ITEM 1. BUSINESS
General
There were no material changes in the nature of the business conducted by Moyco Industries, Inc. during the fiscal year ended June 30, 1995. The Company manufacturers and sells commercial abrasive materials, dental materials and supplies and repacks and sells other disposable materials.
The Company's net sales, operating profit, and identifiable assets for each of the two aforementioned business segments is detailed in Note 5 and Item 6 to the financial statements.
Upon the donation of the Philadelphia, Pennsylvania building to charity, the operations were moved to the company's two other facilities in York, Pennsylvania, and Montgomeryville, Pennsylvania.
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Business Segments
Commercial Abrasive Materials
The Registrant is engaged through its Ultralap Division in the manufacture and sale of commercial abrasive materials under the name "Flex-I- Grit." "Flex-I-Grit" is sold by a master distributor and other repackers to approximately 45 accounts, five of these accounted for 76% of total sales for this division.
The Registrant further is engaged through its Ultralap Division in the manufacture and sale of fine polishing agents and abrasives sold under the trade name "Ultralap." The "Ultralap" products are sold by in-house salesmen to approximately 465 customers, six of these customers accounted for over 36% of the total sales of these products. During the last fiscal year, the sale of "Ultralap" products accounted for approximately 74% of the total sales of this division.
Dental Supplies
The Registrant through its dental division is engaged in the manufacture and sale of dental supplies such as waxes, abrasives, medicaments, dental mirrors, endodontic materials and equipment, sundry dental items as well as a repacker of other disposable materials. During the last fiscal year the sale of a steel-backed dental abrasive manufactured by Registrant and sold under the trade name of "Lightning" accounted for 5% of the total sales of the dental division.
All sales are made from existing inventory by six salaried salespersons to approximately 400 dental supply wholesalers and distributors in the United States and Overseas. During the last fiscal year foreign sales represented approximately 10% of the total sales of the dental division. Two customers accounted for more than 19% of the total sales of this division.
Approximately 2% of the dental supply and repacking business of the Registrant was done with the United States Government for the fiscal year ended June 30, 1995.
Backlog
There is a backlog of orders in the aggregate of $1,416,388 as of June 30, 1995. There had been a backlog of $1,083,437 as of June 30, 1994. Approximately 28% of the backlog at June 30, 1995 was for dental supplies and materials.
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Sources and Availability of Supplies
The Company procures its raw materials and supplies from various sources and does not expect to have any difficulty in procurement during the coming year or during the foreseeable future.
It is intended that the Company will continue in its existing lines of dental supplies and commercial abrasive materials during the current fiscal year.
Research and Development
The Company engages in minimal research activities and has two employees devoting part of their time to this activity. Such research as is conducted is directed toward the development of new products related to current product lines and the improvement and enhancement of existing products.
Competition
All of the lines of business in which the Registrant is presently engaged are highly competitive. There are numerous other manufacturers of dental supplies, polymer backed abrasives, other abrasives and repackers, many of which are larger and have greater financial reserves and more sales representatives.
Employees
The Registrant employs approximately 150 persons, of whom 113 are involved in manufacturing abrasives and other products of the Ultralap and Dental divisions, and 37 are engaged in administration, sales, engineering, supervision and clerical work. The Registrant has had no work stoppages during the past 11 years and considers its employee relations to be good.
Other
Moyco did not experience any curtailment of supplies of electricity, gas, oil or water during the fiscal year ended June 30, 1995 and does not expect any curtailment in the current fiscal year.
In as much as the Company believes it produces no significant discharges of waste or pollutants into the air, there are no significant effects on the company in complying with current Federal, State and local environmental laws and regulations.
Moyco Industries, Inc. as of June 30, 1995 was in compliance with the enactment of the Clean Air Act, effective August 1992.
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ITEM 2.

ITEM 2. PROPERTIES
The Registrant is the owner of two buildings. The Montgomeryville, Pennsylvania facility was a one-story cinder block building containing approximately 26,000 square feet of which approximately 13,000 square feet were used for manufacturing; 11,750 square feet for warehousing and distribution; and 1,250 square feet for offices. This facility is primarily used for the manufacture of precision coated abrasives for commercial and industrial use. During the year, the registrant expanded its Montgomeryville, Pennsylvania facility to 40,125 square feet of which 14,250 square feet are used for manufacturing; 19,875 square feet for warehousing and distribution; and 6,000 square feet for offices. The York, Pennsylvania facility is 68,995 square feet of which approximately 45,807 square feet are used for manufacturing; 16,542 for warehousing and 6,646 for offices. There are mortgages on both properties. Moyco's facilities are suitable for their respective uses and are in general, adequate for Moyco's present needs.
During the year the registrant donated the five story brick building in Philadelphia, Pennsylvania containing approximately 88,000 square feet of which approximately 59,928 square feet was used for manufacturing, 22,968 square feet for warehousing and distribution, and 5,104 square feet for offices to a qualified charity.
The Registrant leased 27,671 square feet of space in a building in Emigsville, Pennsylvania. Initial lease term began September 30, 1991 and ended March 31, 1992 at $5,283 per month. Renewal rate at the then prevailing market rate $6,646, per month. This facility was utilized in connection with the dental supply segment. The lease was terminated in December of 1994 when the registrant moved to its newly constructed building in York, Pennsylvania.
The registrant has completed two capital projects. 30% of the total $1,000,000 expansion of the Montgomeryville facility was financed over 15 years with the Pennsylvania Industrial Development Authority at an interest rate of 2%, 50% of the project cost was financed by the bank over 15 years at 8 3/4% for 5 years and a variable rate for 10 years thereafter and the remaining 20% by the registrant. The Montgomeryville project was completed in March of 1995. Construction of a new building in York, Pennsylvania to replace the leased facility was completed during December 1994. 37% of the total project cost of $2,700,000 was financed by the Pennsylvania Industrial Development Authority at 2%, 53% of the cost was financed by the bank at 9.25% for 5 years and at prime plus 1% thereafter, and the remaining 10% by the registrant.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
The Company has filed suit against two defendants in one action for patent infringement. The proceedings are continuing and the company's attorneys were not able to estimate the likelihood of the outcome in this matter.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
N O N E
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PART II
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
Price Range of Common Stock:
The following table shows the range of low and high prices for the common stock in the over-the-counter market for the quarterly periods indicated according to the Company's records. The quotations represent prices in the over-the-counter market between dealers in securities and do not include retail markup, markdown or commission and do not necessarily represent actual transactions.
Low High ---- ---- First quarter ended September 30, 1994 1.00 1.00
Second quarter ended December 31, 1994 .94 .94
Third quarter ended March 31, 1995 .85 .85
Fourth quarter ended June 30, 1995 2.06 2.13
First quarter ended September 30, 1993 1.00 1.75
Second quarter ended December 31, 1993 .50 1.50
Third quarter ended March 31, 1994 1.25 2.00
Fourth quarter ended June 30, 1994 1.00 3.00
There were no dividends paid during the fiscal year ended June 30, 1995. The number of shareholders of record on June 30, 1995 was 701.
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ITEM 6.

ITEM 6. SELECTED STATEMENT OF OPERATIONS AND BALANCE SHEET DATA
Selected statement of operations data:
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ITEM 6. SELECTED STATEMENT OF OPERATIONS AND BALANCE SHEET DATA (Continued)
Selected statement of operations data:
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ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Summary
The following table sets forth for the periods indicated (i) percentages which certain items reflected in the financial data bear to net sales of the Company and (ii) the percentage increase (decrease) of such items as compared to the indicated prior period:
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations
Year Ended June 30, 1995 Compared to Year Ended June 30, 1994
Net sales increased $1,848,843. The increase in net sales is related to increased pricing, and more directly to increased unit sales in both our abrasive and dental divisions.
Gross profit increased $518,935 and is directly related to the increased sales.
Operating expenses increased $191,851 as a result of the increase in operating activity, increase in costs, as well as increases caused by the closing of the Philadelphia facility and opening of the new facilities.
Interest expense increased $207,402 as a result of the increased long- term borrowings related to the two capital projects in fiscal year end June 30, 1995.
Operating profit growth will be driven by new products, increased market demand (domestic and global) and economies of scale the Company is able to achieve based upon reaching a critical mass in sales volume. Sales and profit can be accelerated further by a synergistic acquisition and/or a strategic alliance which the Company is actively pursuing.
All of our lines of business are in highly competitive markets with others, domestically and internationally, having greater resources. The dental domestic market remains relatively flat as the economic recession continues. Our abrasive division continues to enter new markets, however, our high tech products are subject to sale swings as a result of technological changes as well as purchasing practices by our customers. We are not aware of any conditions in the purchasing of raw material and/or labor markets that can effect the profitability of the Company. There is continued need for sales growth as a result of putting in line new facilities and equipment, inflationary costs, and general operating expense increases.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations
Year Ended June 30, 1994 Compared to Year Ended June 30, 1993
Net sales decreased $1,205,871. The reduction in net sales is related to the dental inventory liquidation placed in the market by the Receiver in the bankruptcy of Healthco International, the world's largest dental dealer. We believe this process is completed and the Healthco customer base has been absorbed by other dental dealers. In addition, our abrasive sales were reduced as a result of a technology change of one of our high tech customers. These two factors substantially impacted our net sales greater than the actual year to date comparisons.
Gross profit decreased $393,596. This is a direct result of the decrease in net sales.
Operating expenses decreased $449,669. Commission expenses and bad debts were less in the current year which were directly related to the decrease in net sales as explained above.
Interest expense decreased $62,739. Lower rates and less debt through the fiscal year account for this change.
Operating profit growth will be driven by new products, increased market demand (domestic and global) and economies of scale the Company is able to achieve based upon reaching a critical mass in sales volume. Sales and profit can be accelerated further by a synergistic acquisition and/or a strategic alliance which the Company is actively pursuing.
All of our company lines of business are in highly competitive markets with others, domestically and internationally, having greater resources. The dental market remains relatively flat as the economic recession continues. Our abrasive division continues to enter new markets, however, our high tech products are subject to sale swings as a result of technological changes as well as purchasing practices by our customers. We are not aware of any conditions in the purchasing of raw material and/or labor markets that can effect the profitability of the Company. There is continued need for sales growth as a result of putting in line new facilities and equipment, inflationary costs, and general operating expense increases.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources
The Company uses a number of measures of liquidity for internal management purposes. These measures include working capital and activity ratios, all of which are set forth below:
Year Ended June 30 ------------------------------------- 1995 1994 1993 ------ ------ ------
Working capital, the ability to meet short-term obligations:
Working Capital $4,589,745 $3,003,840 $3,490,282
Working Capital Ratio 3.39:1 2.01:1 2.74:1
Activity ratios, which should be helpful in evaluating liquidity:
Calendar days to convert sales to cash 60 58 61
Inventory turnover 2.33 2.07 2.50
Inventory as a percent of working capital 70.1 93.8 76.8
Sales to working capital 2.59 3.34 3.22
The Company's working capital at June 30, 1995 was $4,589,745 compared to $3,003,840, in 1994 representing an increase in the amount of $1,585,905. The component differences are reflected in the statement in cash flows.
Current assets increased $541,404 and current liabilities decreased $1,044,501.
During the fiscal years 1993 and 1994 the primary use of funds was the acquisition of additional equipment and lease of additional facilities located in Emigsville, Pennsylvania. This facility produced dental supplies under the name Moyco/Union Broach. During 1994, capital projects were commenced in Montgomeryville and York, Pennsylvania requiring additional funds. These projects were completed in the fiscal year ended June 30, 1995.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Responsibility for Preparation of Financial Statements:
The management of Moyco Industries, Inc. is responsible for the integrity and objectivity of the financial statements. The financial statements and related notes were prepared by the Company using generally accepted accounting principles which were considered appropriate for the circumstances and necessarily include amounts based upon our best estimates and judgment. Financial data found elsewhere in this Annual Report is consistent with these financial statements.
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[LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders Moyco Industries, Inc.
We have audited the balance sheets of Moyco Industries, Inc. as of June 30, 1995 and 1994 and the related statements of operations, changes in shareholders' equity and cash flows for each of the three years ended June 30, 1995. Our audits also included the financial statement schedule on page 38. 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 financial position of Moyco Industries, Inc. as of June 30, 1995 and 1994, and the results of its operations, and its cash flows for each of the three years in the period ended June 30, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects, the information set forth therein.
As described in Note 7 to the financial statements, the company changed its method of accounting for income taxes as required by the provisions of Statements of Financial Accounting Standards No. 109.
Philadelphia, Pennsylvania August 25, 1995, except for Note 14, which is dated August 29, 1995
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MOYCO INDUSTRIES, INC.
BALANCE SHEETS
ASSETS (Note 3)
See accompanying notes to financial statements.
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MOYCO INDUSTRIES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
See accompanying notes to financial statements.
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MOYCO INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
See accompanying notes to financial statements.
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MOYCO INDUSTRIES, INC. STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY YEARS ENDED JUNE 30, 1995, 1994 AND 1993
See accompanying notes to financial statements.
Page 17 to 40
See accompanying notes to financial statements.
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MOYCO INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995 AND 1994
Note 1: Summary of Significant Accounting Policies
Nature of Business
The Company manufactures dental waxes, dental supplies, endodontic material and equipment, pharmaceuticals, precision abrasives, commercial abrasives, and is a repacker of other disposable products for commercial and industrial use and sells to both domestic and international customers.
Principles of Accounting
Cash and Cash Equivalents
The company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Valuation of Inventories
Inventories are stated at the lower of cost or market. Costs of raw materials and cartons are determined by the first-in, first-out method. Labor and overhead included in work-in-process and finished goods are determined at average cost.
Depreciation
Depreciation is computed by the straight-line method over the assets expected useful lives as follows:
Building and Improvements 10-25 Years Machinery, Equipment, Furniture and Fixtures 5-10 Years Automotive Equipment 3 Years
Depreciation charged to expense for the years ended June 30, 1995, 1994, and 1993 was $531,376, $418,891, and $382,372 respectively.
Patents and Trademarks
The costs of patents and trademarks are capitalized and amortized to operations over their estimated useful lives or statutory lives, whichever is shorter. Amortization is computed by the straight-line method.
Mortgage Costs
Mortgage costs are being amortized over the terms of the related mortgages.
Income Taxes
The Company currently accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Prior to fiscal 1994, the Company accounted for income taxes in accordance with Accounting Principles Board Opinion No. 11. The cumulative effect of this change in accounting principle decreased net earnings for fiscal 1994 by $60,168 as discussed in Note 7.
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MOYCO INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995 AND 1994
Note 1: Summary of Significant Accounting Policies (Continued)
Reclassifications
Certain accounts in the prior-year financial statements have been reclassified for comparative purposes to conform with the presentation in the current-year financial statements.
Research and Development
Research and development costs are charged to expense as incurred. The amounts charged for the years ended June 30, 1995, 1994, and 1993 were $35,718, $19,583, and $3,493, respectively.
Earnings Per Common Share
Earnings per common share have been computed by dividing earnings for each year by the weighted average number of common shares outstanding during each period.
Advertising Costs
Advertising costs are charged to expense as incurred. The amounts charged for the years ended June 30, 1995, 1994, and 1993 were $251,984, $243,748, and $245,069, respectively.
Note 2: Inventories
The components of inventories are as follows:
June 30 ------------------------ 1995 1994 ----------- ---------- Raw materials $ 813,185 $ 792,493 Work-in-process 755,992 668,234 Finished goods 1,477,032 1,208,648 Cartons 171,868 149,399 ---------- ---------- $3,218,077 $2,818,774 ========== ==========
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MOYCO INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995 AND 1994
Note 3: Long-Term Debt
Long-term debt is summarized as follows:
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MOYCO INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995 AND 1994
Note 3: Long-Term Debt (Continued)
Substantially all of the Company's assets are pledged as collateral for the long-term debt.
As of June 30, 1995 long-term debt matures as follows:
Twelve Months Ending June 30,
1996 $ 526,954 1997 719,136 1998 1,231,908 1999 885,298 2000 899,479 Thereafter 2,999,639 ---------- $7,262,414 ==========
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MOYCO INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995 AND 1994
Note 4: Employee Benefit Plans
Effective July 1, 1979, the Company adopted a non-contributory profit sharing plan for it's eligible employees. The contribution to the plan is determined on an annual basis by the Board of Directors and cannot exceed the maximum amount which would constitute an allowable deduction for federal income tax purposes. The contribution expense for the years ended June 30, 1995, 1994 and 1993 was $15,000, $25,000 and $25,000, respectively.
In addition to the above, on January 1, 1985 Moyco's Board of Directors established a tax deferred employee savings and protection plan under Section 401(K) of the Internal Revenue Code for all eligible employees. This plan allows employees to contribute between 3% and 10% of their salary, including overtime pay, bonus and commissions to the plan and these contributions are not subject to current federal income taxes. The Company will contribute 50% of the employee's contribution, to a maximum of 6% of the employee's salary subject to the deferral limit (IRC Sec. 401 (a)(30)). Participants are at all times fully vested in their contributions and the Company contributions become vested to the participant at various percentages based on the employee's years of service with 20% vested after three years of service and 20% for each year thereafter.
The Company's contribution aggregated $62,220, $58,606, and $44,919 for the years ended June 30, 1995, 1994, and 1993 respectively.
Note 5: Business Segments
The Company operates within two business segments: dental supplies and precision abrasives. Through its dental supplies division the Company manufactures and sells dental supplies such as waxes, abrasives, medicaments, sundry dental items and endodontic materials and equipment. Through its precision abrasive division the Company manufactures and sells commercial abrasive materials and fine polishing agents.
Financial information concerning the operations in each of the Company's business segments for the years ended June 30, 1995, 1994 and 1993 is as follows:
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MOYCO INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995 AND 1994
Note 5: Business Segments (Continued)
For the years ended June 30, 1995, 1994 and 1993 net sales to various agencies of the U.S. Government represented 1% of the Company's total net sales.
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MOYCO INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995 AND 1994
Note 6: Quarterly Results (Unaudited)
The following tables summarize quarterly financial data for the fiscal year's ended June 30, 1995 and 1994:
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MOYCO INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995 AND 1994
Note 6: Quarterly Results (Unaudited) (Continued)
* During the current year, the first three quarters' inventory computation was based on the prior year's gross profit percentages, which overall was 43.3%. The year end actual inventory valuation resulted in a 40.9% gross profit percentage. Therefore, fourth quarter results reflect the entire years percentage decrease. The gross profit percentage decrease was a result of increased costs due to expansion and construction of two facilities in the year ended June 30, 1995.
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MOYCO INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995, 1994 AND 1993
Note 7: Income Taxes
The provision for income taxes consists of the following:
1995 1994 1993 -------- -------- -------- Currently payable: Federal (net of tax credits) $314,442 $275,215 $183,076 State 128,483 113,144 75,170 -------- -------- --------
442,925 388,359 258,246 -------- -------- --------
Deferred: 35,419 20,479 - -------- -------- --------
Income taxes before cumulative effect of accounting change $478,344 $408,838 $258,246 ======== ======== ========
Deferred income taxes result from the tax effect of transactions which are recognized in different periods for financial and tax reporting purposes. Significant components of deferred income taxes and their related impact on deferred income tax expense are as follows:
1995 1994 1993 -------- -------- --------
Cumulative effect of accounting change $ - $ 60,168 $ - Accelerated depreciation 26,935 44,486 ( 6,185) Contributions carry over ( 333) - - Other 8,817 ( 24,007) 6,185 -------- -------- --------
$ 35,419 $ 80,647 $ - ======== ======== ========
A reconciliation of the U.S. Federal Income Tax rate to the effective income tax rate is as follows:
1995 1994 1993 ---- ---- ---- Federal taxes at graduated rates from 15% to 39% 31.0% 32.0% 23.8% ===== ===== ===== State taxes 12.7% 13.1% 9.8% ===== ===== =====
Effective income tax rate 43.7% 45.1% 33.6% ===== ===== =====
Effective July 1, 1993, the Company adopted Statement of Financial Accounting Standard No. 109, Accounting for Income Taxes. The cumulative effect of the change in accounting principle amounted to $60,168 and is included in determining net income for year ended June 30, 1994. Financial statements for prior years have not been restated.
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MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
Note 8: Commitments and Contingencies
There are no material pending or contemplated legal proceedings against the Company or of which any of its property is subject.
Note 9: Shareholders' Equity
On December 17, 1986, the shareholders approved an increase in the authorized capital to 15,000,000 shares of common stock and 2,500,000 shares of preferred stock, each with a par value of $.005 per share, and authorized the shares of preferred stock to be issued in one or more classes, and in one or more series within a class, with such voting rights, designations, powers, preferences, qualifications, privileges, limitations, options, conversion rights, restrictions and other special rights as may be established from time to time by resolution of the board of directors of the Company at or prior to the time of issuance of shares of such class or series.
Subsequent to June 30, 1995 the aggregate market value of the outstanding common shares increased significantly.
Note 10: Notes Payable, Bank
The Company has an unsecured line of credit with a Bank in the amount of $2,000,000 with interest of 1% above the bank's prevailing prime interest rate. There was 0 and $1,000,000 drawn upon the line of credit at June 30, 1995 and 1994 respectively. This line of credit matures October 31, 1995.
Note 11: Letters of Credit - Bank
The Company has two letters of credit with a bank. $50,000 issued December 6, 1994 expiring December 6, 1997, $100,000 issued May 1, 1995 expiring May 2, 1996 whose beneficiaries are the Montgomery County Industrial Authority and the Pennsylvania Industrial Development Authority. The beneficiaries are both holders of mortgages on part of the Company's buildings. At June 30, 1995 there were no funds drawn on these letters of credit.
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MOYCO INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995 AND 1994
Note 12: Bad Debt
On June 9, 1993 Healthco International, Inc. a major customer of Moyco Industries Inc. filed for bankruptcy under Chapter 11 of the Bankruptcy code. Moyco has determined that the amount due from Healthco International, Inc. is noncollectible and accordingly the balance due at June 30, 1993 of $212,109 has been written off.
Note 13: Legal Proceedings
The Company has filed suit against two defendants in one action for patent infringement. The proceedings are continuing and the Company's attorneys were not able to estimate the likelihood of the outcome in this matter.
Note 14: Subsequent Events
The Company filed a civil suit in July of 1995 against a research and development company for breach of express contract, and fraud and misrepresentation. The company seeks to recover the amount paid of $25,000 per the contract and $500,000 to recover economic losses associated with the nonperformance of this contract, plus interest, the cost of the suit, and attorneys fees. As of August 25, 1995 the outcome of this suit could not be determined.
The Company signed a letter of intent with Integrated Process Equipment, Corporation, (IPEC) towards an exclusive distribution and representation agreement dated August 29, 1995. The agreement provides that Moyco will manufacture and/or distribute for IPEC and its Customers a proprietary tungsten abrasive slurry used in a state of the art chemical mechanical polishing tungsten process system developed by IPEC, which employs IPEC equipment and Moyco abrasive slurries to polish semiconductors.
On July 11, 1995 the Company signed a letter of intent to acquire the assets of a Dental Products Company with approximately $500,000 in annual sales. The purchase price will be based on current assets, net fixed assets less liabilities for cash outlay, plus shares of Moyco Industries, Inc. common stock, the number of which is to be negotiated, for intellectual property, patents, trademarks, and "know how". The assets stated above are subject to due diligence evaluation not yet begun.
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MOYCO INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995 AND 1994
Note 15: Stock Option
The Company adopted an incentive stock option plan on October 30, 1992. The plan provides that key employees and directors may be awarded options not to exceed 200,000 shares of the Company's stock. Under the plans, options are granted at a price not less than the fair market value at the grant date and generally become exercisable upon date of grant. In all cases, options expire ten years after grant. Of the total shares authorized for issuance, 93,500 shares had been granted and 6,400 shares have been exercised. During the year 1,600 shares of those granted were cancelled.
The following summarizes the stock option transactions during the year ended June 30, 1995.
Shares available for future grant were 108,100 shares at June 30, 1995.
Note 16: Concentration of Credit Risk
The Company had funds in one bank in excess of federally insured limits of $876,351 at June 30, 1995.
Note 17: Building Donation
In March 1995 the Company donated its Philadelphia building to a qualified charity. At the time of the donation the book value of the building was $96,323 which is reflected in these financial statements as donation expense as part of other expense. The fair market value of the building was appraised at $125,000 at the time of the donation.
Note 18: Capitalized Interest
The Company capitalized $70,225 of interest costs paid as part of their two construction projects completed during the year ended June 30, 1995.
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ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
NONE
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(1) Executive Officers of the Registrant:
(a) The names, ages and positions with the Registrant of all of the executive officers of the Registrant, none of whom are related by blood, marriage or adoption to each other, are as follows:
(b) The executive officers hold their respective offices until the first meeting of newly elected directors following the next annual meeting of the Company and the election of successor officer unless otherwise terminated by the Board of Directors.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)
(c) The following is a brief account of the business experience of the executive officers of the Registrant:
Mr. Marvin E. Sternberg joined the Registrant in March of 1974, as a Management Consultant and was elected President of the Registrant on August 9, 1974. From 1965 to 1973, Mr. Sternberg was Trustee and Operating Officer for the Robinson Trust, Philadelphia, Pennsylvania. From 1965 to present, Mr. Sternberg has been a partner and/or director in a number of other companies in the Philadelphia, Pennsylvania and Fort Lauderdale, Florida areas.
Mr. Jerome Lipkin joined the Registrant on June 12, 1974 as assistant to the Vice-President. He was elected to Vice-President in charge of operations on March 20, 1978.
Mr. William Woodhead joined the Registrant on January 7, 1985 as Controller. He was elected Secretary/Treasurer on December 18, 1985.
(2) Directors of the Registrant:
(a) The following table sets forth the name of each director of the Registrant and all offices presently held by him. The term of each director will expire on such date as the Annual Meeting of Shareholders is held and his successor is duly elected and qualified.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)
(2) Directors of the Registrant: (Continued)
(b) There are no family relationships between any director or executive officer of the Registrant.
Irvin Paul, D.D.S., has engaged in the practice of Dentistry, with offices in Upper Darby, Pennsylvania, for more than thirty years.
Marvin Cravetz, D.D.S., was engaged in the practice of Dentistry, with offices in Hatboro, Pennsylvania for more than twenty years.
The business experience of the other directors during the past six years is reported under Item 10(1) EXECUTIVE OFFICERS OF THE REGISTRANT.
Item 11.

Item 11. EXECUTIVE COMPENSATION
The following table shows for fiscal years ending June 30, 1995, 1994 and 1993, the cash compensation as well as certain other compensation paid to the named executive officers:
SUMMARY COMPENSATION TABLE
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ITEM 11. EXECUTIVE COMPENSATION (Continued)
Profit Sharing Plan
Effective July 1, 1979, the Company adopted a non-contributory profit sharing plan for its employees who have completed one full year of service and have attained the age of 21. The contribution to the plan is determined on an annual basis by the Board of Directors and cannot exceed the maximum amount which will constitute an allowable deduction for federal income tax purposes and is based on the Company's profitability and shall be paid from the Company's net earnings and/or retained earnings. The Company's contributions shall be based on the ratio of each eligible employee's compensation for the year to total compensation for all eligible employees limited to the lesser of $36,875 or 25% of the eligible employee's compensation.
A participating employee's full account becomes payable upon normal retirement, or upon retirement at any age due to disability, or upon death to the employee's designated beneficiary. In the event employment is terminated before normal retirement, a portion of the Company's contribution is forfeited unless the employee has at least ten full years of service.
All officers and employee-directors participate in the program on the same terms as other salaried employees.
Employee Savings Plan
Effective January 1, 1985 Moyco's Board of Directors established a tax deferred employee savings and protection plan under Section 401(K) of the Internal Revenue Code for all eligible employees. This plan allows an employee to contribute between 3% and 10% of his salary, including overtime pay, bonus and commissions, to the plan and these contributions are not subject to current federal income taxes. The Company will contribute 50% of the employee's contributions, to a maximum of 6% of the employee's salary subject to the deferral limit (IRC Sec. 401 (a)(30)). Participants are at all times fully vested in their contributions and the Company contributions become vested to the participant at various percentages based on the employee's years of service with 20% vested after three years of service and 20% for each year thereafter.
All officers and employee-directors participate in the program on the same terms as other salaried employees.
Director Compensation
Directors do not receive any compensation for serving as directors.
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ITEM 11. STOCK OPTIONS (Continued)
The following table shows stock options exercised and fiscal year end values for the named exective officers under the Moyco Industries, Inc. stock option plan. The plan does not permit the grant of stock appreciation rights ("SARs"). There have been no stock options granted in the current fiscal year.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
(1) Upon exercise of an option, the optionee must pay the exercise price in cash. (2) Represents the difference between the fair market value of the common stock underlying the option and the exercise price at exercise, or fiscal year-end, respectively.
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ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) The following table sets forth information as of June 30, 1995 with respect to any person who is known to the Registrant to be the beneficial owner of more than 5% of any class of Registrant's voting securities:
(1) Of these shares 2,408,365 shares are held by Marvin E. Sternberg, legally and beneficially in his own name; 16,900 shares by Susan Sternberg, wife of said Marvin E. Sternberg, legally and beneficially in her own name; and 497,310 shares are held by said Susan Sternberg together with T. Allen Lipsky in trusts consisting of 165,770 shares each for the respective beneficial interests of Joseph S. Sternberg, Mark E. Sternberg and Janet L. Sternberg, children of said Marvin E. Sternberg and Susan Sternberg.
(2) None of Marvin E. Sternberg, Susan Sternberg or T. Allen Lipsky claim any beneficial interests in the shares herein described which are not reported here for his or her respective legal and beneficial interest.
(b) The following table sets forth information, as of June 30, 1995, as to each class of equity securities of the Registrant beneficially owned, directly or indirectly, by all directors and officers of the Registrant, as a group:
(1) Refer to Footnotes (1) and (2) of previous table.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No director or officer had any material interest, direct or indirect, in any business transaction of the Company during the period July 1, 1994 through June 30, 1995, or in any such proposed transaction.
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PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page No. -------- (a) 1. Financial statements
Included in Part II of this report
Report of independent certified public accountants 13 Balance sheets at June 30, 1995 and 1994 14-15 Statements of operations for the three years ended June 30, 1995 16 Statements of changes in shareholders' equity for the three years ended June 30, 1995 17 Statements of cash flows for the three years ended June 30, 1995 18 Notes to financial statements 19-30
2. Financial statement schedules
Included in Part IV of this report
For the three years ended June 30, 1995 Schedule II - Valuation and qualifying accounts 38
(b) 1. Exhibit I 39
2. Reports on Form 8-K - NONE
All other schedules and notes specified under Regulation S-X are omitted because they are either not applicable, not required or the information called for therein appears in the financial statements or notes thereto.
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SCHEDULE VIII -------------
MOYCO INDUSTRIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED JUNE 30, 1995
===============================================================================
Column A Column B Column C Column D Column E -------- -------- --------- -------- -------- Additions Balance --------- Balance at Accounts at Beginning Charged to Written End of of Period Expense Off (1) Period --------- ---------- -------- ------- Allowance for doubtful receivables:
June 30, 1995 $58,990 $ 20,084 $ 84 $78,990 ======= ======== ======== =======
June 30, 1994 $70,351 $ - $ 11,361 $58,990 ======= ======== ======== =======
June 30, 1993 $70,351 $212,109 $212,109 $70,351 ======= ======== ======== =======
(1) Represents accounts written off against the reserve.
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MOYCO INDUSTRIES STOCK OPTION PLAN FOR THE YEAR ENDED JUNE 30, 1995
EXHIBIT I
The Company adopted an incentive stock option plan on October 30, 1992. The plan provides that key employees and directors may be awarded options not to exceed 200,000 shares of the Company's stock. Under the plans, options are granted at a price not less than the fair market value at the grant date and generally become exercisable upon date of grant. In all cases, options expire ten years after grant. Of the total shares authorized for issuance, 93,500 shares had been granted and 6,400 shares have been exercised. During the year 1,600 shares of those granted were cancelled.
The following summarizes the stock option transactions during the year ended June 30, 1995.
Shares available for future grant were 108,100 shares at June 30, 1995.
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SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MOYCO INDUSTRIES, INC.
BY: /s/ Marvin E. Sternberg ------------------------------------- Marvin E. Sternberg President and Chief Executive Officer Chairman of the Board
Dated: September 14, 1995 ----------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report is signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ Marvin E. Sternberg ------------------------- President and Chief Executive Officer Marvin E. Sternberg
Dated: September 14, 1995 -------------------------
/s/ Jerome Lipkin ------------------------- Vice President and Director Jerome Lipkin Executive Officer
Dated: September 14, 1995 -------------------------
/s/ William Woodhead ---------------------- Secretary/Treasurer and William Woodhead Director
Dated: September 14, 1995 -------------------------
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