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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, 1996,
1995, and 1994, the amounts of net sales and operating profit before general
corporate expense and interest expense, together with identifiable assets at
October 31, 1996, 1995 and 1994 attributable to each of the Company's industry
segments.
Year ended October 31,
------------------------------
1996 1995 1994
------ ------ ------
(In Thousands)
Net sales to unaffiliated customers:
Magnetic Media products $5,382 $3,895 $4,182
Contract Assembly $ - $ 5 $3,769
Operating profit:
Magnetic Media products $ 911 $ 365 $ 377
Contract Assembly - - $ 404
Identifiable assets:
Magnetic Media products $2,652 $1,638 $2,387
Contract Assembly - - $ 340
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, 1996, 1995 and 1994, net
sales of the Company's magnetic media products were as follows:
Net Sales
-----------------------------
Product 1996 1995 1994
- ------------------------------------ ------ ------ ------
Audio magnetic tape products $4,148 $2,908 $3,037
Other magnetic related items (floppy) 22 67 120
Video cassettes 1,212 920 1,025
------ ------ ------
$5,382 $3,895 $4,182
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'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, 1996, the Company's ten largest
customers of magnetic media products accounted in the aggregate for
approximately 82% of the Company's total net sales of such magnetic media
products. During fiscal 1996, the two largest single magnetic media customers
accounted for $1,184,420 and $1,065,053 or 22% and 20% of total magnetic media
sales, respectively. In the fourth quarter of fiscal 1996, the magnetic media
customer which accounted for $1,184,420 of magnetic sales in fiscal 1996
informed the Company that following delivery of products ordered for early
February 1997, such customer would no longer use Certron as its major supplier
for certain of its private-label audio products. Although sales to this
customer should materially decrease beginning in the second quarter of fiscal
1997, the Company does not expect the substantial reduction in this customer's
business in fiscal 1997 to materially reduce the Company's magnetic media
sales in fiscal 1997 as compared to fiscal 1996 magnetic media sales. See
"Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Results of Operations".
The Company believes that the amount of its backlog on any given date is
not necessarily indicative of trends in its magnetic media business 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 and 1996.
2
During the fiscal year ending October 31, 1994, approximately 72% 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 has been actively seeking, without success, other firms to replace
the Spectrol and Gillette business.
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, and 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
Operations - 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, 1997, Certron employed 73 people in its various operations,
consisting of 60 people at its operations in Mexicali, B.C., Mexico, 4 people
at its facility in Corona, California and 9 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 Approx.
Location Sq. ft. Lease Expires annual rent Principal use
- -----------------------------------------------------------------------------
422 N. Smith Avenue 15,970 8-31-98(1) $ 73,000 Warehouse and
Corona, CA packaging
1600 South Broadway 3,196 8-31-98(1) $ 15,000 Warehouse and
Los Angeles, CA sign on top of
building
1545 Sawtelle Blvd. 2,176 2-28-96(1) $ 55,000 Administration
Los Angeles, CA
Calle Venus # 90
Parque Industrial 15,000 2-28-97 $56,000 Magnetic Media
Mexicali, B.C., Mexico assembly &
packaging
and contract
assembly &
manufacturing
- ----------------------------------------------
(1) 422 N. Smith Avenue, 1600 South Broadway and 1545 Sawtelle Blvd. are
leased from Louart Corporation, a principal stockholder of Certron. The 1600
South Broadway is subleased by Certron for $1,200 a month.
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, 1996. 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
------------- ---- ---
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
1996
----
First quarter 15/16 5/8
Second quarter 7/8 5/8
Third quarter 1-3/16 11/16
Fourth quarter 15/16 5/8
As of January 10, 1997, the approximate number of holders of record of
the Company's Common Stock was 1,499. The Company has never paid a cash
dividend on ts Common Stock.
Item 6. Selected Financial Data.
- ---------------------------------
1996 1995 1994 1993 1992
------------------------------------------------------------
Net Sales $5,382,000 $3,900,000 $7,951,000 $10,568,000 $16,778,000
Net income
(loss) before
extraordinary
credit 28,000 ($ 774,000) ($ 170,000)($ 47,000) $ 53,000
Net income (loss) 28,000 ($ 774,000) ($ 170,000)($ 47,000) $ 87,000
Net income (loss)
before extra-
ordinary credit
per share .01 ($.25) ($.05) ($.02) $.02
Net income (loss)
per common
share .01 ($.25) ($.05) ($.02) $.03
Total assets $4,062,000 $3,965,000 $4,710,000 $ 5,054,000 $ 5,197,000
Long-term debt - - - - -
Working capital $2,791,000 $2,844,000 $3,412,000 $ 3,772,000 $ 4,080,000
Stockholders'
equity $3,355,000 $3,368,000 $4,027,000 $ 4,284,000 $ 4,331,000
No cash dividends have been paid during the five-year period ended
October 31, 1996.
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 and
cash flow from operations decreased at October 31, 1996 as compared to that at
October 31, 1995. The decrease in cash flow from operations was primarily the
result of increased sales. Accounts receivable increased by $146,000,
inventories increased by $738,000, cash decreased by $882,000 and other assets
increased by $55,000. Accounts payable and accrued expenses increased by
$110,000.
October 31
------------------------------------
1996 1995 1994
---------- ---------- ----------
Working Capital $2,791,000 $2,844,000 $3,412,000
Current Ratio 4.95 to 1 5.76 to 1 6.00 to 1
Cash Flows from Operations ($ 750,000) $ 124,000 $ 185,000
The Company's liquidity has been supplied by internally generated funds
and, prior to 1995, short-term borrowing. The Company elected not to renew
its bank line of credit which expired on March 31, 1995. The Company
concluded not to incur the cost and expenses of extending and maintaining the
bank line of credit until such time as bank borrowings were required. The
Company believes that it will be able to fund its existing business out of
current cash flow without the necessity of bank borrowings At October 31,
1996, 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. 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 and has had some success in obtaining orders which
resulted in increased fiscal 1996 sales.
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.
6
Results of Operations
- ----------------------
Fiscal 1996 Compared to Fiscal 1995
-----------------------------------
During fiscal 1996, the Company had a net income of $28,000 on sales of
$5,382,000 as compared to a net loss of $774,000 for fiscal 1995 on sales of
$3,900,000. Gross profit increased by $532,000 between fiscal 1996 and fiscal
1995. Selling, general and administrative expenses increased by $6000,
depreciation and amortization expense decreased by $4,000 and interest income
decreased by $69,000.
Sales of magnetic media products were $5,382,000 in fiscal 1996 as
compared to $3,895,000 in fiscal 1995. The increase of 38% was primarily the
result of sales to two major private label users of magnetic media products.
In the fourth quarter of fiscal 1996, the Company was informed by one of
those private label customers that following delivery of products ordered for
early February 1997, such Customer would no longer use Certron as a major
resource for certain of its private label audio products which accounted for
approximately $978,500 of the Company's net sales for the fiscal year ended
October 31, 1996. This customer assured the Company that its decision was not
due to price, quality or delivery. In addition, the customer indicated that
it will continue to purchase other private label audio products from the
Company. At the same time, another private label customer has projected
increased purchases beginning December 1996. Although no assurances can be
given and the Company anticipates that sales will decline beginning in the
second quarter of fiscal 1997, based upon those indications and continued
(although substantially reduced) purchases by the customer which has informed
the Company that the Company would no longer be a major source for certain of
that customer's private label magnetic media products, the Company does not
believe that the Company's fiscal 1997 magnetic media sales will be materially
reduced when compared to fiscal 1996 magnetic media sales.
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 26.8% in fiscal 1996
and 23.4% in fiscal 1995. This change was due to increased sales of audio
magnetic media products. Margins increased by $532,000 (58.3%) in fiscal
1996. Margins in fiscal 1996 were $1,445,000 and in fiscal 1995 were $913,000.
Selling, general and administrative expense increased by $6,000 during
fiscal 1996 from $1,468,000 in 1995 to $1,474,000 in 1996. The increase was
due to an increase of personnel expense by $31,000, advertising by $34,000,and
offset by a decreased of commission by $24,000, insurance by $21,000 and other
expenses by $26,000.
Interest income decreased by $69,000 in fiscal 1996 due to the decrease
in cash and cash equivalents. Interest income in fiscal 1995 was $178,000
compared to $109,000 in fiscal year 1996.
During fiscal 1996, 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, 1996, the
Company held common stocks which had a cost of approximately $114,000 and
market value of approximately $101,000.
7
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 decrease of approximately $13,000 is reflected
in stockholders' equity as an unrealized holding loss (see Notes 1 and 3 of
Notes to Consolidated Financial Statements). If the Company sells these
securities, the Company will recognize a loss in its statement of operations
equal to the amount of the decrease. 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 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 $383,000,
depreciation and amortization expense decreased by $47,000 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. 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. See "Liquidity
and Capital Resources".
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 decreased by $383,000 during
fiscal 1995 from $1,851,000 in 1994 to $1,468,000 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 $78,000.
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
compared to $178,000 in fiscal year 1995.
8
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.
Forward-Looking Statements
--------------------------
The Company's statements herein which are not historical facts, including
statements as to the Company's anticipation that sales will decline beginning
in the second quarter of the 1997 fiscal year and the Company's belief that
magnetic media sales in fiscal 1997 will not be materially reduced when
compared to fiscal 1996 magnetic media sales, are forward-looking statements.
These statements involve risks and uncertainties that could cause actual
results to differ materially from these forward-looking statements. Factors
which could cause actual results to differ materially include economic
conditions, the Company's success in maintaining its current customer base
including sales of other products to the customer which has informed the
company that it would no longer be using the company as a major resource for
certain products, the obtaining of increased orders from a private label
customer consistent with its indications, the Company's ability to obtain
additional customers and business, pricing factors and competition.
9
Item 8. Financial Statements and Supplementary Data.
- ----------------------------------------------------
[Letterhead of Singer Lewak Greenbaum & Goldstein LLP]
Report of Independent Certified Public Accountants
--------------------------------------------------
Board of Directors
Certron Corporation
We have audited the accompanying consolidated balance sheets of Certron
Corporation and Subsidiary as of October 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the three years in the period October 31, 1996. We have also
audited Schedule II of Certron Corporation and Subsidiary for the three years
ended October 31, 1996. 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 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Certron
Corporation and Subsidiary as of October 31, 1996 and 1995, and the
consolidated results of their operations and cash flows for each of the three
years in the period October 31, 1996, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information required to be included therein.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
December 17, 1996
10
CERTRON CORPORATION AND SUBSIDIARY
----------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
October 31,
-------------------------
ASSETS 1996 1995
- ---------- ---------- ----------
CURRENT ASSETS:
Cash and cash equivalents (Note 10) $ 910,000 $1,792,000
Trade accounts receivable, less allowance
for doubtful accounts of $40,000 in 1996
and 1995 (Note 8) 527,000 381,000
Inventories:
Finished products 1,390,000 822,000
Work in process 14,000 9,000
Raw materials 464,000 299,000
---------- ----------
Total inventories 1,868,000 1,130,000
Other current assets 193,000 138,000
---------- ----------
Total current assets 3,498,000 3,441,000
---------- ----------
NOTE RECEIVABLE (Note 2) 250,000 250,000
---------- ----------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, AT COST:
Machinery and equipment 314,000 243,000
Dies and molds 233,000 203,000
Furnitures, fixtures and leasehold improvements 222,000 218,000
---------- ----------
769,000 664,000
Less accumulated depreciation
and amortization ( 588,000) ( 537,000)
---------- ----------
Net Equipment and Leasehold Improvements 181,000 127,000
---------- ----------
MARKETABLE SECURITIES (Note 3) 101,000 115,000
OTHER ASSETS 32,000 32,000
---------- ----------
$4,062,000 $3,965,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 17,000 -
Accrued advertising 314,000 $ 236,000
Accrued professional fees 66,000 66,000
Accrued payroll and related items 171,000 173,000
Other accrued expenses 139,000 122,000
---------- ----------
Total current liabilities 707,000 597,000
---------- ----------
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
(1996 and 1995) 3,128,000 3,128,000
Additional paid-in capital 1,824,000 1,824,000
Net unrealized (loss) gain on marketable
equity securities (Note 3) ( 13,000) 28,000
Accumulated deficit ( 1,584,000) ( 1,612,000)
---------- ----------
Total Stockholders' Equity 3,355,000 3,368,000
---------- ----------
$4,062,000 $3,965,000
========== ==========
See notes to consolidated financial statements.
11
CERTRON CORPORATION AND SUBSIDIARY
----------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------
Year Ended October 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
NET SALES (Note 8) $5,382,000 $3,900,000 $7,951,000
COSTS AND EXPENSES:
Cost of products sold 3,937,000 2,987,000 6,264,000
Selling, general and
administrative (Note 9) 1,474,000 1,468,000 1,851,000
Depreciation and amortization 51,000 55,000 102,000
---------- ---------- ---------
5,462,000 4,510,000 8,217,000
LOSS FROM OPERATIONS ( 80,000) ( 610,000) ( 266,000)
OTHER INCOME (EXPENSE)
Loss on write down of marketable
equity securities - ( 341,000) -
Interest income 109,000 178,000 97,000
---------- ---------- ----------
INCOME (LOSS) BEFORE PROVISION
FOR TAXES 29,000 ( 773,000) ( 169,000)
PROVISIONS FOR TAXES (Note 6) 1,000 1,000 1,000
---------- ---------- ---------
NET INCOME (LOSS) $ 28,000 ($ 774,000) ($ 170,000)
========== ========== =========
Net income (loss) per share $.01 ($.25) ($.05)
==== ==== ====
Weighted average common shares
outstanding 3,128,000 3,128,000 3,128,000
========== ========== ==========
See notes to consolidated financial statements.
12
CERTRON CORPORATION AND SUBSIDIARY
----------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
Net
Unrealized
(Loss) Gain
on
Common Stock Additional Marketable
-------------------- paid-in Equity Accumulated
Shares Amount capital Securities deficit Total
--------- ---------- ---------- ---------- --------- ----------
BALANCE,
October 31,
1993 3,128,000 $3,128,000 $1,824,000 ($ 668,000) $4,284,000
Unrealized
Loss on
Marketable
Securities ($ 87,000) ( 87,000)
Net Loss ( 170,000)( 170,000)
--------- ---------- ---------- -------- ---------- ----------
BALANCE,
October 31,
1994 3,128,000 3,128,000 1,824,000 ( 87,000)( 838,000) 4,027,000
Unrealized
Gain on
Marketable
Securities 115,000 115,000
Net Loss ( 774,000) ( 774,000)
--------- ---------- ---------- -------- --------- ----------
BALANCE,
October 31,
1995 3,128,000 3,128,000 1,824,000 28,000 (1,612,000) 3,368,000
Unrealized
Loss on
Marketable
Equity
Securities ( 41,000) ( 41,000)
Net (Loss)
Income 28,000 28,000
--------- ---------- ---------- --------- --------- ----------
BALANCE,
October 31,
1996 3,128,000 $3,128,000 $1,824,000 ($ 13,000)($1,584,000) 3,355,000
========= ========== ========== ======== ========== ==========
See notes to consolidated financial statements.
13
CERTRON CORPORATION AND SUBSIDIARY
----------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Year Ended October 31,
-----------------------------------
1996 1995 1994
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 28,000 ($ 774,000) ($ 170,000)
---------- ---------- ----------
Adjustments to reconcile net income
(loss) to net cash (used in)
provided by operating activities:
Depreciation and amortization 51,000 55,000 102,000
Loss on write down marketable
equity securities - 341,000 -
Changes in operating assets and
liabilities:
(Increase) decrease in trade
accounts receivable ( 146,000) 486,000 250,000
(Increase) decrease in inventories ( 738,000) 73,000 134,000
(Increase) decrease in other assets ( 55,000) 29,000 ( 44,000)
Increase (decrease) in accounts payable 17,000 ( 16,000) ( 20,000)
Increase (decrease) in accrued
expenses 93,000 ( 70,000) ( 67,000)
---------- ---------- ----------
Total adjustments ( 778,000) 898,000 355,000
---------- ---------- ----------
Net cash (used in) provided by
operating activities ( 750,000) 124,000 185,000
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for equipment and
leasehold improvements ( 105,000)( 57,000) ( 11,000)
Proceeds from sale of marketable
securities & equipment 82,000 91,000 10,000
Purchase of marketable securities ( 109,000)( 226,000) ( 284,000)
---------- ---------- ----------
Net cash used in investing activities ( 132,000)( 192,000) ( 285,000)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit - 460,000 -
Payments of line of credit - ( 460,000) -
---------- ---------- ----------
Net cash used in financing activities - - -
---------- ---------- ----------
NET DECREASE IN CASH
AND CASH EQUIVALENTS ( 882,000)( 68,000) ( 100,000)
CASH AND CASH EQUIVALENTS,
beginning of year 1,792,000 1,860,000 1,960,000
---------- ---------- ----------
CASH AND CASH EQUIVALENTS,
end of year $ 910,000 $1,792,000 $1,860,000
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid during the year for:
Interest $ 13,000 $ 14,000 $ 13,000
Income taxes $ 1,000 $ 1,000 $ 1,000
See notes to consolidated financial statements.
14
CERTRON CORPORATION AND SUBSIDIARY
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
-------------------------------------------
Note 1 - Summary of Significant Accounting Policies
- ---------------------------------------------------
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of Certron
Corporation and its wholly owned subsidiary, Certron Audio, S.A.
(collectively the "Company"). All material intercompany profits,
transactions and balances have been eliminated.
Translation of Foreign Currencies
---------------------------------
All balance sheet accounts of foreign operations are translated into U.S.
dollars at the year-end rate of exchange, and statement of operations
items are translated at the weighted average exchange rates for the year.
Since foreign activities are considered to be an extension of the U.S.
operations, the gain or loss resulting from remeasuring these
transactions into U.S. dollars are included in operations.
Cash and Cash Equivalents
-------------------------
For purposes of these financial 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 adopted 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 were not 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, 1996, the Company had no investments that qualified as
trading or held to maturity.
Marketable equity securities are valued based on quoted market prices.
The cost of securities sold is determined by the "identified cost"
method.
15
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", (FAS 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.
FAS 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.
Income (Loss) Per Common Share
------------------------------
Income (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.
Estimates
---------
In preparing consolidated financial statements in conformity with generally
accepted accounting principles, management makes estimates and assumptions
that affect the amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the consolidated financial
statements, as well as the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
-----------------------------------
The Company measures its financial assets and liabilities in accordance with
generally accepted accounting principles. For certain of the Company's
financial instruments, including cash and cash equivalents, accounts
receivable, notes receivable, accounts payable and accrued expenses, the
carrying amount approximate fair value due to their short maturities.
Concentrations and Uncertainties
--------------------------------
For fiscal year 1996, the Company's ten largest customers accounted for
approximately 82% of the Company's net sales. Two of these customers
accounted for 22% and 20% of the Company's net sales, respectively. The loss
of one or both of these customers would have a negative short-term affect on
the Company's financial position, results of operations and cash flows. The
Company has been informed by one of these customers that it will no longer
use the Company as a major supplier after February 1997.
The intense competition in the magnetic media field has made it difficult for
the Company to maintain prices on its products. There are substantial
competitors in each of the Company's markets that have greater resources than
the Company in order to gain more recognition.
The Company purchases substantially all of its materials for audio and video
cassettes from sources both in the Far East and Mexico.
16
Recently Issued Accounting Pronouncement
----------------------------------------
In November 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," (FAS 123) effective for fiscal years beginning after December
15, 1995. FAS 123 establishes and encourages the use of the fair value based
method of accounting for stock-based compensation arrangements under which
compensation cost is determined using the fair value of stock-based
compensation determined as of the date of grant, and is recognized over the
periods in which the related services are rendered. The statement also
permits companies to elect to continue using the current implicit value
accounting method specified in Accounting Principles Bulletin Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) to account for
stock-based compensation. If the Company were to retain its current implicit
value based method, it will be required to disclose the pro forma effect of
using the fair value based method to account for its stock-based
compensation. The Company intends to continue accounting for stock options
under the APB 25 based method.
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 was originally due in November 1996 and bore interest
(payable monthly) at 14% per annum. At October 31, 1995 this note was in
default and the maker of the note filed a Chapter 11 Bankruptcy Proceeding.
Pending disposition of the Bankruptcy proceeding, maker agreed to pay
interest on the note. The cost of the collection of the note, carried as a
receivable, is $68,000 as of October 31, 1996. It is anticipated that an
additional $7,000 in costs will be spent on collection prior to effectiveness
of the plan of reorganization. In October 1996, the Bankruptcy Court entered
an order confirming the plan of reorganization which subsequently become
effective. Under the plan, the basic note of $250,000 together with the
total costs of collection, was modified so that it bears interest at the rate
of 12 3/4% per annum and is due and payable on or before August 1, 1998. 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, 1995 and 1996.
The investments in equity securities at October 31, 1995 had an original cost
of $87,000 and a fair value of $115,000, resulting in gross unrealized gains
of $31,000 and gross unrealized losses of $3,000 respectively. The
investments in equity securities at October 31, 1996 have an original cost of
$114,000 and a fair value of $101,000, resulting in gross unrealized gains of
$3,000 and gross unrealized losses of $16,000, respectively.
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 stockholders 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 stockholders 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, 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
Cancelled - ( 60,000) $.968
-------- -------
Balance, October 31, 1996 - 64,000 $.968 - $1.66 64,000
======== ======= ======
Options
Executive Stock Shares granted and Options
Option Plan reserved outstanding Price Range Exercisable
- -------------------------- -------- ----------- ----------- -----------
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
Granted ( 64,500) 64,500 $1.00
Cancelled 30,000 ( 30,000) $1.375
------- -------
Balance, October 31, 1996 195,500 104,500 $0.810 - $1.375 40,000
======= ======= ======
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,
------------------------------
1996 1995 1994
----- ----- -----
Statutory rate 34.0% (34.0%) (35.0%)
State taxes, net of
federal benefit 3.5 .1 .6
Unrecognized benefit (utilization)
of net operating losses (34.0 ) 33.9 34.4
----- ------ ------
Effective tax rate 3.5% - % ( - %)
===== ====== ======
For federal income tax return purposes, net operating losses of approximately
$2,371,000 are available through October 31, 2005. For state income tax
purposes, net operating losses of approximately $1,048,000 which expire
beginning October 31, 1995. The company also has general business credit
carry forwards totalling $96,000 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,
1996 1995
---------- ----------
Net operating loss carry forward $ 873,000 $ 947,000
Vacation and severance accruals 69,000 72,000
Allowance for bad debts 16,000 16,000
Inventory 172,000 124,000
Depreciation 9,000 -
Loss on marketable equity securities 136,000 136,000
General business credit 96,000 42,000
---------- ----------
Total deferred tax assets 1,371,000 1,337,000
Valuation allowance for deferred
tax assets ( 1,371,000) ( 1,337,000)
---------- ----------
$ - $ -
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 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 Ending Related
October 31, Party
----------- -------
1997 88,000
1998 73,000
--------
$161,000
19
Total rental expense charged to operations amounted to $199,000, $183,000
and $443,000 for the years ended October 31, 1996, 1995 and 1994
respectively. Rent paid to Louart for the years ended October 31, 1996, 1995
and 1994 totalled $144,000, $130,000 and $138,000 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, 1996, the Chairman
and CEO voluntarily reduced his compensation to $175,000 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 $2,249,473 (41.8% of total magnetic media sales) in 1996; $819,000 (21%
of total magnetic media sales) and $494,000 (12.6%) in 1995 and $713,000
(17%) and $452,000 (11%) in 1994. Receivables from these customers totalled
$172,000 and $56,000, respectively at October 31, 1996.
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 1996, 1995 and 1994 by industry segment, is
summarized as follows:
1996 1995 1994
---------- ---------- ----------
Net sales to unaffiliated customers:
Magnetic media products $5,382,000 $3,895,000 $4,182,000
Contract assembly - 5,000 3,769,000
---------- ---------- ----------
Consolidated $5,382,000 $3,900,000 $7,951,000
========== ========== ==========
Operating profit:
Magnetic media products $ 911,000 $ 365,000 $ 377,000
Contract assembly - - 404,000
---------- ---------- ----------
911,000 365,000 781,000
General corporate expenses ( 978,000) ( 961,000) ( 1,034,000)
Realized loss on marketable
securities - ( 341,000) -
Interest expense ( 13,000) ( 14,000) ( 13,000)
Other income-interest 109,000 178,000 97,000
---------- ---------- ---------
Income (loss) before taxes on income
(benefit) and extraordinary credit $ 29,000 ($ 773,000) ($ 169,000)
========== ========== ==========
Identifiable assets:
Magnetic media products $2,652,000 $1,638,000 $2,387,000
Contract assembly - - 340,000
---------- ---------- ----------
Total identifiable assets 2,652,000 1,638,000 2,727,000
General corporate assets 1,410,000 2,327,000 1,983,000
---------- ---------- ----------
Total assets $4,062,000 $3,965,000 $4,710,000
========== ========== ==========
Depreciation and amortization:
Magnetic media products $ 51,000 $ 55,000 $ 102,000
Contract assembly - - -
---------- ---------- ----------
Total depreciation and
amortization $ 51,000 $ 55,000 $ 102,000
========== ========== ==========
Capital expenditures:
Magnetic media products $ 105,000 $ 57,000 $ 11,000
Contract assembly - - -
---------- ---------- ----------
Total capital expenditures $ 105,000 $ 57,000 $ 11,000
========== ========== ==========
21
Intercompany transfers to the Company's wholly owned subsidiary operating
under a Maquiladora program in Mexicali, B.C., Mexico amounted to $411,000
(1996), $359,000 (1995), and $3,225,000 (1994). The net book value of
tangible identifiable assets of the subsidiary amounted to $97,000 at
October 31, 1996.
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:
1996 $256,000
1995 $259,000
1994 $231,000
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, 1996, uninsured portions of
balances held at those bank aggregated to $599,000.
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, 1996, 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:
Report of Independent Certified Public Accountants -
Singer Lewak Greenbaum & Goldstein LLP 10
Consolidated balance sheets - October 31, 1996 and 1995 11
Consolidated statements of operations - years ended
October 31, 1996, 1995 and 1994 12
Consolidated statements of stockholders' equity - years
ended October 31, 1996, 1995 and 1994 13
Consolidated statements of cash flows - years ended
October 31, 1996, 1995 and 1994 14
Notes to consolidated financial statements 15
2. FINANCIAL STATEMENT SCHEDULES
Schedule II - 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 (incorporated by
reference to Exhibit 10.5 to Registrant's Annual Report on form 10-K for the
year ended October 31, 1995.)
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 Singer Lewak Greenbaum and Goldstein LLP 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, 1996, no reports on form 8-K were filed by Registrant.
25
CERTRON CORPORATION AND SUBSIDIARY
----------------------------------
SCHEDULE II - 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, 1996
Allowance for doubtful
accounts $40,000 ( 0 ) 0 $40,000
======= ====== ====== =======
YEAR ENDED OCTOBER 31, 1995
Allowance for doubtful
accounts $71,000 0 31,000 $40,000
======= ====== ====== =======
YEAR ENDED OCTOBER 31, 1994
Allowance for doubtful
accounts $65,000 6,000 0 $71,000
======= ====== ====== =======
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 28, 1997
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 28, 1997
BY (SIGNATURE) /s/ Jonathan F. Kass
(NAME AND TITLE) President and Director
January 28, 1997
BY (SIGNATURE) /s/ Michael S. Kass
(NAME AND TITLE) Michael S. Kass
Executive Vice President and Director
January 28, 1997
BY (SIGNATURE) /s/ Susan E. Kass
(NAME AND TITLE) Secretary-Treasurer and Director
January 28, 1997
BY (SIGNATURE) /s/ Jesse A. Lopez
(NAME AND TITLE) Jesse A. Lopez
Corporate Controller and Director
(Principal Accounting Officer)
January 28, 1997
BY (SIGNATURE) /s/ Herbert Bronsten
(NAME AND TITLE) Director
January 28, 1997
BY (SIGNATURE) /s/ Rogelio Buenrostro
(NAME AND TITLE) Director
January 28, 1997
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 (incorporated by
reference to Exhibit 10.5 to Registrant's Annual Report on form 10-K for the
year ended October 31, 1995.)
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 Singer Lewak Greenbaum and Goldstein LLP 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, 1996, no reports on form 8-K were filed by Registrant.
/TEXT>