PART I
Item 1. Business.
- ------------------
Certron Corporation is referred to herein as the "Company" or "Certron"
and such reference includes both the corporation and its subsidiary unless
otherwise indicated. Certron was incorporated under the laws of the State of
California in 1966.
Certron's business consists primarily of the design, development and
distribution of magnetic media products and the contract assembly and
manufacturing of products for the proprietary to others.
The following table sets forth, for the years ended October 31, 1995,
1994, and 1993, the amounts of net sales and operating profit before general
corporate expense and interest expense, together with identifiable assets at
October 31, 1995, 1994 and 1993 attributable to each of the Company's industry
segments.
Year ended October 31,
------------------------------
1995 1994 1993
------------------------------
(In Thousands)
Net sales to unaffiliated customers:
Magnetic Media products $3,895 $4,182 $6,857
Contract Assembly $ 5 $3,769 $3,711
Operating profit:
Magnetic Media products $ 365 $ 377 $ 945
Contract Assembly - $ 404 $ 416
Identifiable assets:
Magnetic Media products $1,639 $2,679 $2,664
Contract Assembly - $ 340 $ 419
Magnetic Media Products
- -----------------------
The Company's magnetic media products consist primarily of blank audio and
video cassettes and floppy disks. The Company also distributes magnetic media
accessories for computers. All video tape and most audio tape and related
plastics are presently being procured by the Company primarily from offshore
sources. During the fiscal years ended October 31, 1995, 1994 and 1993, net
sales of the Company's magnetic media products were as follows:
Net Sales
-----------------------------
Product 1995 1994 1993
- ------------------------------------- ------ ------ ------
Audio magnetic tape products $2,908 $3,037 $3,693
Other magnetic related items (floppy) 67 120 237
Video cassettes 920 1,025 2,927
------ ------ ------
$3,895 $4,182 $6,857
====== ====== ======
1
Certron sells blank audio magnetic tapes in several cassette
configurations of various sizes and playing times, and distributes VHS and 8mm
video cassettes. The Company purchases substantially all of its requirements
for audio and video cassettes from sources both in the Far East and Mexico.
Some audio cassette assembly and packaging (primarily of micro and mini
cassettes) by the Company takes place at the facility operated by Certron in
Mexicali, B.C., Mexico (where some slitting also occurs).
Certron also distributes 5-1/4" and 3-1/2" floppy disks manufactured by
others. These floppy disks are used for programming and storage applications
for computers and word processors. The Company packages and labels the
diskettes and, on a test basis, certifies the diskettes as to industry
standards.
Certron's magnetic media products are marketed and sold primarily in the
United States to wholesale distributors, original equipment manufacturers,
mail order companies and major retail outlets. Less than 5% of the Company's
net sales during the last three fiscal years were to foreign customers. The
Company's products are distributed under its own labels and under different
customer labels. Standard sized and miniaturized cassettes for dictation
purposes and cassettes for telephone answering devices are also sold to office
supply outlets and distributors.
For the fiscal year ended October 31, 1995, the Company's ten largest
customers of magnetic media products accounted in the aggregate for
approximately 57% of the Company's total net sales of such magnetic media
products. During fiscal 1995, the two largest single magnetic media customers
accounted for $819,000 and $494,000 or 21% and 13% of total magnetic media
sales, respectively. During fiscal 1994, the two largest single magnetic
media customers accounted for $713,000 and $452,000 or 17% and 11% of total
magnetic media sales, respectively. Loss of both of these customers would
have a short-term adverse effect on the Company's magnetic media products
segment. No other magnetic media customer accounted for more than 5% of the
Company's net sales of magnetic media products.
The Company believes that the amount of its backlog on any given date is
not necessarily indicative of trends in its magnetic media business in as much
as orders received for such products are generally completed in less than 60
days.
Most of the Company's magnetic media products are available from multiple
sources, although certain components utilized in the manufacture of the
Company's magnetic media products are available from a few sources. The
Company has no reason to anticipate that it will be unable to purchase
components from those sources.
Contract Assembly
- -----------------
The Company assembles products for others. Sales from contract assembly
result from contracts negotiated directly with the customer. The products are
designed by the customer and assembled by the Company in accordance with
customer specifications. The customer supplies the raw materials. The
Company's responsibility and sales are limited to the assembly service. All
of the assembly occurs in the Company's facilities in Mexicali, B.C., Mexico.
The Company did not have any meaningful sales in the contract assembly segment
of its business in fiscal 1995.
During the fiscal years ending October 31, 1995, 1994 and 1993, 0%, 72%
and 73% respectively of the Company's Mexicali sales in this segment were to
Papermate, a division of Gillette. Sales to Spectrol Electronics Corporation
accounted for the majority of the remaining balance of sales in this segment
in 1994. The contract with Gillette expired October 31, 1994. The contract
with Spectrol expired August 31, 1994. Spectrol and Gillette did not renew
their contracts. The Company is actively seeking other firms to replace the
Spectrol and Gillette business.
2
Competition
- -----------
In all areas of Certron's magnetic media business, competition is now, and
is expected to continue to be, active and intense. There are many substantial
competitors with larger resources than Certron in each market for its magnetic
media products. The Company believes that it occupies a small portion of the
total market for its magnetic media products. The principal methods of
competition in the magnetic media market involve price, quality and
advertisement, with the promotional priced audio tape products, floppy disk
and video cassettes being the most price sensitive. Since the Company has not
spent substantial amounts in consumer advertising of its high performance
blank tape products, floppy disks or video cassettes, it has been at a
competitive disadvantage in these areas and has had to charge a lower per
unit price than some competitors selling comparable products having strong
brand recognition. The Company has experienced extensive price competition
from Far East manufacturers and distributors of low-cost audio cassettes and
from other manufacturers and distributors for sales of floppy disks and video
cassettes, which has made it difficult for the Company to maintain prices.
See item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation and Liquidity and Capital Resources. Although the
possibility of technical obsolescence of present magnetic media products sold
by the Company exists, the Company is not aware of any development, either in
hardware or media, which presently threaten to supersede the general use now
being made of these types of magnetic media products.
Employees
- ---------
At January 1, 1996, Certron employed 55 people in its various operations,
consisting of 45 people at its operations in Mexicali, B.C., Mexico, 4 people
at its facility in Corona, California and 6 people at its facility in Los
Angeles, California.
3
Item 2. Properties.
- --------------------
The principal office, assembling and warehousing facilities of the Company are
as follows:
Approx. Area Lease Approx.
Location Sq. ft. Expires annual rent Principal use
- ------------------------------------------------------------------------------
422 N. Smith Avenue 15,970 8-31-98(1) $ 72,000 Warehouse and
Corona, CA packaging
1600 South Broadway 3,196 8-31-98(1) $ 15,000 Warehouse and
Los Angeles, CA storage area
1545 Sawtelle Blvd. 2,176 2-28-96(1) $ 52,000 Administration
Los Angeles, CA
Calle Venus # 90
Parque Industrial 15,000 2-28-97 $51,000 Contract
Mexicali, B.C., Mexico assembly
- ----------------------------------------------
(1) 422 N. Smith Avenue, 1600 South Broadway and 1545 Sawtelle Blvd. are
leased from Louart Corporation, a principal stockholder of Certron
Corporation.
The Company believes that its facilities are satisfactorily maintained in
satisfactory operating condition and are adequate for its needs.
Item 3. Legal Proceedings.
- ---------------------------
There are some pending legal proceedings to which the Company is a party,
none of which the Company believes are material.
Item 4. Submission of Matters to a Vote of Security Holders.
- -------------------------------------------------------------
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the solicitation
of proxies or otherwise.
4
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
- ----------------------------------------------------------------------
Matters.
- --------
Certron's Common Stock is traded in the Over-the-Counter market. The
following table shows the high and low bid quotations for such stock in the
Over-the-Counter market for each fiscal quarter during the two fiscal years
ended October 31, 1995. These quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not necessarily represent
actual transactions.
Fiscal period High Low
--------------- ----- -----
1994
----
First quarter 1 7/8
Second quarter 15/16 3/4
Third quarter 15/16 11/16
Fourth quarter 3/4 5/8
1995
----
First quarter 1-1/8 3/4
Second quarter 1-1/8 13/16
Third quarter 1-1/16 1/2
Fourth quarter 1 5/8
As of January 15, 1996, the approximate number of holders of record of the
Company's Common Stock was 1,540. The Company has never paid a cash dividend
on its Common Stock.
Item 6. Selected Financial Data.
- ---------------------------------
1995 1994 1993 1992 1991
Net Sales $3,900,000 $7,951,000 $10,568,000 $16,778,000 $17,689,000
Net (loss)
income before
extraordinary
credit ($ 774,000)($ 170,000)($ 47,000)$ 53,000($ 258,000)
Net (loss) income($ 774,000)($ 170,000)($ 47,000)$ 87,000($ 258,000)
Net (loss) income
before extra-
ordinary credit
per share ($.25) ($.05) ($.02) $.02 ($.08)
Net (loss) income
per common
share ($.25) ($.05) ($.02) $.03 ($.08)
Total asse $3,965,000 $4,710,000 $ 5,054,000 $ 5,197,000 $ 6,504,000
Long-term debt - - - - -
Working capital $2,844,000 $3,412,000 $ 3,772,000 $ 4,080,000 $ 3,884,000
Stockholders'
equity $3,368,000 $4,027,000 $ 4,284,000 $ 4,331,000 $ 4,244,000
No cash dividends have been paid during the five-year period ended October
31, 1995.
5
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations.
- ----------------------
Liquidity and Capital Resources
- -------------------------------
As demonstrated by the following chart, the Company's working capital
decreased at October 31, 1995 as compared to that at October 31, 1994.
Accounts receivable decreased by $486,000 inventories decreased by $73,000,
cash decreased by $68,000 and other assets decreased by $27,000. Accounts
payable and accrued expenses decreased by $86,000.
October 31
-----------------------------------
1995 1994 1993
---------- ---------- ----------
Working Capital $2,844,000 $3,412,000 $3,772,000
Current Ratio 5.76 to 1 6.00 to 1 5.90 to 1
Cash Flows from Operations $ 124,000 $ 185,000 $1,850,000
The Company's liquidity has been supplied by internally generated funds
and short-term borrowing. The following schedule sets forth the borrowing
availability under the Company's short-term line of credit at the end of the
last three fiscal years.
October 31
-----------------------------------
1995 1994 1993
---------- ---------- ----------
Available loan $ $1,000,000 $1,350,000
Outstanding loan 0 0 0
---------- ---------- ----------
Borrowing availability $ $1,000,000 $1,350,000
========== ========== ==========
The Company elected not to renew its bank line of credit which expired on
March 31, 1995. The Company believes that it will be able to fund its
existing business out of current cash flow without the necessity of bank
borrowings, and therefore, concluded not to incur the cost and expenses of
extending and maintaining the bank line of credit until such time as bank
borrowings are required. At October 31, 1995, the Company had no material
commitments for capital expenditures.
The intense competition in the magnetic media field has made it difficult
for the Company to maintain prices on its magnetic media products and has
continually reduced the Company's margins on these products. As a result, the
Company has discontinued sales of certain magnetic media products and refused
to sell magnetic media products at prices not resulting in certain minimum
margin returns. Thus, there has been a general decline in the Company's sales
of magnetic media sales and proportional reduction in related accounts
receivable. The Company does not believe that price competition in the
magnetic media field will lessen in the foreseeable future and, therefore,
there may not presently be meaningful opportunities for it to substantially
increase its sales and operating profit through its traditional outlets. As
described below, the Company is attempting to become a private label
manufacturer of magnetic media products for several large national and
international companies.
6
The Company is actively investigating acquiring other product lines or
businesses. If any of these investigations result in an acquisition of
assets or a business, the Company believes that, due to its existing financial
condition, it can obtain any necessary cash financing for such acquisition
from bank borrowings. There can be no assurance, however, that the Company
can find such an acquisition.
Results of Operations
- ---------------------
Fiscal 1995 Compared to Fiscal 1994
-----------------------------------
During fiscal 1995, the Company had a net loss of $774,000 on sales of
$3,900,000 as compared to a net loss of $170,000 for fiscal 1994 on sales of
$7,951,000. Gross profit decreased by $774,000 between fiscal 1995 and fiscal
1994. Selling, general and administrative expenses decreased by $384,000,
interest expense increased by $1,000 and interest income increased by $81,000.
Sales of magnetic media products were $3,895,000 in fiscal 1995 as
compared to $4,182,000 in fiscal 1994. The decrease of 7% was the result of
lower prices on product, general business conditions and the Company's
decision not to sell magnetic media products not resulting in certain minimum
margin return. See "Liquidity and Capital Resources".
In order to reverse the sales slide, the Company has made every effort to
become a private label manufacturer of magnetic media products for several
large national and international companies by emphasizing the Company's
consistency in quality and manufacturing expertise. Recently, the Company was
successful in obtaining initial orders from two major users of magnetic media
products for private label audio products. Although no assurances can be
given, the Company expects to receive additional orders for these private
label products in the months to come with an anticipated increase in magnetic
media sales beginning in the second quarter or third quarter of fiscal 1996.
Sales of contract assembly and manufacturing services decreased by
$3,764,000 (99.8%) during fiscal 1995 as compared to fiscal 1994. Fiscal 1995
sales were $5,000 and fiscal 1994 sales were $3,769,000. During the fiscal
year ended October 31, 1994, substantially all of the sales in this segment
were to two customers whose contracts expired in the latter portion of the
year and were not renewed. The Company is actively seeking new customers to
replace this lost business.
An investment in Stuart's Department Store, a discount department store
operation located in New England, was written off during the third quarter of
fiscal year 1995 resulting in a charge to operations in the amount of
$341,000. Stuart's filed for bankruptcy under the Federal Bankruptcy Code in
April of 1995 and management has concluded that the chances of recovery from
the Stuart's bankruptcy are highly doubtful.
Total gross margin as a percentage of net sales was 23.4% in fiscal 1995
and 21.2% in fiscal 1994. This change was due to decreased personnel and
warehouse expense. Margins decreased by $774,000 (45.9%) in fiscal 1995.
Margins in fiscal 1995 were $913,000 and in fiscal 1994 were $1,687,000.
Selling, general and administrative expense deceased by $384,000 during
fiscal 1995 from $1,838,000 in 1994 to $1,454,000 in 1995. The decrease was
due to a reduction in commissions by $82,000, freight by $167,000, office
supplies by $37,000, advertising by $19,000 and other expenses by $79,000.
7
Interest income increased by $81,000 in fiscal 1995 due to the increase
in cash and cash equivalents. Interest income in fiscal 1994 was $97,000.
During fiscal 1995, the Company invested cash, not needed in operations,
in publicly traded common stocks of other companies, and may purchase
additional common stocks in the future. Investments in common stocks are
subject to risks of the market, and market prices may fluctuate and be
adversely affected by the operating results of the issuer, as well as general
economic, political and market conditions. As of October 31, 1995, the
Company held common stocks which had a cost of approximately $87,000 and
market value of approximately $115,000. In accordance with Generally Accepted
Accounting Principles, the Company has recorded the value of its investments
in marketable securities on its Balance Sheet to market value and this
increase of approximately $28,000 is reflected in stockholder's equity as an
unrealized holding gain (see Notes 1 and 3 of Notes to Consolidated Financial
Statements). If the Company sells these securities, the Company will
recognize a gain in its statement of operations equal to the amount of the
increase. Although the Company presently intends to hold these securities,
if, on account of its capital requirements or for any other reason, the
Company should decide to liquidate these or other investments at a time when
their market value is less than their cost, the Company would recognize a loss
which could adversely affect the results of operations for the period in which
the sale occurs.
Fiscal 1994 Compared to Fiscal 1993
- -----------------------------------
During fiscal 1994, the Company had a net loss of $170,000 on sales of
$7,951,000 as compared to a net loss of $47,000 for fiscal 1993 on sales of
$10,568,000. Gross profit was down by $907,000 between fiscal 1994 and fiscal
1993. Selling, general and administrative expenses decreased by $740,000,
interest expense increased by $13,000 and interest income increased by
$59,000.
Sales of magnetic media products were $4,182,000 in fiscal 1994 as
compared to $6,857,000 in fiscal 1993. The decrease of 39% was the result of
lower prices on product, general business conditions and the Company's
decision not to sell magnetic media products not resulting in certain minimum
margin returns. See "Liquidity and Capital Resources".
Sales of contract assembly services increased by $58,000 (1.6%) during
fiscal 1994 as compared to fiscal 1993. Fiscal 1994 sales were $3,769,000 and
fiscal 1993 sales were $3,711,000.
Total gross margin as a percentage of net sales decreased to 21.2% in
fiscal 1994 from 24.5% in fiscal 1993. This was due in part to the change in
the method of charging for freight for magnetic media products. Margins
decreased by $907,000 (35%) in fiscal 1994. Margins in fiscal 1994 were
$1,687,000 and in fiscal 1993 were $2,594,000.
Gross margin in the contract assembly segment increased $18,000 from
$502,000 (13.5% of contract sales) in fiscal 1993 to $520,000 (13.8%) in
fiscal 1994. Gross margin in the magnetic media segment decreased by $925,000
from $2,092,000 in 1993 to $1,167,000 in 1994.
Selling, general and administrative expense decreased by $740,000 during
fiscal 1994 from $2,578,000 in 1993 to $1,838,000 in fiscal 1994. The
decrease was due to a reduction in commissions by $50,000, freight by
$152,000, personnel expense by $75,000, general insurance by $11,000,
advertising by $153,000 and other expenses by $299,000.
Interest expense increased to $13,000 in fiscal 1994 due to the payments
of borrowings under the cash surrender value of life insurance. In fiscal
1993, interest expense was $0.
8
Interest income increased by $59,000 in fiscal 1994 due to the increase in
cash equivalent items. Interest income in fiscal 1993 was $38,000.
During the fiscal years ending October 31, 1994, 1993 and 1992, 72%, 73%
and 65% respectively of the Company's Mexicali sales in the contract assembly
segment were to The Gillette Company, Stationery Products Group. Sales to
Spectrol Electronics Corporation accounted for the majority of the remaining
balance of sales in this segment in fiscal 1994. The contract with Gillette
expired October 31, 1994. The contract with Spectrol expired August 31, 1994.
Spectrol and Gillette did not renew their contracts. The loss of both of
these customers had a material adverse effect on the results of this segment
and of the Company for fiscal 1995. The company is actively seeking other
customers to replace the Spectrol and Gillette business.
During fiscal 1994, the Company invested cash, not needed in operations,
in publicly traded common stocks of other companies, and may purchase
additional common stocks in the future. Investments in common stocks are
subject to risks of the market, and market prices may fluctuate and be
adversely affected by the operating results of the issuer, as well as general
economic, political and market conditions. As of October 31, 1994 the Company
held common stocks having a cost of approximately $293,000 and market value of
approximately $206,000. In accordance with Generally Accepted Accounting
Principles, the Company has reduced the value of its investments in marketable
securities on its Balance Sheet to market value and this reduction of
approximately $87,000 is reflected in stockholder's equity as an unrealized
holding loss (see Note 1 to Consolidated Financial Statements).
9
Item 8. Financial Statements and Supplementary Data.
- ----------------------------------------------------
[Letterhead of Singer, Lewak, Greenbaum & Goldstein, L.L.P.]
Report of Independent Certified Public Accountants
--------------------------------------------------
Board of Directors
Certron Corporation and Subsidiary
We have audited the accompanying consolidated balance sheets of Certron
Corporation and Subsidiary as of October 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for the years ended October 31, 1995 and 1994. 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 audits 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Certron
Corporation and Subsidiary as of October 31, 1995 and 1994, and the
consolidated results of their operations and their consolidated cash flows for
the years ended October 31, 1995 and 1994, in conformity with generally
accepted accounting principles.
We have also audited Schedule VIII of Certron Corporation and Subsidiary for
the years ended October 31, 1995 and 1994. In our opinion, this schedule
presents fairly, in all material respects, the information required to be set
forth therein.
/s/ Singer, Lewak, Greenbaum & Goldstein
Singer, Lewak, Greenbaum & Goldstein, L.L.P.
Los Angeles, California
December 8, 1995
10
[Letterhead of Deloitte & Touche LLP]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Certron Corporation
Los Angeles, California:
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Certron Corporation and subsidiary
(the "Company") for the year ended October 31, 1993. Our audit also included
the financial statement schedule listed in the Index at Item 14(a)(2). These
financial statements and financial statement schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and financial statement schedule based on our
audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, such consolidated statements present fairly, in all material
respects, the results of operations and cash flows of the Company for the year
ended October 31, 1993 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
/s/ Deloitte & Touche LLP
January 24, 1994
11
CERTRON CORPORATION AND SUBSIDIARY
----------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
October 31,
----------------------
ASSETS 1995 1994
- ------------------------------------- ---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $1,792,000 $1,860,000
Trade accounts receivable, less allowance
for doubtful accounts of $40,000 in 1995
and $71,000 in 1994 (Note 8) 381,000 867,000
Inventories:
Finished products 822,000 933,000
Work in process 9,000 9,000
Raw materials 299,000 261,000
---------- ----------
Total inventories 1,130,000 1,203,000
Other current assets 138,000 165,000
---------- ----------
Total current assets 3,441,000 4,095,000
---------- ----------
NOTE RECEIVABLE (Note 2) 250,000 250,000
---------- ----------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, AT COST:
Machinery and equipment 243,000 221,000
Dies and molds 203,000 168,000
Furnitures, fixtures and leasehold improvements 218,000 218,000
---------- ----------
664,000 607,000
Less accumulated depreciation
and amortization ( 537,000)( 482,000)
---------- ----------
Net Equipment and Leasehold Improvements 127,000 125,000
---------- ----------
MARKETABLE SECURITIES (Note 3) 115,000 206,000
OTHER ASSETS 32,000 34,000
---------- ----------
$3,965,000 $4,710,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 16,000
Accrued advertising $ 236,000 176,000
Accrued professional fees 66,000 83,000
Accrued payroll and related items 173,000 211,000
Other accrued expenses 122,000 197,000
---------- ----------
Total current liabilities 597,000 683,000
---------- ----------
COMMITMENTS (Notes 7)
STOCKHOLDERS' EQUITY (Note 5):
Common stock, no par value; stated value
$1 per share; authorized 10,000,000 shares;
issued and outstanding, 3,128,000 shares
(1995 and 1994) 3,128,000 3,128,000
Additional paid-in capital 1,824,000 1,824,000
Net unrealized gain (loss) on marketable
equity securities (Note 3) 28,000 ( 87,000)
Accumulated deficit ( 1,612,000)( 838,000)
---------- ----------
Total Stockholders' Equity 3,368,000 4,027,000
---------- ----------
$3,965,000 $4,710,000
========== ==========
See notes to consolidated financial statements.
12
CERTRON CORPORATION AND SUBSIDIARY
----------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
Year Ended October 31,
----------------------------------------
1995 1994 1993
---------- ---------- -----------
NET SALES (Note 8) $3,900,000 $7,951,000 $10,568,000
COSTS AND EXPENSES:
Cost of products sold 2,987,000 6,264,000 7,974,000
Selling, general and
administrative (Note 9) 1,454,000 1,838,000 2,578,000
Depreciation and amortization 55,000 102,000 100,000
Interest 14,000 13,000
---------- ---------- -----------
4,510,000 8,217,000 10,652,000
LOSS FROM OPERATIONS ( 610,000) ( 266,000) ( 84,000)
OTHER INCOME (EXPENSE)
Realized loss on marketable
securities ( 341,000) - -
Interest Income 178,000 97,000 38,000
---------- ---------- -----------
LOSS BEFORE PROVISION FOR TAXES ( 773,000) ( 169,000) ( 46,000)
PROVISIONS FOR TAXES (Note 6) 1,000 1,000 1,000
---------- ---------- -----------
NET LOSS ($ 774,000) ($ 170,000) ($ 47,000)
========== ========== ===========
Net Loss Per Share ($.25) ($.05) ($.02)
==== ==== ====
Weighted average common shares
outstanding 3,128,000 3,128,000 3,128,000
========= ========= =========
See notes to consolidated financial statements.
13
CERTRON CORPORATION AND SUBSIDIARY
----------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
Net
Unrealized
(Loss) Gain
on
Additional Marketable
Common Stock paid-in Equity
--------------- Secu- Accumulated
Shares Amount capital rities deficit
--------- ---------- ---------- -------- -----------
BALANCE,
October 31, 1992 3,128,000 $3,128,000 $1,824,000 ($ 621,000)
Net Loss ( 47,000)
--------- ---------- ---------- -------- ----------
BALANCE,
October 31, 1993 3,128,000 3,128,000 1,824,000 ( 668,000)
Unrealized Loss on
Marketable Securities ($ 87,000)
Net Loss ( 170,000)
--------- --------- ---------- -------- -----------
BALANCE,
October 31, 1994 3,128,000 3,128,000 1,824,000 ($ 87,000)( 838,000)
Unrealized Gain on
Marketable Equity
Securities 115,000
Net Loss ( 774,000)
--------- --------- ----------- -------- ----------
BALANCE,
October 31, 1995 3,128,000 $3,128,000 $1,824,000 $ 28,000 ($1,612,000)
========= ========== ========== ======== ==========
See notes to consolidated financial statements.
14
CERTRON CORPORATION AND SUBSIDIARY
----------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Year Ended October 31,
------------------------------------
1995 1994 1993
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($ 774,000) ($ 170,000) ($ 47,000)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 55,000 102,000 100,000
Realized loss on marketable securities 341,000 - -
Gain on insurance settlement - - ( 2,000)
Changes in operating assets and
liabilities:
Decrease in trade accounts receivable 486,000 250,000 1,506,000
Decrease in inventories 73,000 134,000 405,000
Decrease (increase) in other assets 29,000 ( 44,000) ( 16,000)
Decrease in accounts payable ( 16,000) ( 20,000) ( 192,000)
(Decrease) increase in accrued
expenses ( 70,000) ( 67,000) 96,000
---------- ---------- ----------
Total adjustments 898,000 355,000 1,897,000
---------- ---------- ----------
Net cash provided by
operating activities 124,000 185,000 1,850,000
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for equipment and
leasehold improvements ( 57,000) ( 11,000) ( 137,000)
Proceeds from sale of marketable
securities & equipment 91,000 10,000 18,000
Purchase of marketable securities ( 226,000) ( 284,000) -
Proceeds from insurance settlement - - 18,000
Investment in note receivable - - ( 250,000)
---------- ---------- ----------
Net cash used in investing activities ( 192,000) ( 285,000) ( 351,000)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit 460,000 - 206,000
Payments of line of credit ( 460,000) - ( 206,000)
---------- ---------- ----------
Net cash used in financing activities - - -
---------- ---------- ----------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS ( 68,000) ( 100,000) 1,499,000
CASH AND CASH EQUIVALENTS,
beginning of year 1,860,000 1,960,000 461,000
---------- ---------- ----------
CASH AND CASH EQUIVALENTS,
end of year $1,792,000 $1,860,000 $1,960,000
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid during the year for:
Interest $ 14,000 $ 13,000
Income taxes $ 1,000 $ 1,000 $ 1,000
See notes to consolidated financial statements.
15
CERTRON CORPORATION AND SUBSIDIARY
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
-------------------------------------------
Note 1 - Summary of Significant Accounting Policies
- ---------------------------------------------------
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Certron Audio, S.A. All material
intercompany profits, transactions and balances have been eliminated.
Translation of Foreign Currencies
---------------------------------
All balance sheet accounts of foreign operations are translated into US
dollars at the year-end rate of exchange, and statement of earnings items are
translated at the weighted average exchange rates for the year. Since
foreign activities are considered to be an extension of the US operations,
the gain or loss resulting from remeasuring these transactions into US
dollars are included in income.
Cash and Cash Equivalents
-------------------------
For purposes of these statements, the Company considers all cash on hand and
on deposit, and securities with original purchased maturities of less than
three months to be cash and cash equivalents.
Inventories
-----------
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Equipment and Leasehold Improvements
------------------------------------
Equipment and leasehold improvements are stated at cost and are depreciated
or amortized using the straight-line method over the lesser of the estimated
useful lives of the assets or the applicable lease terms.
Marketable Equity Securities
----------------------------
The company has elected to adopt Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
(FAS 115), for the year ended October 31, 1994. In accordance with FAS 115,
prior years' financial statements have not been restated to reflect the
change in accounting method. There was no cumulative effect as a result of
adopting FAS 115 in 1994.
Management determines the appropriate classification of its investments in
debt and equity securities at the time of purchase and reevaluates such
determination at each balance sheet date. Securities available for sale are
carried at fair value, with the unrealized gains and losses, net of tax,
reported in a separate component of stockholders' equity. At October 31,
1995, the Company had no investments that qualified as trading or held to
maturity.
Marketable equity securities are valued based on quoted market prices.
16
Taxes on Income
---------------
The Company files tax returns excluding its subsidiary for federal tax
purposes and combined returns with its subsidiary for state purposes.
For the year ended October 31, 1994, the Company adopted the liability method
of accounting for income taxes pursuant to Statement of Financial Accounting
Standard, No. 109, "Accounting for Income Taxes", (FASB 109). The Company
previously used the deferred method. The accumulated effect of the change in
accounting principle on the Company's October 31, 1994 financial statement
was insignificant and, accordingly, has been given no accounting recognition
in the statement of operations.
FASB 109 requires an asset and liability approach that recognizes current and
deferred taxes payable or refundable as a result of all events that have been
recognized in the financial statements or income tax returns as measured by
the provisions of enacted tax laws.
Loss Per Common Share
---------------------
Loss per common share is based on the weighted average number of common
shares outstanding during the year and the effect of common stock
equivalents, if dilutive.
Note 2 - Note Receivable
- ------------------------
The Company has a note receivable from an unrelated party which is
collateralized by a first deed of trust and assignment of rents on commercial
property. The note is due in November 1996 and bears interest (payable
monthly) at 14% per annum. At October 31, 1995 this note was in default and
the maker of the note had filed a Chapter 11 Bankruptcy Proceeding. Pending
disposition of the bankruptcy proceeding, maker has agreed to pay interest
on the note. The Company believes that the collateral is sufficient to cover
all amounts due.
Note 3 - Marketable Securities
- ------------------------------
The Company has investments in marketable equity securities, which have been
classified as non current, available-for-sale, at October 31, 1994 and 1995.
The investments in equity securities at October 31, 1994 had an original cost
of $293,000 and a fair value of $206,000, resulting in an unrealized holding
loss of $87,000. The investments in equity securities at October 31, 1995
have an original cost of $87,000 and a fair value of $115,000, resulting in
an unrealized holding gain of $28,000.
Note 4 - Note Payable
- ---------------------
The Company elected not to renew its bank line of credit which expired on
March 31, 1995. The Company believes that it will be able to fund its
existing business out of current cash flow without the necessity of bank
borrowings, and therefore, concluded not to incur the cost of extending and
maintaining the bank line of credit until such time as bank borrowings are
required.
17
Note 5 - Stockholders' Equity
- -----------------------------
Under the Company's 1983 Stock Option Plan, 450,000 shares of common stock
were reserved for issuance to officers, directors and key employees. The
1983 plan expired by its terms in January 1993. The expiration of the 1983
plan has no effect on outstanding options granted thereunder prior to the
expiration of the 1983 plan.
The Company's Executive Stock Option Plan (the "Executive Plan") was approved
by shareholders in March 1989. In January 1995, the Board of Directors
adopted an amendment to the Executive Plan changing its name to the Executive
Stock Option Plan, increasing the number of shares of Common Stock covered
thereby from 150,000 to 300,000 and extending the expiration date of the
Executive Plan from January 1999 to January 2005. The increase in the number
of shares and the extension of the expiration date of the plan were approved
by shareholders in March 1995. Options under the plan have been reserved for
issuance to officers, directors and key employees.
Options under both Plans may be exercised in various installments, may not be
exercised beyond ten years and the option price may not be less than the fair
market value of the common stock on the date the option is granted.
Options
Shares granted and Options
1983 Stock Option Plan reserved outstanding Price Range Exercisable
- -------------------------- -------- ----------- ------------- -----------
Balance, November 1, 1992 241,000 137,000 $.937 - $1.66
Cancelled 19,500 ( 19,500) $1.10 - $1.66
Granted ( 35,500) 35,500 $1.50 - $1.65
Reserve Shares expired 225,500 -
------- -------
Balance, October 31, 1993 - 153,000 $.937 - $1.66
Cancelled - ( 20,000) $.937 - $1.50
------- -------
Balance, October 31, 1994 - 133,000 $.937 - $1.66
Cancelled - ( 9,000) $.968 - $1.50
------- -------
Balance, October 31, 1995 - 124,000 $.968 - $1.50 124,000
======= ======= =======
Options
Executive Stock Shares granted and Options
Option Plan reserved outstanding Price Range Exercisable
- -------------------------- -------- ----------- ------------- -----------
Balance, November 1, 1992 80,000 70,000 $1.625 - $1.719
Granted ( 70,000) 70,000 $1.060 - $1.375
------- -------
Balance, October 31, 1993 10,000 140,000 $1.060 - $1.719
Cancelled 60,000 ( 60,000) $1.625
------- -------
Balance, October 31, 1994 70,000 80,000 $1.060 - $1.719
Increase in Shares Reserved
for Issuance 150,000
Granted ( 10,000) 10,000 $0.810
Cancelled 20,000 ( 20,000) $1.060 - $1.719
------- -------
Balance, October 31, 1995 230,000 70,000 $0.810 - $1.375 70,000
======= ======= ======
18
Note 6 - Taxes on Income
- ------------------------
The provision for taxes on income is comprised of the minimum state income
taxes of $1,000.
A reconciliation of the federal statutory rates to the effective rates is
summarized as follows:
Year Ended October 31,
----------------------------
1995 1994 1993
----- ----- -----
Statutory rate (34.0%) (35.0%) (35.0%)
State taxes, net of federal
benefit .1 .6 1.4
Unrecognized benefit of
net operating losses 33.9 34.4 33.6
----- ----- -----
Effective tax rate - % ( - %) ( - %)
===== ===== =====
For federal income tax return purposes, net operating losses of approximately
$2,548,000 are available through October 31, 2005. For state income tax
purposes, net operating losses of approximately $1,350,000. The company
also has federal general business credit carry forwards totalling
approximately $105,000 that expire in fiscal year 2000.
Significant components of the Company's deferred tax liabilities for income
taxes consist of the following:
October 31, October 31,
1995 1994
----------- -----------
Net operating loss carry forwards $ 947,000 $ 819,000
Vacation and severance accruals 72,000 84,000
Allowance for bad debts 16,000 28,000
Inventory 124,000 70,000
Loss on marketable securities 136,000 -
General business credit 42,000 108,000
----------- ----------
Total deferred tax assets 1,337,000 1,109,001
Valuation allowance for deferred
tax assets ( 1,337,000) ( 1,109,001)
----------- ----------
$ - $ -
=========== ==========
The deferred tax assets have been offset in entirety by a valuation allowance
due to the uncertainty of their realization.
Note 7 - Commitments
- --------------------
Operating Leases -
The Company leases office, production and warehouse facilities under
long-term operating leases. The Company leases its office and warehouse
space from Louart Corporation ("Louart"), a stockholder of the Company.
Aggregate minimum net lease payments under non-cancelable operating leases
having initial or remaining terms of more than one year are as follows:
Year nding
October 31,
-----------
1996 106,000
1997 88,000
1998 73,000
--------
$267,000
19
Total rental expense charged to operations amounted to $183,000, $443,000
and $458,000 for the years ended October 31, 1995, 1994 and 1993
respectively. Rent paid to Louart for the years ended October 31, 1995,
1994 and 1993 totalled $130,000, $138,000 and $67,000 respectively.
Some leases contain renewal options, inflation escalation clauses and under
some leasing arrangements, the Company pays maintenance, insurance, taxes
and other expenses in addition to the above minimum annual rentals.
Employment Contract -
On November 1, 1993, the Company entered into an employment agreement with
its Chairman/Chief Executive Officer under which the Company is committed to
annual salary payments to the officer in the amount of $200,000 through
fiscal 1998. During the fiscal year ended October 31, 1995, the Chairman
and CEO voluntarily reduced his compensation to $160,000 for that year.
Note 8 - Industry Segment Information
- -------------------------------------
The Company operates principally in two segments: magnetic media products
and contract assembly. Operations in magnetic media products primarily
involve the design, development, assembly and sale of blank magnetic media
and related products.
Sales to two single customers in the magnetic media products field accounted
for $819,000 (21% of total magnetic media sales) and $494,000 (12.6%) in
1995; $713,000 (17%) and $452,,000 (11%) in 1994; $1,083,000 (16%) and
$876,000 (13%) in 1993. Receivables from these customers totalled $119,000
and $35,000, respectively at October 31, 1995.
Identifiable assets by industry segment are those that are used in the
Company's operation in each industry. Corporate assets are principally cash
and other assets.
20
Financial information for 1995, 1994 and 1993 by industry segment, is
summarized as follows:
1995 1994 1993
---------- ---------- -----------
Net sales to unaffiliated customers:
Magnetic media products $3,895,000 $4,182,000 $ 6,857,000
Contract assembly 5,000 3,769,000 3,711,000
---------- ---------- -----------
Consolidated $3,900,000 $7,951,000 $10,568,000
========== ========== ===========
Operating profit:
Magnetic media products $ 365,000 $ 377,000 $ 945,000
Contract assembly - 404,000 416,000
---------- ---------- -----------
365,000 781,000 1,361,000
General corporate expenses ( 961,000) ( 1,034,000) ( 1,445,000)
Realized loss on marketable
securities ( 341,000) - -
Interest expense ( 14,000) ( 13,000) -
Other income-interest 178,000 97,000 38,000
---------- ---------- -----------
(Loss) income before taxes on
income(benefit) and
extraordinary credit ($ 773,000) ($ 169,000) ($ 46,000)
========== ========== ===========
Identifiable assets:
Magnetic media products $1,638,000 $2,387,000 $ 2,664,000
Contract assembly - 340,000 419,000
---------- ---------- -----------
Total identifiable assets 1,638,000 2,727,000 3,083,000
General corporate assets 2,327,000 1,983,000 1,971,000
---------- ---------- -----------
Total assets $3,965,000 $4,710,000 $ 5,054,000
========== ========== ===========
Depreciation and amortization:
Magnetic media products $ 55,000 $ 102,000 $ 100,000
Contract assembly - - -
---------- ---------- -----------
Total depreciation and
amortization $ 55,000 $ 102,000 $ 100,000
========== ========== ===========
Capital expenditures:
Magnetic media products $ 57,000 $ 11,000 $ 137,000
Contract assembly - - -
---------- ---------- -----------
Total capital expenditures $ 57,000 $ 11,000 $ 137,000
========== ========== ===========
21
Intercompany transfers to the Company's wholly owned subsidiary operating
under a Maquiladora program in Mexicali, B.C., Mexico amounted to $359,000
(1995) $3,225,000 (1994), and $2,863,000 (1993) The net book value of
tangible identifiable assets of the subsidiary amounted to $34,000 at
October 31, 1995.
Note 9 - Related Party Transactions
- -----------------------------------
The Company made payments to Louart, a stockholder of the Company, for rent
of warehouse and office space, secretarial and administrative services, and
an automobile. These fees are included in selling, general and
administrative expenses.
The payments made to Louart for these items are as follows:
1995 $259,000
1994 $231,000
1993 $266,000
Note 10 - Cash
- --------------
The Company maintains cash deposits at several banks located in California.
Deposits at each bank are insured by the Federal Deposit Insurance
Corporation up to $100,000. As of October 31, 1995, uninsured portions of
balances held at those bank aggregated to $1,640,000.
22
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure.
- ---------------------
There have been no reported disagreements on any matter of accounting
principles or practices or financial statement disclosure of a kind described
in Item 304 of Regulation S-K.
PART III
The information called for by Part III (items 10, 11, 12 and 13) is
incorporated by reference from Certron's definitive proxy statement to be
filed pursuant to Regulation 14A which involves the election of directors and
which Certron intends to file with the Securities and Exchange Commission not
later than 120 days after October 31, 1995, the end of the fiscal year covered
by this Form 10-K. If such definitive proxy statement is not filed with the
Securities and Exchange Commission in the 120-day period, the items comprising
the Part III information will be filed as an amendment to this Form 10-K,
under cover of Form 8, not later than the end of the 120-day period.
23
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
- --------------------------------------------------------------------------
(a) 1.FINANCIAL STATEMENTS
The following consolidated financial statements of Certron Corporation
and its subsidiary are included in Part II, Item 8:
Independent Auditors' Report - Singer, Lewak,
Greenbaum & Goldstein 10
Independent Auditors' Report - Deloitte & Touche 11
Consolidated balance sheets - October 31, 1995 and 1994 12
Consolidated statements of operations - years ended
October 31, 1995, 1994 and 1993 13
Consolidated statements of stockholders' equity - years
ended October 31, 1995, 1994 and 1993 14
Consolidated statements of cash flows - years ended
October 31, 1995, 1994 and 1993 15
Notes to consolidated financial statements 16
2. FINANCIAL STATEMENT SCHEDULES
Schedule VIII - Valuation and qualifying accounts 26
All other schedules are omitted because they are not applicable or not
required, or because the required information is included in the
consolidated financial statements or notes thereto.
24
3. EXHIBITS
3.1 Articles of Incorporation of Registrant, as amended (incorporated
by reference to Exhibit 3.1 to Registrant's Annual Report of from 10-K for the
year ended October 31, 1981 and Exhibit "A" and Exhibit "B" to Registrant's
Proxy Statement dated February 17, 1988).
3.2 By-Laws of Registrant, as amended (incorporated by reference to
Exhibit 3.2 to Registrant's Quarterly Report on form 10-Q for the quarter
ended April 30, 1989).
*10.1 Registrant's 1983 Stock Option Plan (incorporated by reference to
Exhibit "A" to REGISTRANT's Proxy Statement dated February 14, 1983).
*10.2 First Amendment to Registrant's 1983 Stock Option Plan
(incorporated by reference to Exhibit 10.2 to Registrant's Annual Report on
form 10-K for the year ended October 31, 1986).
*10.3 Second Amendment to Registrant's 1983 Stock Option Plan
(incorporated by reference to Exhibit 10.3 to Registrant's Annual Report on
form 10-K for the year ended October 31, 1986).
*10.4 Registrant's 1989 Stock Option Plan (incorporated by reference
to Exhibit "B" to Registrant's Proxy Statement dated February 21, 1989).
*10.5 Amendment to Registrant's 1989 Stock Option Plan.
10.6 Form of Indemnification Agreement between Registrant and its
Directors and selected officers and agents (incorporated by reference to
Exhibit "C" to Registrant's Proxy Statement dated February 17, 1988).
*10.7 Employment Agreement effective as of November 1, 1993 between
Registrant and Marshall I. Kass (incorporated by reference to Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for quarter ended January 31,
1994).
21. Subsidiaries of Registrant (incorporated by reference to Exhibit
22 to Registrant's Annual report on form 10-K for the year ended October 31,
1981).
23.1 Singers, Lewak, Greenbaum and Goldstein consent.
23.2 Deloitte and Touche consent.
27 Financial Data Schedule
* Indicates management contract or compensation plan or arrangement required
to be filed as an Exhibit to this Form 10-K
(b) During the fourth quarter of Registrant's fiscal year ended
October 31, 1995, no reports on form 8-K were filed by Registrant.
25
CERTRON CORPORATION AND SUBSIDIARY
----------------------------------
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
-------------------------------------------------
Balance at Additions Balance at Balance at
beginning charged to accounts end of
Classifications of period expense written off period
- --------------- --------- ---------- ----------- ----------
YEAR ENDED OCTOBER 31, 1995
Allowance for doubtful
accounts $71,000 (31,000) 0 $40,000
======= ====== ======= =======
YEAR ENDED OCTOBER 31, 1994
Allowance for doubtful
accounts $65,000 6,000 0 $71,000
======= ====== ======= =======
YEAR ENDED OCTOBER 31, 1993
Allowance for doubtful
accounts $65,000 0 0 $65,000
======= ====== ======= =======
26
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.
(REGISTRANT) CERTRON CORPORATION
BY (SIGNATURE) /s/ Marshall I. Kass
(NAME AND TITLE) Marshall I. Kass
Chairman of the Board and
Chief Executive and
Operating Officer
January 26, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
BY (SIGNATURE) /s/ Marshall I. Kass
(NAME AND TITLE) Marshall I. Kass
Chairman of the Board and
Chief Executive Officer and Director
(Principal Executive Officer and
Principal Financial Officer)
January 26, 1996
BY (SIGNATURE) /s/ Jesse A. Lopez
(NAME AND TITLE) Jesse A. Lopez
Corporate Controller
(Principal Accounting Officer)
January 26, 1996
BY (SIGNATURE) /s/ Michael S. Kass
(NAME AND TITLE) Michael S. Kass
Vice President and
Director
January 26, 1996
BY (SIGNATURE) /s/ Jonathan F. Kass
(NAME AND TITLE) Executive Vice President and
Director
January 26, 1996
BY (SIGNATURE) /s/ Susan E. Kass
(NAME AND TITLE) Secretary-Treasurer and
Director
January 26, 1996
27
EXHIBIT INDEX
Exhibit No. Description Page
----------- ----------- ----
3.1 Articles of Incorporation of Registrant, as amended (incorporated
by reference to Exhibit 3.1 to Registrant's Annual Report of from 10-K for the
year ended October 31, 1981 and Exhibit "A" and Exhibit "B" to Registrant's
Proxy Statement dated February 17, 1988).
3.2 By-Laws of Registrant, as amended (incorporated by reference to
Exhibit 3.2 to Registrant's Quarterly Report on form 10-Q for the quarter
ended April 30, 1989).
*10.1 Registrant's 1983 Stock Option Plan (incorporated by reference to
Exhibit "A" to REGISTRANT's Proxy Statement dated February 14, 1983).
*10.2 First Amendment to Registrant's 1983 Stock Option
Plan (incorporated by reference to Exhibit 10.2 to Registrant's Annual Report
on form 10-K for the year ended October 31, 1986).
*10.3 Second Amendment to Registrant's 1983 Stock Option Plan
(incorporated by reference to Exhibit 10.3 to Registrant's Annual Report on
form 10-K for the year ended October 31, 1986).
*10.4 Registrant's 1989 Stock Option Plan (incorporated by reference to
Exhibit "B" to Registrant's Proxy Statement dated February 21, 1989).
*10.5 Amendment to Registrant's 1989 Stock Option Plan.
10.6 Form of Indemnification Agreement between Registrant and its
Directors and selected officers and agents (incorporated by reference to
Exhibit "C" to Registrant's Proxy Statement dated February 17, 1988).
*10.7 Employment Agreement effective as of November 1, 1993 between
Registrant and Marshall I. Kass (incorporated by reference to Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for quarter ended January 31,
1994).
21. Subsidiaries of Registrant (incorporated by reference to Exhibit 22
to Registrant's Annual report on form 10-K for the year ended October 31,
1981).
23.1 Singers, Lewak, Greenbaum and Goldstein consent.
23.2 Deloitte and Touche consent.
27 Financial Data Schedule
* Indicates management contract or compensation plan or arrangement required
to be filed as an Exhibit to this Form 10-K
(b) During the fourth quarter of Registrant's fiscal year ended October
31, 1995, no reports on form 8-K were filed by Registrant.