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+Proc-Type: 2001,MIC-CLEAR
+Originator-Name: webmaster@www.sec.gov
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+<SEC-DOCUMENT>0000354807-01-500004.txt : 20010205
+<SEC-HEADER>0000354807-01-500004.hdr.sgml : 20010205
+ACCESSION NUMBER:		0000354807-01-500004
+CONFORMED SUBMISSION TYPE:	10-K
+PUBLIC DOCUMENT COUNT:		1
+CONFORMED PERIOD OF REPORT:	20000930
+FILED AS OF DATE:		20010201
+
+FILER:
+
+	COMPANY DATA:	
+		COMPANY CONFORMED NAME:			MSI ELECTRONICS INC
+		CENTRAL INDEX KEY:			0000354807
+		STANDARD INDUSTRIAL CLASSIFICATION:	SEMICONDUCTORS & RELATED DEVICES [3674]
+		IRS NUMBER:				111969354
+		STATE OF INCORPORATION:			DE
+		FISCAL YEAR END:			0930
+
+	FILING VALUES:
+		FORM TYPE:		10-K
+		SEC ACT:		
+		SEC FILE NUMBER:	000-09877
+		FILM NUMBER:		1521227
+
+	BUSINESS ADDRESS:	
+		STREET 1:		3100 47TH AVE
+		CITY:			LONG ISLAND CITY
+		STATE:			NY
+		ZIP:			11101
+		BUSINESS PHONE:		7189373330
+
+	MAIL ADDRESS:	
+		STREET 1:		3100 4TH AVENUE
+		CITY:			LONG ISLAND CITY
+		STATE:			NY
+		ZIP:			11101
+</SEC-HEADER>
+<DOCUMENT>
+<TYPE>10-K
+<SEQUENCE>1
+<FILENAME>msi10k01.txt
+<DESCRIPTION>MSI20001
+<TEXT>
+
+SECURITIES AND EXCHANGE COMMISSION
+WASHINGTON, DC 20549
+
+FORM 10-K
+
+ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
+SECURITIES AND EXCHANGE ACT OF 1934
+
+For the fiscal year ended September 30, 2000
+
+Commission File No. 0-9877
+
+MSI ELECTRONICS, Inc.
+
+(Exact name of Registrant as specified in its Charter)
+
+Delaware                                    11-1969354
+
+(State or other Jurisdiction of             (I.R.S. Employer
+Incorporation or Organization)               Identification Number)
+
+3100 47th Avenue, Long Island City, New York 11101
+
+(Address of principal executive offices with Zip Code)
+
+Registrant's telephone number, including area code 718 937-3330
+
+
+Title of Each Class       Name of each Exchange on which registered
+
+None                      None
+
+
+Securities Registered Section 12(g) of the Act
+
+Common Stock $.03 Par Value Pursuant to Per Share
+
+Indicate by check mark whether the Registrant (1) has filed all reports
+required to be filed by Section 12 or 15(d) of the Securities and Exchange
+Act of 1934 during the preceding 12 months (or for such shorter period that
+the Registrant was required to file such reports) and (2) has been the
+subject to such filing requirements for the past 90 days.  Yes [x]  No [ ]
+
+Aggregate market value of Common Stock held by non-affiliates of the
+Registrant at September 30, 2000 (computed by reference to the last reported
+average closing bid price for the Common Stock as reported through
+NASDAQ: $358,729).
+
+Number of Shares of Common Stock outstanding at September 30, 2000:
+952,572 shs.
+
+DOCUMENTS INCORPORATED BY REFERENCE
+
+Definitive Proxy Statement to be filed in connection with the Registrant's
+2000 Annual Meeting of Shareholders is incorporated by reference into Items
+10, 11, 12 and 13 of Part II of this report, to the extent indicated therein.
+
+Part I
+
+Item 1 - Business
+
+    MSI Electronics Inc. (the "Registrant") is a Delaware corporation
+organized on September 29, 1960 under the name Microwave Instruments Inc.
+On January 18, 1962 Microwave Instruments Inc. was changed to its present
+name, MSI Electronics Inc. The business of the Registrant is:
+
+a) to manufacture and sell electronic products to test and measure the
+properties of semiconductors;
+b) to develop and sell products and services in interactive media;
+c) to distribute specialized electronic products manufactured by others.
+
+Products to Characterize Semiconductors
+
+    MSI Instruments are used by manufacturers of integrated circuits,
+transistors, diodes and other semiconductor components to measure the
+electrical properties of wafers used in these devices. MSI instruments
+are used by industrial, governmental, and university laboratories for
+research and development and are also used in industrial production
+environments. The instruments are used in research and development
+to measure known materials to improve both device performance and
+manufacturing yields as well as in research on new or innovative materials
+to develop devices with expanded or entirely new capabilities. Competition
+for the Registrant's semiconductor measurements products comes primarily
+from Hewlett-Packard, Keithley Instruments, Inc., Materials Development
+Corp., and Solid State Measurements Corp. The Registrant competes on
+quality, innovation and delivery.
+
+Products and Services in Interactive Media
+
+    The Registrant has developed hardware and software products for
+the Internet, television broadcast and telephone systems. The Registrant
+has licensed its 1994 patent on telephone advertising and will receive
+royalties on it in the upcoming year. The Registrant has focused its
+efforts on large scale database-driven interactive products that can
+be licensed to other companies as well as exploited by the Registrant.
+
+Distributor of Specialized Electronic Components
+
+    The Registrant sells electronic components and allied products
+that it purchases from other manufacturers and suppliers. The Registrant
+is continually seeking to increase this portion of the business by seeking
+suppliers of new components and products as well as additional customers.
+
+Products for Medical Applications
+
+    The Registrant is no longer developing products aimed at consumers
+for this market.
+
+Sales of Product Lines
+
+    The amount of sales to unaffiliated customers and the profits or
+losses of the Registrant's product lines for fiscal 2000 are set forth in
+the Schedule of Industry Segments of Business on Page F-10  appended. Sales
+were conducted under the supervision of the principal operating officer who
+monitored the activities of the two subsidiaries, one independent domestic
+sales representative and four independent foreign sales representatives.
+
+Backlog
+
+    As of November 30, 2000 the Registrant had no backlog of orders.
+
+Research and Development Expenses
+
+    All costs and expenses for research and development are charged to
+earnings in the year disbursed. The table below sets forth the amount spent
+by the Registrant during the last two fiscal years on research and
+development leading to new products.
+
+<TABLE>
+
+    Year Ended    Amount Spent    Persons Engaged on
+    Sept 30                       Full Time* Basis
+    <C>           <C>             <C>
+    2000          $110,769        2
+    1999          $157,214        2
+    1998          $137,964        2
+
+</TABLE>
+
+* or equivalent inasmuch as there are both part-time and full-time
+employees so engaged.
+
+Employees
+
+    As of September 30, 2000, the Registrant had three full time and two
+part time employees. The full time employees perform technical,
+administrative and marketing functions and the part time employees perform
+administrative and manufacturing functions. The Registrant has never entered
+into a collective bargaining agreement with any union, has never had a work
+stoppage and considers its relations with its employees to be satisfactory.
+The Registrant believes it is in compliance with all civil rights statutes
+and with applicable laws regulating the discharge of materials into the
+environment, or otherwise relating to the protection of the environment.
+
+
+Item 2. - Properties
+
+    The Registrant had its lease extended for an additional year to expire
+October 31, 2001 for its occupancy of 1650 sq. ft. premises, 1350 sq. ft. of
+factory and 300 sq. ft. of office, in a building located at 3100 47th Avenue,
+Long Island City, New York. The rental is 420,000.00 per annum. The Registrant
+rents 180 sq. ft. of office space located at 122 East 42nd Street, New York,
+NY at $1,600.00 per month on a month to month basis and 480 sq. ft. of office
+space at 89b. London Road in East Grinstead, England at $9,600 per annum.
+
+
+Item 3 - Legal Proceedings
+
+    There are no legal proceedings or threatened proceedings against
+the Registrant.
+
+
+Item 4. - Submission of Matters to a Vote of Security Holders
+
+     No matter was submitted to a vote of the shareholders during the
+fourth quarter of the Fiscal Year ended September 30, 2000 through the
+solicitation of proxies or otherwise.
+
+Part II
+
+
+Item 5 - Markets for the Registrant's Common Equity and Related
+	Stockholder Matters
+
+    (a) The Common Stock of the Company now trades on the OTC Bulletin
+Board under the symbol MSIEE. On January 20, 1994, the shares of the
+Registrant were delisted from the NASDAQ SmallCap Market due to the failure
+to meet the bid price requirement as set forth in the NASDAQ By-Laws.
+
+    (b) The following table sets forth the quarterly high and low bid
+prices for the Registrant's Common Stock. $.03 par value per share for the
+year ended September 30, 1999 as reported by NASDAQ. These quotations reflect
+inter-dealer prices, without mark-up, mark-down or commission and may not
+necessarily represent actual transactions.
+
+<TABLE>
+
+                        Fiscal Year Ended
+                          September 30,
+                        ----------------------
+                        <C>         <C>
+                        2000        1999
+                        ---------   ----------
+                        High  Low   High  Low
+                        ----------------------
+<S>                     <C>   <C>   <C>   <C>
+First Quarter           $.75  $.63  $.75  $.65
+Second Quarter          2.00   .50   .75   .65
+Third Quarter           1.15   .50   .90   .65
+Fourth Quarter          ---    ---   .63   .50
+
+</TABLE>
+
+    (c) Approximate Number of Holders of Common Stock
+
+    As of September 30, 2000, there were approximately 257 holders of
+record of the Registrant's Common Stock, $.03 par value per share.
+
+    (d) Dividends
+
+    There are no contractual restrictions on the present or future ability
+of the Registrant to pay cash dividends. The Registrant has no present
+intentions to pay cash dividends in the foreseeable future.
+
+Item 6 - Selected Financial Data
+
+    The selected financial data required by this Item 6 are set forth
+at the pages indicated in Item 14(a)(1) below.
+
+<TABLE>
+
+                             For the Years Ended September 30,
+                  ---------------------------------------------------------
+                  <C>         <C>         <C>         <C>         <C>
+                  2000        1999        1998        1997        1996
+                  ---------------------------------------------------------
+<S>               <C>         <C>         <C>         <C>         <C>
+Net Sales         $  437,779  $  611,558  $  645,275  $  687,438  $  668,613
+Net Loss            (332,711)   (235,081)   (264,928)   (270,730)   (249,413)
+Net Loss
+  Per Share             (.35)       (.25)       (.28)       (.26)       (.26)
+Total
+  Assets           $1,011,283 $1,492,244  $1,713,368  $1,941,838  $2,234,903
+
+</TABLE>
+
+
+Item 7 - Management's Discussion and Analysis of Financial Condition and
+	Results of Operations
+
+
+Results of Operations
+
+    The net sales of the Registrant for the fiscal years ended September 30,
+2000, 1999, and 1998 were, and $437,739 $611,558, and $645,275 respectively.
+The decrease of $173,819 or 28.2% for the fiscal year 2000 over 1999 was due
+to a decrease in sales of the semiconductor product line and a decrease in
+the sales of the instrument product line. The decrease of $33,717 or 5.2%
+for the fiscal year 1999 over 1998 was due to a decrease in sales of the
+semiconductor product line offset by an increase in the sales of the
+instrument product line.
+
+    The cost of sales for the years ended September 30, 2000, 1999, and 1998
+were $371,717, $435,504, and $461,593 respectively. Costs expressed as a
+percentage of sales for the respective years were 84.9%, 71.2% and 71.5%. The
+increase of $63,787 or 14.73% for the fiscal year 2000 over 1999 was due to
+the decrease in sales and an increase in research and development expenditures.
+The decrease of $26,089 or 5.65% for the fiscal year 1999 over 1998 was due to
+a decrease in sales.
+
+    Selling and administrative expenses were $432.732 for the fiscal year
+ended September 30, 2000, $480,617 for the fiscal 1999 year and $483,571
+for the fiscal 1998 period. The decrease of 447,885 or 10.0% for the fiscal
+year 2000 over 1999 and the decrease of $2,954, or 0.6% for the fiscal year
+1999 over 1998 were due to a decrease in sales.
+
+    Investment and other income for the fiscal years ended September 30,
+2000 was $43,649, $73,225, for fiscal year 1999 and $46,775 for fiscal year
+1998. The decrease of $29,576 for fiscal 2000 over fiscal 1999 was due to a
+decrease in the value of marketable securities and the decrease in investment
+income due to a decrease in the availability of investment funds. The increase
+of $26,450 for fiscal 1999 from fiscal 1998 was due to a net increase in value
+of marketable securities offset by a decrease in investment income due to a
+decrease in the availability of investment funds.
+
+    Income tax was $9,650 for the fiscal year ended September 30,
+2000, $3,743 for fiscal 1999 and $11,814 for fiscal 1998. The increase in
+taxes of $5,907 in 2000 from 1999 and the decrease in taxes of $8,071 in
+1999 from 1998 were principally due to taxes paid by the Company's foreign
+subsidiary.
+
+    The net loss for fiscal years ended September 30,2000, 1999 and
+1998 were $332,711, $235,081, and $264,928 respectively. The decrease in
+the loss in fiscal 1999 over 1998 was due primarily to the increase in
+investment and other income.  The increase in the loss in fiscal 2000 over
+1999 was due the decrease in the sales and by the decrease in investment
+and other income.
+
+    For the first quarter fiscal 2000 or the three month period ended
+December 31, 2000, sales are estimated to decrease by 10% from sales
+for the comparable period ended December 31, 1999. For the full fiscal
+year ended September 30, 2001, sales are estimated to increase by
+10% as compared to the fiscal year ended September 30,2000.
+
+Liquidity and Capital Resources
+
+    Of its total assets at September 30, 2000 the Registrant had
+82.2% or an aggregate of $831,690 cash and cash equivalents including
+certificates of deposits, money market funds and marketable securities.
+The major application of the Registrant's liquid position is to fund the
+development of hardware and software products for sale to consumer and
+industrial markets and to finance the sale of the products developed.
+It is anticipated that the expenses for product development, testing and
+marketing will be financed in the foreseeable future from cash and liquid
+investments on hand but should there be increased demands for cash, the
+Registrant may seek other sources of financing, including public offerings.
+If additional financing is required, there can be no assurance that funds
+will be available on terms acceptable to the Registrant. Should funds not
+be available, new product development would be delayed which could have
+an adverse affect on the Registrant. The Registrant does not intend to
+become an investment company as defined in the Investment Companies Act
+of 1940.
+sales.
+
+Item 8 - Financial Statements and Supplementary Data
+
+    The financial statements as of September 30, 2000 and for previous
+years are submitted on Pages F-1 thru F-13 in the section appended to this
+report.
+
+Item 9 - Changes in and Disagreements with Accountants on Accounting
+    and Financial Disclosure
+
+    No Form 8-K has been filed within the 24 months prior to the date of
+the most recent financial statements reporting a change of accountants and/or
+reporting disagreements on any matter of accounting principle or financial
+statement disclosure.
+
+
+Part III
+
+Item 10 - Directors and Executive Officers of the Registrant
+
+    Information regarding directors and executive officers of the Registrant
+is set forth on Page 2 of the 2000 Proxy Statement which is incorporated
+herein by reference.
+
+
+Item 11 - Executive Compensation
+
+    Information regarding executive compensation is set forth on Page 3 of the
+2000 Proxy Statement which is incorporated herein by reference.
+
+Item 12 - Security Ownership of Certain Beneficial Owners and Management
+
+    Information regarding security ownership of certain beneficial owners and
+management is set forth on Page 4 of the 2000 Proxy Statement which is
+incorporated herein by reference.
+
+
+Item 13 - Certain Relationships and Related Transactions
+
+    Information regarding certain relationships and related transactions is
+set forth on Page 3 of the 2000 Proxy Statement which is incorporated herein
+by reference.
+
+
+Part IV
+
+Item 14 - Exhibits. Financial Statement Schedules and Reports on Form 8-K
+
+a) 1. Financial Statements                                        Page
+
+    1. Report of Independent Certified Public Accountants         F-1
+
+    2. Consolidated Balance Sheet as of September 30, 2000
+       and 1999                                                   F-2
+
+    3. Consolidated Statement of Income for the fiscal years
+       ended September 30, 2000, 1999 and 1998                    F-3
+
+    4. Consolidated Statement of Retained Earnings
+       at September 30, 2000, 1999 and 1998                       F-4
+
+    5. Consolidated Statement of Changes in Financial Position
+       for the fiscal years ended September 30, 2000,
+       1999 and 1998                                              F-5
+
+    6. Notes to Consolidated Financial Statements         F-6 to F-12
+
+    7. Financial Highlights for the years ended September 30,
+       2000, 1999 and 1998                                       F-13
+
+Financial schedules are omitted because they are not required or are
+not material or the required information is included in the notes to
+financial statements.
+
+3. Exhibits
+
+    3a. Certificate of incorporation of the Registrant (filed
+        September 19, 1960) previously filed as Exhibit 4(a) to
+        the Registrant's Form S-1 Registration Statement No. 2-18113,
+        which became effective on August 30, 1961 (thereafter the
+        "Registration Statement") is incorporated by reference.
+
+    3b. Certificate of Amendment to Certificate of Incorporation of
+        Registrant (filed March 3, 1961)previously filed as Exhibit 4(b)
+        to the Registration Statement is incorporated herein by reference.
+
+    3c. Certificate of Amendment to Certificate of Incorporation of
+        Registrant (filed April 19, 1961) previously filed as
+        Exhibit 4(c) to the Registration Statement is incorporated
+        herein by reference.
+
+    3d. Certificate of Amendment to Certificate of Incorporation of
+        Registrant (filed January 18, 1962), previously filed as
+        Exhibit 3(d) to the Registrant's Form 10 Registration Statement
+        No. 0-9877, which became effective on October 6, 1981 (hereinafter
+        the "Form 10 Registration Statement") is incorporated herein
+        by reference.
+
+    3e. By-laws of Registrant previously filed as Exhibit 4(d) to the
+        Registration Statement is incorporated herein by reference.
+
+    3f. Certificate of Amendment to Certificate of Incorporation of Registrant
+        filed February 24, 1984 is incorporated herein by reference.
+
+    4. Specimen of Common Stock of the Registrant previously filed as
+        Exhibit 5 to the Registration Statement incorporated herein
+        by reference.
+
+    10a. Profit Sharing Plan of Registrant adopted October 1, 1973,
+        previously filed as Exhibit 10a to the Registration Statement
+        is incorporated herein by reference.
+
+    10a(1). Restated Profit Sharing Plan of Registrant adopted October 1,
+        1982, previously filed as Exhibit 10(a)1 to the Registrant's
+        Annual Report on Form 10-K for the fiscal year ended September 30,
+        1983 is incorporated herein by reference.
+
+    10b. Deferred Compensation Plan of Registrant adopted December 10,
+        1979, previously filed as Exhibit 10 to the Form 10 Registration
+        Statement is incorporated herein by reference.
+
+    10b(1). Amendment to the Deferred Compensation Plan of the Registrant
+        previously filed as Exhibit 10b(1) to the Registrant's Annual
+        Report on Form 10-K for the fiscal year ended September 30, 1989,
+        is incorporated herein by reference.
+
+    10c. Pension Plan of Registrant dated October 1, 1982, previously
+        filed as Exhibit 10c to the Registrant's Annual Report on Form
+        10-K for the fiscal year ended September 30, 1983, is incorporated
+        herein by reference.
+
+22 Subsidiaries of Registrant herewith
+
+    (b) Reports of Form 8-K
+
+    There were no reports on Form 8-K filed during the last quarter of the
+fiscal year ended September 30, 2000.
+
+Exhibit 22 Subsidiaries of MSI Electronics Inc.
+
+    The following table sets forth information pertaining to the Registrant's
+subsidiaries and includes the jurisdiction of incorporation, the percentage of
+voting securities of such subsidiaries owned by the Registrant and the method of
+financial reporting.
+
+
+<TABLE>
+
+Name        State or Country        Percentage of           Consolidated
+            of Incorporation        Voting Securities       Financial
+                                    Owned                   Statements
+- --------    ----------------        -----------------       ----------------
+<C>         <C>                     <C>                     <C>
+Elyon       England                 100%                    Yes
+Electronics
+Ltd.
+
+Xadax Inc.  New York                100%                    Yes
+
+</TABLE>
+
+SIGNATURES
+
+Pursuant to the requirements of Section 13 or 15(d) of the Securities and
+Exchange Act of 1934, the Registrant has duly caused this report to be signed
+on its behalf by the undersigned, thereunto duly authorized.
+
+Dated: December 29, 2000
+
+                                                MSI ELECTRONICS Inc.
+
+                                                By: /s/ Matthew Lederman
+                                                --------------------
+                                                Matthew Lederman
+                                                Chairman of the Board
+
+
+Pursuant to the requirements of the Securities and Exchange Act of 1934,
+this report has been signed below by the following persons on behalf of
+the Registrant and in the capacities indicated on December 29, 1999.
+
+    Signature                                  Title
+    ---------                                  -----
+
+/s/ Mattthew Lederman                     President and Director
+- -------------------                       Chief Executive and Chief
+Matthew Lederman                          Financial Officer
+
+
+/s/ Theodore R. Bashkow                   Secretary and Director
+- -----------------------
+Theodore R. Bashkow
+
+
+/s/ Robert W. Keene
+- -----------------------                   Director
+Robert W. Keene
+
+
+
+
+ANNUAL REPORT ON FORM 10-K
+
+ITEM 8, ITEM 14(a)(1) AND (2), (c) AND (d)
+
+FINANCIAL STATEMENTS
+
+LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
+
+CERTAIN EXHIBITS
+
+FINANCIAL STATEMENT SCHEDULES
+
+YEAR ENDING SEPTEMBER 30, 2000
+
+MSI ELECTRONICS INC. AND SUBSIDIARIES
+
+LONG ISLAND CITY, NEW YORK
+
+
+FORM 10-K - ITEM 14(a)(1) AND (2)
+
+MSI ELECTRONICS INC. AND SUBSIDIARIES
+
+SEPTEMBER 30, 2000
+
+LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
+
+The following consolidated financial statements of MSI Electronics
+Inc. and Subsidiaries are included in Item 8:
+
+                                                                  Page No.
+
+Consolidated Balance Sheets
+  September 30, 2000 and 1999                                     F-2
+
+Consolidated Statements of Income
+  For the years ending September 30, 2000, 1999 and 1998          F-3
+
+Consolidated Statements of Shareholders' Equity
+  For the years ending September 30, 2000, 1999 and 1998          F-4
+
+Consolidated Statements of Cash Flows
+  For the years ending September 30, 2000, 1999 and 1998          F-5
+
+Notes to Consolidated Financial Statements                        F-6
+
+
+
+    The following consolidated financial statement schedule, of MSI
+Electronics Inc. and Subsidiaries are included in Item 14(d):
+
+
+Financial Highlights
+  For the years ending September 30, 2000, 1999, 1998,
+    1997 and 1996                                                 F-13
+
+All other schedules for which provision is made in the applicable
+accounting regulation of the Securities and Exchange Commission
+are not required under the related instructions or are inapplicable,
+and therefore have been omitted.
+
+
+MSI ELECTRONICS INC.
+Long Island City, New York
+
+
+To the Board of Directors and Shareholders:
+
+	Independent Auditors' Report
+
+
+    We have audited the accompanying consolidated balance sheet of MSI
+ELECTRONICS INC. and its subsidiaries as of September 30, 2000, 1999
+and the related consolidated statements of income, shareholders' equity,
+and cash flows for the three years in the period ending September 30,
+2000.  Our audits also included the financial statement schedules listed
+in the Index at Item 14(a).  These financial statements and schedules are
+the responsibility of the Company's management.  Our responsibility is to
+express an opinion on these financial statements and schedules based on
+our audits.
+
+    We conducted our audit in accordance with generally accepted auditing
+standards.  Those standards require that we plan and perform the audit to
+obtain reasonable assurance about whether the financial statements are
+free of material misstatement.  An audit includes examining, on a test
+basis, evidence supporting the amounts and disclosures in the financial
+statements.  An audit also includes assessing the accounting principles
+used and significant estimates made by management, as well as evaluating
+the overall financial statement presentation.  We believe that our audit
+provides a reasonable basis for our opinion.
+
+	In our opinion, the financial statements referred to above present
+fairly, in all material respects, the financial position of MSI ELECTRONICS
+INC. and its subsidiaries as of September 30, 2000 and 1999 and the results
+of their operations and their cash flows for each of the three years in the
+period ended September 30, 2000 in conformity with generally accepted
+accounting principles. Also, in our opinion, the related financial statement
+schedules, when considered in relation to the basic financial statements
+taken as a whole, present fairly in all material respects the information
+set forth therein.
+
+
+
+						WEISSMAN AND RUDNITSKY, CPA'S
+
+New York, New York
+November 29, 2000
+
+
+MSI ELECTRONICS INC. AND SUBSIDIARIES
+
+<TABLE>
+
+CONSOLIDATED BALANCE SHEETS
+
+SEPTEMBER 30, 2000 AND 1999
+
+<CAPTION>
+
+
+                                         ASSETS
+
+                                    2000        1999
+                                    ---------   ---------
+<S>                                 <C>         <C>
+Current assets
+  Cash                              $ 361,411   $ 482,327
+  Temporary cash
+   investments                        202,646     318,721
+  Receivables                         116,057     177,943
+  Inventories                          47,715      87,233
+  Marketable securities               267,633     336,820
+  Prepaid expenses                     10,564      68,193
+                                   ----------  ----------
+Total current assets                1,006,026   1,471,237
+Property, plant and equipment           4,691      20,441
+Other assets                              566         566
+                                   ----------  ----------
+Total assets                       $1,011,283  $1,492,244
+                                   ==========  ==========
+
+</TABLE>
+
+
+<TABLE>
+
+               LIABILITIES AND SHAREHOLDERS' EQUITY
+
+<CAPTION>
+
+<S>                                <C>        <C>
+Current liabilities
+  Accounts payable                 $  85,096  $  193,423
+  Taxes payable                        5,201          88
+                                   ---------  ----------
+Total current liabilities             90,297     193,511
+Shareholders' equity
+  Common stock - par value $.03
+    Authorized - 5,000,000 shares
+    Issued - 1,418,448 shares         42,554      42,554
+  Capital in excess
+    of par value                     420,201     420,201
+  Retained earnings                1,185,479   1,518,190
+  Currency translation
+    adjustments                      (21,070)     20,691
+                                   ----------  ---------
+                                   1,627,164   2,001,636
+  Less treasury stock at cost:
+    465,876 shares in 2000
+    and 460,876 in 1999              706,178     702,903
+                                   ----------  ---------
+Total shareholders' equity           920,986   1,298,733
+                                   ----------  ---------
+Total liabilities and
+  shareholders' equity            $1,011,283  $1,492,244
+                                  ==========  ==========
+
+</TABLE>
+
+                         See accompanying notes
+
+                                 F-2
+
+
+MSI ELECTRONICS INC. AND SUBSIDIARIES
+
+<TABLE>
+
+CONSOLIDATED STATEMENTS OF INCOME
+
+FOR THE YEARS ENDING SEPTEMBER 30, 2000, 1999 AND 1998
+
+<CAPTION>
+
+                         2000            1999            1998
+                         -----------     -----------     -----------
+<S>                      <C>             <C>             <C>
+Net sales                $  437,739      $  611,558      $  645,275
+Cost of goods sold          371,717         435,504         461,593
+                         -----------     -----------     -----------
+Gross profit                 66,022         176,054         183,682
+Selling and
+  administrative
+  expenses                  432,732         480,617         483,571
+                         -----------     -----------     -----------
+Net loss before
+  investment and
+  other income
+  and taxes                (366,710)       (304,563)       (299,889)
+
+Investment and
+  other income               43,649          73,225          46,775
+                          ----------      ----------      ----------
+Net loss before
+  income taxes             (323,061)       (231,338)       (253,114)
+Provision for
+  income taxes                9,650           3,743          11,814
+                          ----------      ----------      ----------
+Net loss                   (332,711)       (235,081)       (264,928)
+                          ==========      ==========      ==========
+Loss per share                $(.35)          $(.25)          $(.28)
+                          ==========      ==========      ==========
+
+</TABLE>
+
+
+                            See accompanying notes
+
+                                      F-3
+
+MSI ELECTRONICS INC. AND SUBSIDIARIES
+
+<TABLE>
+
+CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
+
+<CAPTION>
+
+                 Common    Treasury   Capital in Retained   Currency     Total
+                 Stock     Stock      Excess of  Earnings   Translation
+                                      Par Value             Adjustments
+                 --------  ---------  ---------- ---------  ------------ -----------
+<S>              <C>       <C>        <C>        <C>        <C>          <C>
+Balance at
+  September
+  30, 1997       $42,554   $(698,426) $420,201   $2,018,199 $12,964      $1,795,492
+
+  Purchase of
+    6,626 shares              (4,477)                                        (4,477)
+
+  Net loss
+    for year                                       (264,928)               (264,928)
+
+  Currency
+    translation
+    adjustment                                               19,657          19,657
+                 --------  ---------  ---------- ---------  ------------ -----------
+Balance at
+  September
+  30, 1998       $42,554  $(702,903)  $420,201   $1,753,271 $32,621      $1,545,744
+
+  Net loss
+    for year                                       (235,081)               (235,081)
+
+  Currency
+    translation
+    adjustment                                              (11,930)        (11,930)
+                 --------  ---------  ---------- ---------  ------------ -----------
+Balance at
+    September
+    30, 1999     $42,554   $(702,903) $420,201   $1,518,190 $20,691      $1,298,733
+
+  Purchase of
+    5000 shares               (3,275)                                        (3,275)
+
+  Net loss
+    for year                                       (332,711)               (332,711)
+
+  Currency
+    translation
+    adjustment                                              (41,761)        (41,761)
+                 --------  ---------  ---------- ---------  ------------ -----------
+Balance at
+  September
+  30, 2000       $42,554   $(706,178) $420,201   $1,185,479 $(21,070)      $920,986
+                 ========= ========== ========== ========== ============ ===========
+
+</TABLE>
+
+
+                               See accompanying notes
+
+                                         F-4
+
+
+MSI ELECTRONICS INC. AND SUBSIDIARIES
+
+<TABLE>
+
+CONSOLIDATED STATEMENTS OF CASH FLOWS
+
+FOR THE YEARS ENDING SEPTEMBER 30, 2000, 1999 AND 1998
+
+<CAPTION>
+
+                             2000            1999            1998
+                             -----------     -----------     -----------
+<S>                          <C>             <C>             <C>
+Net loss                     $(332,711)      $(235,081)      $(264,928)
+                             -----------     -----------     -----------
+Adjustments to reconcile net
+  loss to net cash (used) by
+  operating activities:
+
+Depreciation and
+  amortization                  11,237          14,219         16,006
+
+Unrealized loss (gain)
+  on marketable
+  securities                     1,021          (4,819)        37,241
+
+(Gain)loss on sale
+  of marketable
+  securities                     5,579          (2,007)         5,631
+
+(Increase) decrease
+  in current assets
+
+  Receivables                   61,886         (81,795)        7,761
+  Inventories                   39,518          17,998       (45,037)
+  Prepaid expenses              57,629         (22,981)       13,260
+
+Increase (decrease)
+  in current
+  liabilities
+
+  Accounts payable            (108,327)        31,409         35,510
+  Taxes payable                  5,113         (5,522)       (14,232)
+                              ----------     ----------     ----------
+  Total
+    adjustments                 73,656        (53,498)        56,140
+                              ----------     ----------     ----------
+Net cash (used)
+  by operating
+  activities                  (259,055)      (288,579)      (208,788)
+                              ----------     ----------     ----------
+Investing activities:
+
+  Purchases of property,
+    plant and
+    equipment                   (1,580)        (1,053)        (6,622)
+  Purchase of marketable
+    securities                 (43,825)       (68,393)      (238,161)
+  Proceeds from sale
+    of marketable
+    securities                 112,505         94,169        286,138
+                              ----------     ---------      ----------
+Net cash provided
+  (used) by investing
+  activities                    67,100         24,723         41,355
+                              ----------     ---------      ----------
+Financing activities:
+  Purchase
+    of treasury
+    stock                       (3,275)             0         (4,477)
+                              ----------     ---------      ----------
+Net cash (used)
+  by financing
+  activities                    (3,275)             0         (4,477)
+                              ----------     ---------      ----------
+Effect of exchange
+  rate changes
+	on cash                  (41,761)       (11,930)        19,657
+                              ----------     ---------      ----------
+Net(decrease) in
+  cash and cash
+  equivalents                 (236,991)      (275,786)      (152,253)
+Cash and cash
+  equivalents at
+  beginning of
+  year                         801,048      1,076,834      1,229,087
+                              ----------   -----------     -----------
+Cash and cash
+  equivalents at
+  September 30,               $564,057      $801,048      $1,076,834
+                              ==========    ==========    ============
+
+</TABLE>
+
+                         See accompanying notes
+
+                                F-5
+
+
+MSI ELECTRONICS INC. AND SUBSIDIARIES
+
+NOTES TO FINANCIAL STATEMENTS
+
+SEPTEMBER 30, 2000, 1999 AND 1998
+
+
+1. Organization and Summary of Significant Accounting Policies:
+
+(a) Organization:
+
+    The Company is a Delaware corporation organized on September 29, 1960.
+The Company sells electronic instruments designed to measure semiconductor
+properties, semiconductors, and electronic components.
+
+(b) Principles of Consolidation:
+
+    The consolidated financial statements include the accounts of the
+Company, Elyon Electronics Limited, a United Kingdom subsidiary, and XADAX
+Inc., both wholly-owned subsidiaries. Significant intercompany accounts and
+transactions have been eliminated in consolidation.
+
+(c) Use of Estimates:
+
+    The preparation of financial statements in conformity with generally
+accepted accounting principles requires management to make estimates and
+assumptions that affect the reported amounts of assets and liabilities and
+disclosure of contingent assets and liabilities at the date of the
+financial statements and reported amounts of revenues and expenses during
+the reporting period. Actual results could differ from those estimates.
+
+(d) Translation of Foreign Currencies:
+
+    The accounts of the Company's foreign subsidiary have been translated
+to U.S. Dollars as follows: at rates prevailing during the year for sales
+and expenses (except depreciation); at year-end rates for monetary assets
+and liabilities; and at historical rates for inventories, plant and
+equipment and related accumulated depreciation.
+
+(e) Depreciation:
+
+    The Company's policy is to depreciate its fixed assets over the useful
+lives of 3 to 7 years.
+
+    Expenditures for maintenance, repairs and betterments which did not
+materially prolong the normal useful life of the assets are charged to
+operations as incurred.
+
+                         See accompanying notes
+
+                                 F-6
+
+
+MSI ELECTRONICS INC. AND SUBSIDIARIES
+
+NOTES TO FINANCIAL STATEMENTS
+
+SEPTEMBER 30, 2000, 1999 AND 1998
+
+
+1. Organization and Summary of Significant Accounting
+    Policies (Continued):
+
+(f) Income Taxes:
+
+    The Company provides for income taxes on pretax accounting income at
+rates in effect under existing tax law.
+
+    At September 30, 2000, the Company had net operating loss
+carryforwards of approximately $1,783,000 for Federal income tax reporting
+purposes, which expire in the years 2008 to 2015.  The ultimate realization
+of the tax benefits from the net operating loss carryforwards is dependent
+upon future taxable earnings of the Company.
+
+    The foreign subsidiary has recorded provision for income taxes at
+applicable foreign tax rates.
+
+    The provision for income taxes consisted of:
+
+<TABLE>
+
+				YEARS ENDED SEPTEMBER 30,
+
+Current:
+
+                 2000             1999            1998
+                 --------         --------        --------
+<S>              <C>              <C>             <C>
+Federal          $     0          $    0          $     0
+State and local    4,260           4,496            6,597
+Foreign            5,390	      (753)	          5,217
+                 --------         --------        ---------
+Total             $9,650          $3,743          $11,814
+                 ========         ========        =========
+
+</TABLE>
+
+(g) Temporary Cash Investments:
+
+    The Company has a cash management program which provides for the
+investment of excess cash balances in short term money market instruments.
+For purposes of the statement of cash flows, the Company considers all
+highly liquid debt instruments purchased with a maturity of three months
+or less to be cash equivalents.
+
+(h) Research and Development Costs:
+
+    Research and development expenditures are charged to operations as
+incurred.  During 2000, 1999 and 1998, research and development costs
+aggregated $110,769, $157,214, and $137,964, respectively.
+
+                                 F-7
+
+
+MSI ELECTRONICS INC. AND SUBSIDIARIES
+
+NOTES TO FINANCIAL STATEMENTS
+
+SEPTEMBER 30, 2000, 1999 AND 1998
+
+
+1. Organization and Summary of Significant Accounting
+    Policies (Continued):
+
+(i) Basic Earnings per Share:
+
+    Basic earnings per share are computed by dividing earnings available to
+common stockholders by the weighted average number of common shares
+outstanding during the period.  The Company has only one class of stock and
+all earnings (losses) are available to common stockholders.  For the fiscal
+years ending September 30, 2000, 1999 and 1998, basic earnings (loss) per
+share is computed based on weighted average common shares outstanding of
+952,832, 957,572 and 959,511, respectively.
+
+(j) Stock Options:
+
+    In June 1993, the Board of Directors of the Company granted a stock
+option to a key employee to purchase up to 50,000 shares of the Company's
+common stock at an exercise price of $1.344 per share.  After five years of
+the date of the grant no options were exercised.  As of September 30, 2000
+there are no options outstanding.
+
+(k) Marketable Securities:
+
+    Marketable securities consist of mutual funds and common stock.
+Marketable securities are stated at market value.  All marketable
+securities are defined as trading securities under the provision of
+Statement of Financial Accounting Standards No. 115, "Accounting for
+Certain Investments in Debt and Equity Securities" (SFAS 115) and
+unrealized gains and losses are reflected in earnings. Market value is
+determined by the most recently traded price of the security at the
+balance sheet date.  Net realized gains or losses are determined on
+the FIFO cost method.
+
+2. Temporary Cash Investments:
+
+    Temporary cash investments consisted of the following:
+
+<TABLE>
+
+                                    September 30,
+
+                                2000            1999
+                                --------        --------
+<S>                             <C>             <C>
+Certificates of Deposit         $202,646        $318,721
+                                ========        ========
+
+</TABLE>
+
+                                       F-8
+
+
+MSI ELECTRONICS INC. AND SUBSIDIARIES
+
+NOTES TO FINANCIAL STATEMENTS
+
+SEPTEMBER 30, 2000, 1999 AND 1998
+
+
+3.Receivables:
+
+<TABLE>
+
+                                    September 30,
+
+                                 2000            1999
+                                 --------        --------
+<S>                              <C>             <C>
+Receivables consists of:
+
+Trade receivables:               $116,057        $177,943
+                                 ========        ========
+
+
+</TABLE>
+
+4. Inventories:
+
+    Inventories were taken by physical count and are valued at the lower
+of cost (first-in, first-out method), or market and consisted of the
+following:
+
+<TABLE>
+
+                                    September 30,
+
+                                 2000            1999
+                                 -------         -------
+<S>                              <C>             <C>
+Finished goods                   $41,150         $84,125
+Work in progress                   1,876               0
+Raw materials                      4,689           3,108
+                                 -------         -------
+Total	                           $47,715         $87,233
+                                 =======         =======
+
+</TABLE>
+
+
+5. Marketable Securities:
+
+    Marketable securities are defined as trading securities under the
+provision of Statement of Financial Accounting Standards No. 115,
+"Accounting for Certain Investments in Debt and Equity Securities" (SFAS
+115).   Unrealized gains and (losses) were $(1,021) and $4,819 for the years
+2000 and 1999 respectively.
+
+                                 F-9
+
+MSI ELECTRONICS INC. AND SUBSIDIARIES
+
+NOTES TO FINANCIAL STATEMENTS
+
+SEPTEMBER 30, 2000, 1999 AND 1998
+
+
+6. Property, Plant and Equipment:
+
+    Property, plant and equipment are stated at cost.  Major categories
+are as follows:
+
+<TABLE>
+
+                                     September 30,
+
+                                 2000            1999
+                                 -------         -------
+<S>                              <C>             <C>
+Patents                          $ 3,592         $ 3,592
+Machinery and equipment           43,327          42,538
+Office furniture
+  and equipment                  102,102         101,312
+Sales equipment                   17,528          37,031
+                                 -------         -------
+                                 166,549         184,473
+Less accumulated
+  depreciation                   161,858         164,032
+                                 -------         -------
+Total                             $4,691         $20,441
+                                 =======         =======
+</TABLE>
+
+
+7. Retirement Plans:
+
+    For the year ending September 30, 1993,  the Company implemented
+a 401K plan for all eligible employees, in which the Company may elect
+to match employees' contributions up to a maximum of $500 per employee.
+
+	401K Plan:
+
+	For the years ended September 30, 2000, 1999 and 1998, contributions
+were $0, $0, and $0 respectively.
+
+8. Industry Segment Information:
+
+<TABLE>
+
+                 Net Sales    Operating    Identi-   Capital   Depreciation
+                              Income       fiable    Expendi-  & Amortization
+                                           Assets    tures
+                -----------   ----------   --------- --------- --------------
+
+<S>             <C>           <C>          <C>       <C>       <C>
+2000
+- ----
+Semiconductors
+  and Electronic
+  Components     $322,688     $21,691      $28,960        $0    $1,095
+
+Instruments       115,051    (388,401)      20,192         0     1,074
+
+General                 0           0      962,131     1,580     9,068
+                 ---------  ----------  ------------ -------- ---------------
+Total            $437,739   $(366,710)  $1,011,283    $1,580   $11,237
+                 =========  ==========  ============ ======== ===============
+
+</TABLE>
+
+                                 F-10
+
+NOTES TO FINANCIAL STATEMENTS
+
+SEPTEMBER 30, 2000, 1999 AND 1998
+
+8.	Industry Segment Information (continued):
+
+<TABLE>
+
+                 Net Sales    Operating    Identi-   Capital   Depreciation
+                              Income       fiable    Expendi-  & Amortization
+                                           Assets    tures
+                 ---------    ---------    -------   --------  --------------
+<S>              <C>          <C>          <C>       <C>       <C>
+1999
+- ----
+Semiconductors
+  and Electronic
+  Components     $390,465     $(20,268)    $68,478        $0      $2,938
+
+Instruments       221,093     (284,295)     21,267       922       3,811
+
+General                 0            0   1,402,499       131       7,470
+                 --------    ---------- ----------   ---------  --------------
+Total            $611,558    $(304,563) $1,492,244    $1,053     $14,219
+                 ========    ========== ==========   =========  ==============
+
+1998
+
+Semiconductors
+  and Electronic
+  Components     $459,170        $7,910     $80,977  $5,336      $1,004
+
+Instruments       186,105      (307,799      31,015   1,092       3,317
+
+General                 0             0   1,601,376     194      11,685
+                 ---------    ----------  ---------- --------- ---------------
+Total            $645,275     $(299,889)  $1,713,368 $6,622     $16,006
+                 =========    ==========  ========== ========= ===============
+
+</TABLE>
+
+Export Sales:
+
+    Sales to foreign customers amounted to $47,010 in fiscal 2000, $119,904
+in fiscal 1999, and $30,028 in fiscal 1998.
+
+    Major Customers:
+
+    No customer accounted for more than 10% of net instrument sales or net
+semiconductor sales in fiscal 2000, 1999, 1998.
+
+                               F-11
+
+
+MSI ELECTRONICS INC. AND SUBSIDIARIES
+
+NOTES TO FINANCIAL STATEMENTS
+
+SEPTEMBER 30, 2000, 1999 AND 1998
+
+Geographic Information - Sales:
+
+<TABLE>
+
+                            Years ended September 30,
+
+                  United States           Foreign           Total
+                  --------------          -----------       ----------
+<S>               <C>                     <C>               <C>
+
+2000              $68,041                 $369,698          $437,739
+
+1999              $101,189                $510,369          $611,558
+
+1998              $156,076                $489,199          $645,275
+
+</TABLE>
+
+
+9. Statements of Cash Flows:
+
+<TABLE>
+
+
+                         For the years ended September 30,
+
+                       2000            1999            1998
+                       --------        --------        -------
+<S>                    <C>             <C>             <C>
+The company paid:
+
+Income taxes           $6,589          $6,637          $7,939
+Interest                    0               0               0
+
+</TABLE>
+
+10. Contingencies and Commitments:
+
+    Significant concentrations of credit risk:
+
+    The company has cash and temporary cash investments deposits at
+banks of $2,540 in 2000 and $18,721 in 1999 in excess of what would be
+covered by the Federal Deposit Insurance Company.
+
+    Lease:
+
+    The Company has various leases for equipment and buildings which
+are classified as operating leases.  Total rent expense for all operating
+leases for 2000 and 1999 were $45,562, and $37,372, respectively.
+
+    Future minimum lease payments under the noncancelable operating
+leases with initial or remaining terms for one year or more are as
+follows:
+
+<TABLE>
+
+                    Year ending September 30:
+
+                  <C>                       <C>
+			2000                      $20,556
+
+</TABLE>
+
+
+                                 F-12
+
+
+MSI ELECTRONICS INC. AND SUBSIDIARIES
+
+FINANCIAL HIGHLIGHTS
+
+FOR THE YEARS ENDED SEPTEMBER 30, 2000, 1999, 1998, 1997, AND 1996
+
+<TABLE>
+
+            2000        1999        1998        1997        1996
+            ----------- ----------- ----------- ----------- -----------
+<S>         <C>         <C>         <C>         <C>         <C>
+Net sales   $ 437,739   $ 611,558   $ 645,275   $ 687,438   $ 668,613
+(Loss)before
+  taxes      (323,061)   (231,338)   (253,114)  (256,557)   (226,395)
+Net(loss)    (332,711)   (235,081)   (264,928)  (270,730)   (249,413)
+Net (loss)
+per share (1)    (.35)       (.25)       (.28)      (.28)       (.26)
+Total
+  assets     1,011,283  1,492,244   1,713,368  1,941,838   2,234,903
+Current
+  assets     1,006,026  1,471,237   1,679,195  1,898,281   2,206,480
+Current
+  liabil-
+  ities         90,297    193,511     167,624    146,346     168,203
+Shareholders'
+  equity       920,986  1,298,733   1,545,744  1,795,492   2,066,700
+Number of
+  shares
+  out-
+  standing (1) 952,832    957,572     959,511    966,421    975,568
+Shareholders'
+equity per
+share (1)          .97       1.36        1.61       1.86       2.19
+
+</TABLE>
+
+(1) Based upon weighted average number of shares outstanding.
+
+
+                                     F-13
+
+
+
+
+</TEXT>
+</DOCUMENT>
+</SEC-DOCUMENT>
+-----END PRIVACY-ENHANCED MESSAGE-----