CARLSBAD — Heralding what officials contend is the conversion of Specialized Systems Inc. into a low-tech retail business, the Carlsbad-based company on Tuesday said it had received a contract to produce $4 million worth of specialty T-shirts over the next two years.
The contract with Van Nuys-based PMI Inc. of California, a promotional marketing company, signals Specialized Systems' entry into specialty T-shirt production. That segment of Specialized Systems' operations will eventually expand to 80% of annual revenues, Chairman and Chief Executive Stephen J. Nemergut said.
Art for the T-shirts will be printed at the company's Carlsbad plant and will be used for "nationwide promotional activities" by several large public corporations, Nemergut said. He declined to identify the companies because of a confidentiality clause in the agreement.
Since its founding in 1977, Specialized Systems has concentrated on telecommunications devices for the deaf, operations which have been overwhelmingly unprofitable.
Late last year, the company merged with Applied Marketing Inc. of Van Nuys, a drug and grocery products distributor headed by Nemergut, who happened to be a Specialized Systems founder.
Nemergut has since led a reorganization at Specialized Systems, selling its unprofitable office communications product line and planning to expand into specialty retail products. Nemergut also penned a merger agreement with a Hong Kong company that could mean an infusion of as much as $12 million into Specialized Systems over the next two years. The deal has yet to be completed, Nemergut said Tuesday.
As a result of the diversification, the company's revenues are expected to reach between $600,000 and $900,000 in 1985, Nemergut said, up from last year's $558,000.
Possible $5 Million in Sales
Sales next year could climb to $5 million, Nemergut said.
For the six months ended June 30, the company reported a loss of $65,100 on sales of $105,600, contrasted with a loss of $79,000 and sales of $138,300 in the comparable period last year.
In a related development, a $176,500 lawsuit filed by Specialized Systems that alleged fraud against a San Diego-based electronics firm will be heard by the American Arbitration Assn. in November.
The suit claims that Raytronics, which once was planning to merge with Specialized Systems, "constructively defrauded" the company. Raytronics President Dennis H. Berglund has said that there are "no practical legal grounds" for the allegations.