent breach of any of the obligations on
the part of the Tenant hereinbefore contained and the deposit paid hereunder
shall be forfeited by the Landlord as and for liquidated damages and net as
penalty but without prejudice to the Landlord's right to claim any further
damages which the Landlord shall have sustained or may sustain. All costs and
expenses incurred by the Landlord shall be paid by the Tenant and shall be
recoverable from him as debt.
(b) a written notice served by the Landlord on the Tenant in manner hereinafter
mentioned to the effect that the Landlord thereby exercises the power of re-
entry herein contained shall be a full and sufficient exercise of such power
without actual physical entry on the part of the Landlord.
(c) Notwithstanding the foregoing, the landlord may in any such event at its option
elect not to terminate this Agreement but to deduct from the deposit the amount
of any monetary loss incurred by the Landlord in consequence of the breach, non-
observance or nonperformance by the Tenant in which event the Tenant shall, as a
condition precedent to the continuation of the tenancy, deposit with the
Landlord the amount so deducted and, if the Tenant shall fail so to do, the
Landlord shall forthwith be entitled to re-enter on the said premises and to
determine this Agreement in which event the deposit may be forfeited to the
Landlord as hereinbefore provided.
(d) acceptance of rent by the Landlord shall not be deemed to operate as a waiver by
the Landlord of any right to proceed against the Tenant in respect of any breach
non-observance or non-performance of the said agreements stipulations terms and
conditions herein contained and on the Tenant's part to be observed and
performed.
(e) The Landlord shall not be under any liability to the Tenant or to any other
person whomsoever in respect of any loss or damage to person or property
sustained by the Tenant or any such other person caused by or through or in any
way owing to the overflow of water or the escape of fumes smoke fire or any
other substance or thing from anywhere within the said building and the Tenant
shall fully and effectually indemnify the Landlord from and against all claims
and demands made against the Landlord by any person in respect of any loss,
damage or injury caused by or through or in any way owing to the overflow of
water or the escape of fumes smoke fire or any other substance or thing from the
said premises owing to the neglect or default of the Tenant his servants,
agents, licensees or workmen or to the defective or damaged condition of the
interior of the said premises for which the Tenant is responsible hereunder and
against all costs and expenses incurred by the Landlord in respect of any such
claim or demand.
(f) the lifts as installed in the said building shall be permitted for use by the
Tenant under the instructions imposed by the Landlord at all reasonable times
only. Should the Tenant fail to observe the instructions as imposed by the
Landlord, he shall not be allowed to use the said lifts. The Tenant shall
indemnify the Landlord for all damage done to the said lifts due to the mis-use
by the Tenant of the said lifts.
(g) all fire-fighting equipment as installed in the said premises shall be and
remain the property of the Landlord and the Tenant shall take due care thereof
and in particular the Tenant shall not allow such equipment to be moved to any
other position.
(h) during the three months immediately preceding the expiration of the term hereby
created, the Landlord shall be at liberty to affix and maintain without
interference upon arty external part of the said premises a notice stating that
the said premises are to be let and such other information in connection
therewith as the Landlord shall reasonably required and the Tenant shall upon
prior notice from the Landlord permit persons with the authority from the
Landlord or its agents at all reasonable times of the day upon prior appointment
to view the said premises or any part thereof.
(i) the Tenant will on the signing of this Agreement pay to the Landlord a sum set
out in the Fourth Schedule hereto by way of deposit for the due performance and
observance of the agreements on the part of the Tenant herein contained. At the
expiration or sooner determination of this Agreement if the Tenant shall have
paid all rent rates and other charges due hereunder and if there shall be no
breach of any of the agreements on the Tenant's part to be observed and
performed the Landlord will repay to the Tenant the said deposit but without any
interest thereon 14 days after the Tenant shall have duly delivered to the
Landlord vacant possession of the said premises but if there shall be any
arrears of rent rates or other outstanding utility charges in connection with
the enjoyment of the said premises the Landlord may apply the said deposit
towards payment of such arrears of rent rates and outstanding charges and if
there shall be any breach of the said agreements or any of them the Landlord
shall pay or apply the said deposit or such part thereof towards remedying such
breach (in so far as this may be possible) and shall only pay the balance (if
any) of the said deposit to the Tenant.
(j) any notice under this Agreement shall be in writing and if to the Tenant shall
be sufficiently served if left addressed to him at the said premises or any part
thereof or sent by registered post to or left at his last known address in Hong
Kong (and if a company to its registered office) and if to the Landlord shall be
sufficiently served if sent to it by registered post or left at its registered
office in Hong Kong.
(k) for the purpose of Part III of the Landlord and Tenant (Consolidation)
Ordinance, Chapter 7, and for the purpose of these presents the rent in respect
of the said premises shall be deemed to be in arrear if not paid in advance at
the time and in the manner hereinbefore stipulated.
(l) the Tenant hereby expressly declares that at the expiration or sooner
determination of this Agreement the Tenant will not invoke or seek to avail
himself of any protection which may or shall hereafter be afforded by any
ordinance or regulation of Hong Kong protecting tenants or lessees from eviction
but will promptly and punctually quit and deliver up possession of the said
premises at the expiration of this Agreement or sooner determination as
aforesaid.
(m) in the event of the said premises or any part thereof at any time during the
said term being damaged or destroyed by fire or by any other cause (not
attributable to the act or default of the Tenant) so as to be unfit for
occupation and use or become subject to a closure order or become inaccessible
to the Tenant then the rent hereby reserved or a fair proportion thereof
according to the nature and extent of the damage sustained shall be suspended
until the said premises shall again be rendered fit for occupation and use or
until the said premises cease to be subject to a closure order or cease to be
inaccessible Provided Always that the Landlord shall not be required to
reinstate the said premises if by reason of their condition or any local
regulations or other circumstances beyond the control of the Landlord it is in
the opinion of the Landlord not economical or practicable or reasonable so to
do. If the Landlord shall not have reinstated the said premises to render it
fit for occupation and use or accessible or cause the closure order to be
removed within three (3) months from the occurrence of the relevant event, the
Tenant or the Landlord shall have the right to terminate this Agreement
forthwith by giving the other party notice in writing. Upon such termination
and upon vacant possession of the said premises being delivered by the Tenant to
the Landlord the deposits paid herein and any rental paid in advance shall be
returned to the Tenant in accordance with Clause 4(i) herein within 14 days
after the date when vacant possession of the said premises have been delivered
back to the Landlord and each party shall release the other from the further
performance and observance of the covenants terms and stipulations herein
without prejudice to either party's right to claim damages against the other for
any prior breach of any of the covenants terms and stipulation herein.
(n) the tenancy hereby created is personal to the Tenant and without in any way
limiting the generality of Clause 2(k) above, the following acts and events
shall, unless with the prior written approval of the Landlord, be deemed to be
breaches of Clause 2(k) above:-
(i) any reconstruction, amalgamation, merger or voluntary liquidation (in the
case the Tenant being a corporation);
(ii) the giving by the Tenant of a Power of Attorney or similar authority whereby the
donee of the Power obtains the right to use, possess, occupy or enjoy the said
premises or any part therefore or does in fact use, possess, occupy or enjoy the
same.
(o) for the purpose of these presents any act default or omission of the agents,
licensees, servants, visitors or customers of the Tenant shall be deemed to be
the act default or omission of the Tenant.
(p) The Landlord shall be entitled to treat nonpayment of management fee and rates
(if any) and any other payment payable by the Tenant hereunder or any part
thereof in all respects as non-payment of rent under this Agreement.
(q) unless the context otherwise requires, words herein importing the masculine
gender shall include the feminine and neuter gender and words herein in the
singular shall include the plural and vice versa.

5.(a) The Landlord shall be at liberty to make such rules and regulations
as it shall reasonably deem fit for the management of the Building including but
not limiting to the common area, common facilities, loading and unloading spaces
and lifts. A copy of the House Rules or any amendment thereto once posted on
the notice board of the Building shall take effect immediately (unless otherwise
stated therein) and the same shall be deemed to have been sufficiently served to
the Tenant, notwithstanding Clause 40) hereof. If there is any discrepancy
between such rules and regulations and this Agreement the provisions of this
Agreement shall prevail.
(b) The Landlord shall also be at liberty to enter into a Deed of Mutual Covenant
(if the same has not done previously) with any co-owner or such other person
having an interest in the Kwai Chung Town Lot No. 366 and the Building in such
manner and in form as it shall deem fit provided that the Tenant's rights
hereunder shall not be impeded.

6. The Tenant hereby declares that the Tenant has not paid to the Landlord either
directly or indirectly any construction or key money premium or other
consideration of a similar nature for securing the tenancy hereby created.

7. The Tenant shall not be entitled to make any claim whatsoever against the
Landlord in respect of any cessation or failure whether total or partial of the
lifts and central cooling and air-conditioning system of the said building and
the fire equipment in the said premises whether such cessation or failure is due
to the act neglect or default of the Landlord or not.

8. The Landlord hereby agrees that the Tenant shall have the right to redecorate or
renovate the said premises subject to the following terms and conditions:-
(a) the Tenant shall at its own costs prepare and submit to the Landlord for
approval suitable drawings and specifications of the works proposed to be
carried out by the Tenant (hereinafter called "the Tenant's Work") together with
schematic sketches illustrating the design and layout proposal of such proposed
works (hereinafter collectively called "the Tenant's Plans").
(b) the Landlord will consider the Tenant's Plans and may accept or reject the
Tenant's Plans or require modification thereof or any part of them as it thinks
fit within 14 days from the date of submission of the Tenant's Plans to the
Landlord PROVIDED that the acceptance of the Tenant's Plans shall not be
unreasonably withheld and that the Tenant's Plans shall not be unreasonably
required to be modified.
(c) the Tenant shall have the sole responsibility for compliance with all applicable
statutes, codes, ordinances, and other regulations for all work performed by or
on behalf of the Tenant on the said premises, the approval of plans,
specifications, calculations or of the Tenant's Work shall not constitute any
implication, representation or certification by the Landlord that the said
improvements are in compliance with the said statutes, codes, ordinances and
other regulations.
(d) the Tenant shall obey and cause his servants agents contractors and workmen to
obey and comply with all instructions and directions which may be given in
connection with the carrying out of such work by the Landlord or its agents or
servants.

9. Each party hereto shall pay its own solicitor's costs and expenses incurred in
relation to the negotiation, preparation and execution of this Agreement. The
Stamp Duty payable thereon shall be borne and paid by the parties hereto
equally.

THE FIRST SCHEDULE ABOVE REFERRED TO (NAMES ADDRESSES AND DESCRIPTION OF PARTIES HERETO)
Landlord : STONEYCROFT ESTATES LIMITED whose registered office is situate at
5th Floor, Loke Yew Building, 50-52 Queen's Road Central, Hong Kong.
Tenant: MEASUREMENT LIMITED whose office is situate at Units A-B, 12th Floor,
Wo Kee Hong Building, 585-609 Castle Peak Road, Kwai Chung, New Territories.

THE SECOND SCHEDULE ABOVE REFERRED TO (DESCRIPTION OF SAID PREMISES)
ALL THOSE UNITS A to B on the TWELFTH FLOOR of WO KEE HONG BUILDING Kwai Chung
New Territories erected on All That piece or parcel of ground registered in the
District Land Office Kwai Chung as Kwai Chung Town Lot No. 366 which portion is
shown colored Pink on the Floor Plan hereto annexed for the purpose of
identification only.

THE THIRD SCHEDULE ABOVE REFERRED TO (TERM OF LETTING, RENT, ETC.)
For the term of TWO YEARS commencing on the 2nd day of May 1996 to the 1st day
of May 1998 at the rent of DOLLARS FIFTY ONE THOUSAND FIVE HUNDRED FORTY SEVEN
AND CENTS FIFTY ONLY ($51,547.50) Hong Kong Currency per calendar month
(exclusive of rates, management and general services and maintenance charges)
payable in advance on the 1st day of each and every calendar month during the
said term without any deduction.

THE FOURTH SCHEDULE ABOVE REFERRED TO (DEPOSIT)
DOLLARS ONE HUNDRED THREE THOUSAND NINETY FIVE ONLY ($103,095.00) Hong Kong
Currency.

IN WITNESS whereof the parties hereto have hereunto set their hands the date
first above written.
</TABLE>

<TABLE>
<S><C>
EXHIBIT 10 - MATERIAL CONTRACT: BUILDING LEASE

Lessor (First Party): Beijing Qinglian Leather Group Company, Beijing City Gexing Living Services Center
Address: 29 Nan[illegible] East Road, Fengtai District, Beijing City
"Building Lease Permit" No.: G50045
Commissioned Agent: Guo Chunxin
Address: 7A Cuijingge Jiaerjia Garden, Chegongmiao Tianan Industrial Zone, Shenzhen

Lessee (Second Party): Jingliang Electronics (Shenzhen) Co., Ltd.
Address: F1.6, 4D, Chegongmiao Tianan Industrial Zone, Shenzhen
Business License or Identity Card Number: Registration Number: No. Qi-Du-Yue-Shen-Zong-Hua-Zi-Di
303476

Pursuant to the "Building Lease Regulations of Shenzhen Special Economic Zone" and the enforcement
provisions thereof, First Party and Second Party, having reached a consensus following consultations, do
make this lease.

The terms of the lease are the following:

Article One
First Party does lease the building located at F1.6 4C Tianfa Building, Chegongmiao Tianan Industrial
Zone, Futian District to Second Party for use by Second party. Total building area is 1,134.65 square
meters.

Article Two
The lease term for the building leased by Second Party is one year and zero months, i.e. from February 15,
1997 to February 15, 1998.

Article Three
Second Party may use the leased building for production workshop and office purposes. First Party
guarantees that the leased building can be used for the aforesaid purposes and that said building is in
compliance with applicable national fire safety provisions. Use by Second Party of the leased building for
other purposes requires approval in writing from First Party. Second Party shall, in compliance with the
provisions of applicable laws and regulations, perform the procedures whereby the change in building use
report is reported for approval.

Article Four
First Party warrants that uses of leased building set forth in Article Three conform to the provisions of
applicable laws, regulations, and by-laws. Second Party guarantees that its actions during the leased
building use process shall comply with the provisions of applicable laws, regulations, and by-laws.

Article Five
Unit rent of leased building is Twenty-two Rmb per square meter of building floor space monthly. Total
monthly rent is Twenty-four Thousand Nine Hundred Sixty-two Point Three Rmb exactly. RMB 24,962.30
Second Party shall pay rent to First Party by the 15th-20th day of each month.

Article Six
By February 15, 1997, First Party shall hand over leased building to Second Party for use by Second Party.
In the event that First Party should fail to hand over leased building to Second Party by the date stipulated
in the previous clause, Second Party may request that the effective term of this lease be extended, such
extension to be confirmed and signed in writing by both First and Second Parties.

Article Seven
During the term of the lease, First Party shall be responsible for payment of property tax, use fees for the
land used by the leased building, and building lease administrative fees. Second Party shall be responsible
for payment of the water and electricity bills, hygiene fees, building management fees, and telephone bills
of leased building.

Article Eight
See Article Three of page 7, Attached Page.

Article Nine
This lease stipulates a security deposit. Upon signing hereof by First Party and Second Party, First Party
may collect from Second Party a lease deposit in the amount of one month's rent, i.e. Twenty-four
Thousand Nine Hundred Sixty-two Point Three Rmb Exactly. When First Party collects the lease deposit, it
shall provide Second Party with a receipt. First Party and Second Party must conscientiously perform each
clause stipulated herein. If either party should commit a breach of contract, such party must bear breach of
contract liability in accordance with the law.

Article Ten
First Party shall guarantee that the safety of the building and of the facilities located therein is in compliance
with the provisions of the applicable laws, regulations, and by-laws. Second Party shall use each facility
within building in a normal manner and shall take good care of same in order that abnormal damage be
avoided. Upon termination of contract, Second Party shall return building in a timely manner and
guarantees that the facilities within the building shall be in perfect condition (excluding normal wear and
tear). At the same time, Second Party shall make full payment for all expenses for which it is responsible.

Article Eleven
If, during the leased building use process, the leased building or the facilities therein should suffer such
damage or mechanical failure as to hinder safe, normal use, Second Party shall promptly notify First Party
and shall employ effective measures. First Party shall effect repairs within ten days after receipt of notice
from Second Party. If Second Party is unable to notify First Party, or if First Party refuses to make repairs,
Second Party may effect repairs on behalf of First Party after receiving an official stamp from the agency
which registered the lease. The expenses for such repairs (including repairs made by Second Party on
behalf of First Party) shall be borne by First Party.

Article Twelve
If, due to improper or unreasonable use by Second Party, the leased building or the facilities therein should
suffer damage or mechanical failure, Second Party shall be responsible for prompt repairs or
compensation. If Second Party refuses to make repairs or provide compensation, First Party, after
obtaining an official stamp from the agency which registered the lease, may make repairs on behalf of First
Party. Repair expenses shall be borne by Second Party.

Article Thirteen
If, during the effective term hereof, First Party definitely needs to remodel, expand, or install fixtures in the
leased building, it may do so only with the consent of Second Party and after obtaining approval from the
government departments concerned. First Party and Second Party shall make a separate written
agreement concerning this matter. During the effective term hereof, Second Party may install fixtures in the
leased building after obtaining the consent of First Party and approval from the government departments
concerned. First Party and Second Party shall make a separate written agreement concerning this matter.

Article Fourteen
Second Party may not sublet the leased building, whether in whole or in part, to another party without the
written consent of First Party. After receiving consent from First Party to sublet, Second Party shall perform
registration procedures at the agency in charge of building leases. However, the term of the sublet may not
terminate later than the end of the original lease term of Second Party. Second Party moreover guarantees
that the party which receives the sublease shall not again sublet the sublet building.

Article Fifteen
If, during the effective term hereof, First Party must re-assign all or part of the leased building, First Party
shall provide notice to Second Party of same one month in advance. Under conditions of equality, Second
Party has right of prior purchase. If the leased building is assigned to another party, First Party shall
guarantee that the assignee shall continue to perform this lease.

Article Sixteen
If one of the following should occur during the effective term hereof, this lease will automatically be
dissolved.
(1) Force majeure or an accident occurs, the result of which is that this lease cannot be performed.
(2) The government decides to condemn the land on which the leased building is located, and the leased
building must therefore be demolished.
(3) The "Building Lease Permit" of the First Party expires. Second Party may request that First Party
provide compensation for losses which result from dissolution of the contract for the reason stated in 16.3.

Article Seventeen
If one of the following situations obtains, First Party will have the right to rescind this lease. Second Party
shall compensate First Party for losses sustained by First Party as a consequence of such situation.
(1) Second Party does not pay rent for more than two months.
(2) Second Party owes more than fifty thousand yuan for various expenses.
(3) Second Party, without receiving approval from First Party or from the departments concerned, makes an
unauthorized change to the use of the leased building.
(4) Second Party violates the stipulations of Article Twelve of this lease and does not take responsibility for
repairs or does not pay repair expenses, with the result that the building or equipment sustains serious
damage.
(5) Second Party, without receiving written approval from First Party or from the departments concerned,
installs fixtures in the leased building.
(6) Second Party, without written approval from First Party, sublets leased building to another party.
If First Party, on the basis of the aforesaid situations, effects a unilateral rescission of the lease, First Party
shall notify Second Party in writing that Second Party is to move out and return the leased building. If there
is a balance remaining on the amounts which Second Party has prepaid, First Party shall return such
balance to Second Party. Second Party, however, has no right to demand refund of the deposit.

Article Eighteen
If one of the following situations should obtain, Second Party has the right to rescind this lease. First Party
shall compensate Second Party for losses sustained by Second Party as a result of such situation.
(1) First Party delays turning over the leased building for more than two months.
(2) First Party violates the stipulations of Article Four of this lease. As a result, Second Party is unable to
continue using the leased building according to its purposes.
(3) First Party violates the stipulations of Article Eleven and does not take responsibility for repairs or
payment of repair expenses, with the result that Second Party is unable to continue using the building.
(4) First Party, without approval from Second Party and the departments concerned, remodels, expands, or
installs fixtures in the leased building.
If Second Party, for the aforesaid reasons, effects a unilateral rescission of the lease, Second Party shall
promptly notify First Party in writing, shall promptly vacate the leased building, and shall have the right to
demand that First Party repay double the amount of the deposit, pay a penalty of Forty-five Thousand Rmb,
and refund the balance on prepaid amounts.

Article Nineteen
In the event that First Party and Second Party are unable to reach a consensus on rescission of the lease,
the two parties may request that the agency which registered this lease provide mediation. Or they may
request arbitration from the Shenzhen Arbitration Committee or may initiate a lawsuit at a People's Court.
First Party and Second Party may rescind this lease during the effective term of this lease if they reach a
consensus.

Article Twenty
If, upon expiration of this lease, Second Party needs to continue to rent and use the leased building,
Second Party shall submit to First Party a request for renewal of lease two months prior to the expiration
date. If First Party must continue to lease the leased building, Second Party shall, under equal conditions,
have right of priority to lease the leased building. If First Party and Second Party reach an agreement on
lease renewal, the two parties shall make a new lease and shall register the lease at the lease-registering
agency.

Article Twenty-one
After termination of this lease, Second Party shall vacate the leased building and return the same to First
Party within 15 days after termination. In the event that Second Party should fail to move out or return the
leased building within the required time, First Party has the right to request that the lease-registering
agency force a recovery of the leased building and moreover that assets left by Second Party be checked
and disposed of and that satisfaction be made to First Party for rent and other expenses.

Article Twenty-two
If Second Party should be delinquent in the payment of rent, Second Party shall pay a late fee to First Party.
The amount of the late fee is: the number of late days multiplied by 5 0/00 of monthly rent.

Article Twenty-three
If Second Party should, without authorization, sublet the leased building, whether in whole or in part, to
another party, Second Party shall pay a breach of contract penalty to First Party. The amount of the breach
of contract penalty is Twenty-two Rmb per month per square meter of sublet building floor space.

Article Twenty-four
If either First Party or Second Party should fail to perform an obligation stipulated by this lease, and if such
failure should cause the other party to sustain losses, the non-performing party should compensate the
other party for the actual amount of the loss and expected earnings.

Article Twenty-five
If First Party and Second Party have additions and/or deletions to make to the clauses of this lease form,
the two parties may set forth such additions and/or deletions on an attached page hereto. The contents of
the attached page shall possess the same legal effect as is possessed by this lease. If First Party and
Second Party find that this lease contains omissions, the two parties may conduct separate consultations
and draft a supplementary agreement. The supplementary agreement will possess a legal effect equal to
that possessed by this lease only after said agreement is examined and verified by the agency which
registered the original lease.

Article Twenty-six
In the event that disputes arise concerning the performance hereof, First party and Second Party shall
reach a solution by means of consultations. If consultations fail to result in a solution, the parties may
request that the agency which registered this lease provide mediation, or the parties may initiate a lawsuit
at a People's Court.

Article Twenty-seven
The original version of this lease is in Chinese.

Article Twenty-eight
There are 8 identical copies of this lease. First Party and Second Party each have 3 copies, and the lease-
registering agency has 1 copy. Tianan [illegible] [seal:] Beijing Qinglian Leather Group Company

Article Twenty-nine
This lease takes effect on the day on which it is signed.

First Party (signature/seal): Beijing Qinqlian Leather Group Company, Beijing City Gexing Living Services
Center
Legal representative: /illegible seal/[seal:] Beijing City Gexing Living Services Center
Contact telephone: 010.67666096
Bank account number: 20106515396 (Shenzhen Bank of Industry and Commerce, Shangbu Branch)
Commissioned agent (signature/seal): Guo Chunxin

Second Party (signature/seal): Jingliang Electronics (Shenzhen) Co., Ltd.
Legal representative: 330 6796
Contact telephone: Liu Xiao[seal: ]Jingliang Electronics (Shenzhen) Co., Ltd.
Commissioned agent:

January 17, 1997

Witness (signature/seal):

Month Day 199__
[seal:]Administrative Office for Building Leases in the Futian District of Shenzhen City
Shatou Lease Office
Contract Examined and Verified [illegible]
Lease-registering agency: [illegible]

January 20, 1997

(Attached Page)Note:

1. The Beijing City Gexing Living Services Center is a subsidiary unit of Beijing Qinglian Leather Group
Company. The Shenzhen property is managed by Gexing Living Services Center.
2. Shenzhen Xinghua Building Beijing Light Industry [illegible] Department is the unit name of the account
which our company is using now. The number of the account which is used for monthly payment of factory
building rent by Second Party to First Party is 20106515396. (Shenzhen Bank of Industry and Commerce,
Shangbu Branch). Shenzhen Xinghua Building Beijing Light Industry [illegible] department is our
company's higher-level unit.
3. Regarding the expenses which should be paid by Second Party (refer to those listed in Article Seven of
this lease), First Party and Second Party shall go to the Tianan Administrative Department and perform the
payment and account-transfer procedures for relevant expenses. Beginning on the first day of the lease,
Second Party will make payment to the administrative department for expenses.
[stamp:]BLANK

[stamp:] Attachment
[stamp:] Shatou Lease Office
Attachment to Factory Building Lease
Entered Into By
Beijing City Gexing Living Services Center, A Subsidiary of
Beijing Qinglian Leather Group Company,
and Jingliang Electronics (Shenzhen) Co., Ltd.

1. Second Party leases from First Party the factory building located at F1.64C Chegongmiao Tianan
Industrial Zone. The lease term is one year. If Second Party needs to rescind the lease for special cause
prior to the end of the lease term, Second Party must present its views on lease termination two months in
advance. Otherwise, Second Party must compensate First Party for economic losses thereby incurred. If
the two parties agree to renew the lease, the text of the lease will be discussed separately.
2. Following negotiations between First Party and Second Party, it has been decided that part of the
aluminum alloy partitions between the sample room, store room, and workshop shall be removed. Second
Party shall make compensation to First Party in a single payment in the amount of Fifty Thousand Rmb
exactly. Compensation shall be paid in full to First Party before Second Party moves into and installs
fixtures in the factory building.
3. First Party gives Second Party one month for installing fixtures, i.e. from January 15 to February 15,
1997. First Party shall transfer the accounts for water and electricity expenses, management fees, and so
on to Second Party by January 15.
4. Second Party shall not be liable for natural damage which might occur to the office desks, telephones,
store room storage shelves, electric water heaters, etc. of First Party during use by Second Party. A lump
payment of One Thousand yuan (Rmb) shall be made to First Party during the effective term of the lease.
Second Party is to pay First Party prior to moving in and installing fixtures.
5. If Second Party finds it necessary, Second Party may, with consent of First Party, seal the main door of
First Party (nail a board between the steel gate and the glass door) and open up a passage between 4C
and 4D remove the platform in front of the main door of 4C.
6. The two parties agree that if it is necessary to install a fire prevention spray system in the factory building,
the two parties will each pay fifty percent of the installation cost. Second Party will own half of the spray
equipment for three years. After three years (and including three years), First Party will have full ownership.
7. Beginning on the day on which Second Party moves in, Second Party will pay the monthly rental fee for
the one telephone, number 3303642, in the factory building; payment will be made to the Business Office of
Greater Shenzhen Telephone Company.
8. Following consultations, the two parties agree that First Party shall issue a receipt to Second Party for the
rent it receives each month. Every six months, Beijing City Gexing Living Services Center will issue one
formal invoice. It will do this twice per year.

[seal:][illegible] Leather Group Company
First Party Signature: Guo Chunxin
[seal:]Beijing City Gexing Living Services Center
/illegible seal/

[seal:]Jingliang Electronics (Shenzhen) Co., Ltd.
Second Party Signature: Liu Xiao

January 17, 1997
</TABLE>

<TABLE>
<S><C>
EXHIBIT 10 - MATERIAL CONTRACT: LEASE AGREEMENT

FIRST AMENDMENT TO LEASE BY AND BETWEEN:

TRANSCUBE ASSOCIATES
a New Jersey partnership,
"Landlord"

- -and-

MEASUREMENT SPECIALTIES, INC.,
a New Jersey corporation,
"Tenant"

DATED: FEBRUARY 24, 1997
LAW OFFICES
EPSTEIN, EPSTEIN, BROWN & BOSEK
A Professional Corporation
245 Green Village Road
P.O. Box 90l
Chatham Township, NJ 07928-0901
(201) 593-4900
Fax (201) 593-4966

U:\USERS\GC\KARCZYNS\12625226.lAM
February 12, 1997

FIRST AMENDMENT TO LEASE, made this 24th day of February, 1997, between TRANSCUBE
ASSOCIATES, a New Jersey partnership having an office at 180 Passaic Avenue, Fairfield, New Jersey
07004, hereinafter called the "Landlord"; and MEASUREMENT SPECIALTIES, INC., a New Jersey
corporation, having an Office at 80 Little Falls Road, Fairfield, New Jersey 07004, hereinafter called the
"Tenant".

WITNESSETH:

WHEREAS, the Landlord owns certain lands and premises in the Township of Fairfield, County of Essex
and State of New Jersey, which said lands and premises are commonly known as 80 Little Falls Road,
upon which there has been erected a building containing approximately 125,692 square feet (hereinafter
called the "building"); and

WHEREAS, the Landlord and Tenant have heretofore entered into a certain lease agreement dated May 4,
1994 (hereinafter called the "Lease"), pursuant to which Tenant has leased approximately 14,000 square
feet of space in the building (hereinafter called the "original leased premises"), all in accordance with the
terms and conditions of the Lease; and

WHEREAS, the Landlord has agreed to provide and lease to Tenant additional space containing
approximately 4,524 square feet, outside dimensions to center line of common wall (hereinafter called the
"additional leased promises"), as said additional leased premises shall be completed by Landlord for
Tenant in the building hereinabove referred to in accordance 'with the terms and conditions hereinafter
provided; and

WHEREAS, the Landlord and Tenant have agreed to extend the original Lease term for a further period of
one (1) year on the terms and conditions hereinafter provided; and

WHEREAS, the Landlord and Tenant by this First Amendment to Lease wish to modify, supplement and
amend the terms and conditions of the Lease to provide for additional rent and other Lease obligations an
the same shall be required and attributable to the additional leased premises,

NOW, THEREFORE, in consideration of the sum of ONE ($1.00) DOLLAR and other good and valuable
consideration, the parties hereto covenant and agree as follows:

1. The leased premises shall consist of the original leased premises containing approximately 14,000
square feet, together with the additional leased premises containing approximately 4,524 square feet, to be
constructed by Landlord for Tenant, which total leased space shall comprise 18,524 square feet, hereinafter
called the revised leased premises and Article 1 of the Lease is hereby modified accordingly.
2. The Lease term under the Lease as to the additional leased premises shall commence on or about
March 1, 1997 (hereinafter called the "Additional Commencement Date"). The Lease as to the revised
leased premises shall expire on June 30, 2000.
3. Commencing on the Additional Commencement Date, the Fixed Rent for the revised leased premises
shall be the following annual Fixed Rent, payable as in Article 3.1 of the Lease provided:
4. Commencing on the Additional Commencement Date the Tenant covenants and agrees to pay annual
Fixed Rent at the rate of ONE HUNDRED EIGHT THOUSAND SEVEN HUNDRED THIRTY FIVE AND
88/100 ($108,735.88) DOLLARS per annum, payable in equal installments of NINE THOUSAND SIXTY
ONE AND 32/100 ($9,061.32) DOLLARS per month. Tenant shall pay, in addition to the Fixed Rent
hereinabove provided, all other charges as in the Lease required and as may be attributable to the revised
leased premises.
5. Effective as of the Additional Commencement Date, Tenant's Pro Rata share for additional rent and other
charges provided in the Lease shall be revised from 11.14% to 17.64% wherever applicable, which revision
and readjustment is attributable to the incorporation of the additional leased promises in and to the original
leased premises as herein referred to.
6. Anything herein contained to the contrary notwithstanding, it is expressly understood and agreed that the
Tenant shall take the additional leased premises and improvements as of the Additional Commencement
Date of the within Lease in an "as is" condition, except that the Landlord shall install a wall within the
additional leased premises and tie Tenant's usage of electric and gas applicable to the additional leased
premises into Tenant's utility meters currently serving the original leased premises.
7. Except as in this First Amendment to Lease provided, all other terms and conditions of the Lease shall
remain in full force and effect and shall be applicable to the additional leased premises upon the Additional
Commencement Date.
8. This Agreement shall be binding on the parties hereto, their heirs, successors and assigns.
9. IN WITNESS WHEREOF, the parties have hereunto set their hands and seals or cause these presents
to be signed by its proper corporate officers and caused its proper corporate seal to be hereunto affixed, the
day and year first above written.

WITNESS: TRANSCUBE ASSOCIATES

WITNESS: BY:

ATTEST: MEASUREMENT SPECIALTIES, INC.
BY:
</TABLE>

<TABLE>
<S><C>
EXHIBIT 10 - MATERIAL CONTRACT: BUILDING LEASE

Supplementary Agreement to Building Lease

In March 1997, Shenzhen Dongming Technology Co., Ltd. ("First Party") and Jingliang Electronics
(Shenzhen) Co, Ltd. ("Second Party") conducted negotiations regarding adjustments to the price of the
building lease. They reached the following agreement:

One,
First Party will continue to lease the factory building at F1.6-4D (1134.65 m) and the dormitory at H2.8, 8-
A15 - 8-A18, 8B2 (273.28 m) in Tianan Chegongmiao Industrial Village, Chegongmiao Industrial Zone,
Shenzhen City to Second Party for production and dormitory use.

Two,
The rent standard for the factory building shall be adjusted to 22 HK dollars/ m2; the rent standard for the
dormitories shall be adjusted to 24 HK dollars/ m2, to take effect beginning April 1997 and effective until
May 1999, no further [illegible] Liu 3-18-97

Three,
Following the price adjustment, Second Party shall pay First Party a monthly rent of HK $31,521.

Four,
All other clauses in the original building lease remain effective.

First party (signature/seal): Liu [illegible]
Legal representative: 3-18-97/illegible seal/
Contact telephone: (0755)3354487
Bank account number: Central Bank, Hongling Brach, 0128030001625

Second party: Liu Xiao
Legal representative: [seal: ] Jingliang Electronics (Shenzhen)
Contact telephone(0755) 3419611
Bank account number: 3880490521001

============================================================================

Building Lease Clauses

One,
First Party leases the factory building at F1.6-4D (1134.65 m2) and the dormitory at H2.8, 8-A15 - 8-A18,
8B2 (273.28 m2) in Tianan Chegongmiao Industrial Village, Chegongmiao Industrial Zone, Shenzhen City
to Second Party for production and dormitory use (hereinafter referred to as "Leased Building").

Two,
The term of the lease begins on the day on which the building lease becomes effective and ends on March
1, 2000 (i.e., five years months). Even though other clauses herein may have different provisions, First
Party and Second Party agree that, at the end of the third year of the lease term, Second Party has the right
to give First Party three month's written notice to terminate this lease. At that time, the security deposit paid
by Second Party shall be returned.

Three,
Second Party shall pay rent in the amount of HK $28,705.16 per month and shall make such payment in full
within 15 days of the beginning of the month.

Four,
After the building lease takes effect, Second Party shall pay First Party a performance deposit equal to two
months rent: HK $57,410.32, to be returned to Second Party after the expiration of the lease.

Five,
First Party is responsible for payment of Leased Building real estate tax, personal income adjustment tax,
land use fee, and Leased Building lease administrative fee. Second Party is responsible for payment of
water and electricity expenses, public health fee, and building management fee.

Six,
Second Party must pay rent in accordance with the contract. If Second Party is delinquent in the payment
of rent, a late penalty equal to 5 0/00 of the rent will be charged per diem. If rent is unpaid for more than
three months, First Party has the right to recover the building and moreover has the right to refuse to refund
the performance deposit.

Seven,
After first obtaining approval from First Party and submitting the matter for approval by the departments
concerned, and under the condition that the architectural structure of the building shall not be damaged and
that no other party will be affected, Second Party shall be responsible for all fixture-installation expenses
incurred in the course of implementing interior installation of fixtures. If, upon expiration of the lease, First
Party and Second Party do not renew the lease, Second Party may remove equipment and objects other
than those which are tightly attached to walls, ceilings, floors, etc. and clean the interior such that it is in
sanitary condition.

Eight,
Second Party may not make unauthorized changes to the structure or [illegible] of the building. If Second
Party, whether intentionally or as a result of negligence, causes damage to the Leased Building or auxiliary
equipment, Second Party shall be responsible for restoring the building to its original condition or for
making compensation for economic losses.

Nine,
During the term of the lease, Second Party shall comply with the administrative control of the local
administrative departments and shall conscientiously observe applicable administrative laws and
regulations.

Ten,
First Party shall be responsible for regular maintenance of Leased Building or for commissioning Second
Party to perform maintenance on behalf of First Party. Second Party has the right to deduct the amount it
spends on maintenance from the rent it should pay. If First Party fails to perform maintenance in a timely
manner or fails to commission the lessee to perform maintenance on its behalf and such failure results in
damage to the building, Second party shall not be responsible. If Second Party or a Third Party therefore
suffers losses, First Party shall be responsible for compensation.

Eleven,
If, during the term of the lease, the building is destroyed by an Act of God, with the result that Second Party
is unable to continue use, this lease will automatically terminate, and the two parties shall not be liable to
each other.

Twelve,
During the term of the lease, neither First Party nor Second Party may rescind the lease for any reason. If
First Party desires to recover the building, First Party must provide notice in writing to Second Party three
months in advance and moreover obtain consent. At the same time, First Party should refund double the
amount of the performance deposit. If Second Party needs to vacate the building, it likewise must provide
notice in writing to First Party three months in advance and moreover obtain consent. At the same time,
Second Party may not request that the performance deposit be refunded.

Thirteen,
During the term of the lease, Second Party may not sublet the building to a third party without the consent
of First Party. Upon expiration or rescission of the lease, Second Party must return the building to First
Party on schedule. If Second Party needs to renew the lease, it must consult with First Party three months
in advance. If the term has expired, but Second Party fails to return the building, and moreover has not
renewed the lease, First Party may directly apply to the department which administers building leases for
mediation, or First Party may initiate a lawsuit at a People's Court.

Fourteen,
If First Party sells the building, First Party must notify Second Party three months in advance. After title to
the building has been transferred, the original lease will continue to be effective.

Fifteen,
If First Party has electrical appliances, personal property, and other items in Leased Building for Second
Party, a separate, detailed list may be made. Second Party should maintain said items in perfect condition
and return them undamaged to First Party when the lease term expires and the building is returned.

Sixteen,
If this lease contains any omissions, the two parties may consult each other and draft supplementary
provisions. The supplementary provisions will have the same legal effect as that of the lease.

Seventeen,
If a dispute should arise during the performance hereof, First Party and Second Party should resolve
dispute through consultations. If consultations fail, the parties may request that the department which
administers building leases provide mediation, or they may initiate a lawsuit at a People's Court.

Eighteen,
The governing version of this lease is the Chinese-language version, of which there are five identical
copies. First Party and Second Party each have two copies, and the lease-registering agency has one. All
possess the same legal effect.

Nineteen,
Other items agreed to by the two parties.

Twenty,
First Party must supply to Second Party, by March 15, 1995, three programmable telephones for use by
Second Party. Second Party shall pay telephone expenses. After this lease term expires, Second Party
shall return the telephones to First Party.

Twenty-one,
Second Party shall handle the installation procedures for the fire protection system with which Leased
Building should be equipped. Second Party shall first pay all costs associated with setting up and installing
the fire protection system. When Second party vacates the premises and hands over the fire protection
system, still in working order, to First Party, First Party shall pay to Second Party the amount which Second
Party spent on costs associated with setting up and installing the fire protection system.

Twenty-two,
During the first year, the factory building rent standard is HK $20 per square meter; the dormitory rent
standard during the first year is HK $22 per square meter. Beginning in the second year, the rents will be
determined on the basis of the average building lease rent increases (decreases) which are supplied by the
departments concerned of the Shenzhen City government.

Twenty-three,
Note 1. First Party hereby declares and warrants:
1. First Party shall, pursuant to "Building Lease Regulations of Shenzhen Economic Zone" and the
enforcement provisions thereof, submit application to the departments concerned of Shenzhen City and
obtain a legally valid "Building Lease Permit" for the Leased Building and moreover will bear all application
expenses.
2. First Party has already legally obtained the right and power to lease Leased Building to Second Party.
3. First Party will register this lease with the appropriate government agency of Shenzhen City and will bear
all registration expenses.
4. Leased Building is not encumbered by any liens, mortgages, or claims.
5. First Party does not know of any third party which actually claims, or may claim, right to use, occupy, or
control Leased Building or any part thereof. Nor does First Party know of any other means which would
cause use by Second Party of Leased Building to be subject to restrictive conditions, other than those
conditions expressly stipulated in this lease.
6. Leased Building is not in violation of any applicable law or regulation of the People's Republic of China
(for example: regulations regarding construction, safety, environmental protection, health, hygiene, and fire
prevention.).

The above warranties and declarations shall be continuous in nature. First Party shall warrant that, during
the entire term of the lease, said declarations and warranties will [illegible] true and accurate. If any
statement or warranty is inaccurate, First Party shall compensate Second Party in order that Second Party
avoid liability, losses, or damage caused by said inaccurate declarations or warranties made by First Party.
Moreover, Second Party will have the right to terminate this lease. Upon termination, First Party shall
compensate Second Party for all losses suffered by Second Party.

[signature:] Liu [illegible]Liu Xiao
</TABLE>

<TABLE>
EXHIBIT 11 - STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<S> <C> <C> <C>
For the year ended March 31,
1997 1996 1995

Primary net income per common share:

Net income $ 1,174,844 $ 987,031 $ 333,856
Assumed interest income net of tax
effect under modified treasury stock method (a) 42,546 62,642
Preferred dividend reequirements (1,802)
----------- ----------- -----------
Net income available to common shareholders $ 1,217,390 $ 1,049,673 $ 332,054

Weighted average common shares outstanding 3,531,987 3,529,833 3,502,005
Net effect of dilutive common equivalent shares
using average market price 337,315 365,103 45,335
----------- ----------- -----------
Total 3,869,302 3,894,936 3,547,340

Primary net income per common share $0.31 $0.27 $0.09

Fully diluted net income per common share:

Net income $ 1,174,844 $ 987,031 $ 333,856
Assumed interest income net of tax effect under
modified treasury stock method (a) 42,546 62,642
----------- ----------- -----------
Net income available to common shareholders $ 1,217,390 $ 1,049,673 $ 333,856

Weighted average common shares outstanding 3,531,987 3,529,833 3,502,005
Net effect of dilutive common equivalent shares
using year-end market price, if higher than
average market price 337,315 365,103 152,807
Assumed conversion of convertible preferred
Series C stock 11,195
----------- ----------- -----------
Total 3,869,302 3,894,936 3,666,007

Fully diluted net income per common share (a) $0.31 $0.27 $0.09

(a) Improvements of earnings per common share have not been taken into account
</TABLE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF MEASUREMENT SPECIALTIES, INC. AND SUBSIDIARIES AS
OF MARCH 31, 1997, AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS,
SHAREHOLDERS' EQUITY AND CASH FLOWS FOR THE YEAR 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> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-1-1996
<PERIOD-END> MAR-31-1997
<CASH> 239
<SECURITIES> 0
<RECEIVABLES> 2844
<ALLOWANCES> (32)
<INVENTORY> 3676
<CURRENT-ASSETS> 7125
<PP&E> 3030
<DEPRECIATION> (1644)
<TOTAL-ASSETS> 9234
<CURRENT-LIABILITIES> 3421
<BONDS> 0
<COMMON> 5385
0
0
<OTHER-SE> 31
<TOTAL-LIABILITY-AND-EQUITY> 9234
<SALES> 25004
<TOTAL-REVENUES> 25004
<CGS> 16393
<TOTAL-COSTS> 16393
<OTHER-EXPENSES> 7693
<LOSS-PROVISION> 74
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 825
<INCOME-TAX> (350)
<INCOME-CONTINUING> 1175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1175
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31

</TABLE>