<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the quarter ended April 30, 1997 Commission File Number 0-8193
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ------------------------
DAEDALUS ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 38-1873250
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. BOX 1869
-------------
ANN ARBOR, MICHIGAN 48106 (313) 769-5649
------------------------- --------------
(Address of principal executive offices) (Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities 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 subject to such
filing requirements for the past 90 days.
Yes (X) No ( )
Number of shares outstanding of common stock, $.01 par value, as of June 6,
1997
534,024 shares
<PAGE> 2
Page 2 FORM 10-Q
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DAEDALUS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - UNAUDITED
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
April 30, April 30,
- -------------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING REVENUE
Standard products $ 1,471,041 $ 1,333,573 $ 454,530 $ 742,007
Product development 703,294 203,391 215,114 127,659
- -------------------------------------------------------------------------------------------------------------------
2,174,335 1,536,964 669,644 869,666
Other Income 9,737 1,561 3,875 128
- -------------------------------------------------------------------------------------------------------------------
2,184,072 1,538,525 673,519 869,794
COST AND EXPENSES
Cost of revenue - standard products 848,721 911,626 331,392 323,676
Cost of revenue - product development 566,464 206,341 139,211 113,739
Research and development 93,781 408,959 22,132 144,006
Selling and administrative 707,375 753,575 230,153 197,643
Interest 49,423 55,998 14,053 20,062
- -------------------------------------------------------------------------------------------------------------------
2,265,764 2,336,499 736,941 799,126
- -------------------------------------------------------------------------------------------------------------------
INCOME (LOSS)
BEFORE INCOME TAXES (81,692) (797,974) (63,422) 70,668
CREDIT FOR INCOME TAXES - NOTE C 0 (17,000) 0 0
- -------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (81,692) $ (780,974) $ (63,422) $ 70,668
- -----------------------------------------------====================================================================
NET EARNINGS (LOSS) PER SHARE $ (0.15) $ (1.50) $ (0.12) $ 0.13
- -----------------------------------------------====================================================================
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE> 3
Page 3 FORM 10-Q
DAEDALUS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, July 31,
1997 1996
(unaudited)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS - Note D
CURRENT ASSETS
Cash and cash equivalents $ 57,455 $ 56,768
Accounts receivable, less allowance of $2,500 76,175 259,079
Unbilled accounts receivable 868,920 546,024
Inventories - Note B 535,744 640,213
Other current assets 32,005 7,829
- ------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,570,299 1,509,913
PROPERTY AND EQUIPMENT
Land 177,131 177,131
Building 1,433,898 1,433,898
Machinery and equipment 831,767 817,640
Special equipment 433,893 397,951
- ------------------------------------------------------------------------------------------------------------
2,876,689 2,826,620
Less accumulated depreciation (1,709,614) (1,606,526)
- ------------------------------------------------------------------------------------------------------------
1,167,075 1,220,094
OTHER ASSETS 1,668 39,446
- ------------------------------------------------------------------------------------------------------------
$ 2,739,042 $ 2,769,453
- ---------------------------------------------------------------------------=================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable to bank - Note D $ 557,000 $ 689,000
Accounts payable 122,981 184,524
Accrued compensation and related costs 95,428 97,936
Accrued commissions 119,939 1,129
Customer deposits 85,889
Reserve for product warranties 48,083 30,500
Other accrued liabilities 69,149 32,228
Current portion of mortgage - Note D 247,018 261,261
- ------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,345,487 1,296,578
STOCKHOLDERS' EQUITY
Common stock, $.01 par value
Authorized--2,000,000 shares 5,340 5,329
Issued and outstanding--534,024 shares and 532,924 shares at
April 30, 1997 and July 31, 1996, respectively
Additional paid-in capital 1,164,700 1,162,339
Retained earnings 223,515 305,207
- ------------------------------------------------------------------------------------------------------------
1,393,555 1,472,875
- ------------------------------------------------------------------------------------------------------------
$ 2,739,042 $ 2,769,453
- ---------------------------------------------------------------------------=================================
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE> 4
Page 4 FORM 10-Q
DAEDALUS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
April 30,
1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (81,692) $ (780,974)
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation 103,088 140,756
Amortization of software 37,778 51,211
Net book value of special equipment sold 138,726 152,450
Increase in deferred tax asset (17,000)
Decrease (increase) in accounts receivable (139,992) 728,001
Decrease (increase) in inventory 104,469 (11,227)
Decrease (increase) in other assets (24,176) 155,707
Increase (decrease) in accounts payable and accrued expenses 109,263 (350,786)
Increase in customer deposits 85,889 8,890
- -----------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATING ACTIVITIES 333,353 77,028
INVESTING ACTIVITIES
Purchase of property and equipment (188,795) (72,369)
- -----------------------------------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (188,795) (72,369)
FINANCING ACTIVITIES
Proceeds from revolving line of credit 1,318,000 1,597,749
Payments on revolving line of credit (1,450,000) (1,647,749)
Payments on long-term debt (14,243) (16,878)
Proceeds of stock issued pursuant to stock option and
stock purchase plan 2,372 49,388
- -----------------------------------------------------------------------------------------------------------------
CASH USED IN FINANCING ACTIVITIES (143,871) (17,490)
INCREASE (DECREASE) IN CASH 687 (12,831)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 56,768 76,797
- -----------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 57,455 $ 63,966
- -----------------------------------------------------------------------------====================================
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE> 5
Page 5 FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1997
NOTE A - BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) that are, in the opinion of management, necessary for a fair
presentation of the results of operations, financial position and cash flows
for the periods presented. The accompanying unaudited financial statements
have been prepared in accordance with the instructions to Form 10-Q and,
therefore, do not include all information necessary to be in conformity with
generally accepted accounting principles.
Reference is made to the Notes to Consolidated Financial Statements in the
Annual Report to Stockholders for the year ended July 31, 1996.
The results of operations for the nine months ended April 30, 1997 are not
necessarily indicative of the results to be expected for the full year.
Certain reclassifications were made to the July 31, 1996 financial statements
to conform with the classification used in the April 30, 1997 financial
statements.
NOTE B - INVENTORY
Inventory includes work-in-process of approximately $50,000 and $104,000 as of
April 30, 1997 and July 31, 1996, respectively. The remaining inventory
consists of parts and subassemblies, both purchased and manufactured, that can
be used in the manufacturing process or sold as spare parts.
NOTE C - INCOME TAXES
The Company estimates its provision for income taxes using its estimated annual
effective rate. . The Company has limited the recognition of income tax
benefit for its net operating loss carryforwards due to cumulative losses
realized in recent years. The valuation allowance for deferred taxes at April
30, 1997 is $420,000.
NOTE D - REVOLVING CREDIT
On April 30, 1997, the Company had a $1,550,000 line of credit with a bank,
with availability subject to a formula, bearing interest at one and one-half
percent above the bank's prime rate (effective rate of 9.75%). The formula is
$950,000 based on the value of the real estate, with the remaining available
borrowings based on 50% of the value of certain receivables specified in the
line of credit agreement. As of April 30, 1997, total availability was
$1,349,000 pursuant to the formula. The Company had an outstanding balance
under this line of credit agreement of
<PAGE> 6
Page 6 FORM 10-Q
approximately $557,000 at April 30, 1997 and an additional $238,000 of the line
of credit reserved for a standby letter of credit. This compares to a balance
of $689,000 under the prior line of credit agreement at July 31, 1996 and an
additional $258,000 reserved for a standby letter of credit.
The Company has classified its total mortgage liability as a current liability
since the line of credit is a secured master demand note. The line is secured
by substantially all of the Company's assets and does not include any financial
covenants.
NOTE E - EARNINGS PER SHARE
The computation of net earnings per share is based on the weighted average
number of shares of common stock outstanding during the nine and three month
periods ended April 30, 1997 and 1996. The weighted average number of shares
used in the computation was 533,278 and 519,144 for the nine months ended as of
April 30, 1997 and 1996, respectively, and 533,491 and 514,097 for the quarter
ended April 30, 1997 and 1996, respectively, all of which were issued and
outstanding. No adjustments were made to either net earnings or the number of
shares outstanding in calculating earnings per share as such adjustments would
have been antidilutive.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
The Company manufactures products for, and performs development projects in,
the field broadly described as "remote sensing". The principal products
manufactured by the Company are airborne imaging systems which are installed in
aircraft for acquisition of data on environmental parameters. A principal
application of the Company's remote sensing products has been the measurement
of environmental parameters in support of pollution control programs and
environmental impact studies.
The Company is also engaged in customer-funded projects for the development of
advanced equipment in the remote sensing field. Some of these projects may
lead to the incorporation of newly developed technology into existing or future
product lines.
These two portions of the business are conducted by the same pool of personnel
using the same equipment and operating space and constitute a single industry
segment. The margins associated with these two portions of the business are
different, with standard products generally having higher margins than
customer-funded development projects. The Company receives the majority of its
revenue from a small number of relatively large contracts. Standard product
contracts are generally of higher dollar value than customer-funded product
development contracts, with each contract representing a substantial portion of
total revenue each year. Therefore, the timing of the receipt of a standard
product sales contract as well as the related manufacturing endeavor can have a
material impact on a quarter-to-quarter or year-to-year comparison of the
Company's results of operations. Most standard product sales contracts and
some customer-funded product
<PAGE> 7
Page 7 FORM 10-Q
development contracts are also accompanied by a significant deposit.
Therefore, the timing of the contract receipt can have a material impact on the
Company's cash flow.
The Company incurred a loss of $63,000 in the third quarter and $82,000 in the
first nine months of fiscal 1997. The losses in the current fiscal year and
in the three preceding fiscal years have caused the Company to experience
liquidity problems and its bank line of credit is being utilized to maintain
operations. However, the Company received a substantial amount of new business
in the last five quarters which has allowed it to reduce the size of its
losses during that period of time and to reduce outstanding amounts borrowed
under its line of credit. The Company's short-term viability and operating
results are dependent on its ability to acquire additional equity capital or
maintain the current levels of new business and cash flow. See "Business
Development - New Orders and Backlog" and "Liquidity and Sources of Capital".
The Company's long-term viability is dependent upon its ability to successfully
implement its Growth Plan and attain consistent profitability. See "Business
Development - Growth Plan.
OPERATING REVENUE
Standard product revenue for the nine month period ended April 30, 1997
increased from the comparable period of fiscal 1996 due to the recognition of
revenue on a new standard product contract for $1,189,000 received in the first
quarter of fiscal 1997 and on a standard product order from NASA for $789,000
received in the second quarter of fiscal 1997. Standard product revenue for the
three month period ended April 30, 1997 decreased from the comparable period of
fiscal 1996 due to the low level of backlog along with the low level of new
orders received in the third quarter of fiscal 1997. Product development
revenue increased in the three and nine month periods of fiscal 1997 from the
comparable periods of fiscal 1996 due to the Company's recognition of revenue
on two product development contracts received in late fiscal 1996.
The level of the Company's revenues and profits has historically fluctuated
from quarter-to- quarter and from year-to-year as the majority of its revenue
is derived from a small number of high dollar value contracts. Although
fluctuations are normal given the Company's reliance on a small number of high
value contracts for the majority of its revenue, the low level of standard
product orders received in the last three fiscal years is causing severe
liquidity problems. See "Business Development - New Orders and Backlog" and
"Liquidity and Sources of Capital".
DOMESTIC VS. INTERNATIONAL REVENUE
International contracts represented 53% and 73% of total revenue during the
first nine months of fiscal 1997 and 1996, respectively, and 54% and 70% of
total revenue during the third quarter of fiscal 1997 and 1996, respectively.
International revenue was slightly higher in absolute terms in the first nine
months of fiscal 1997 compared to the same period of fiscal 1996 primarily due
to the Company's recognition of revenue on international contracts received in
late fiscal 1996 and early fiscal 1997. International revenue decreased in
absolute terms in the third quarter of fiscal 1997 compared to the same period
in fiscal 1996 as a result of the low level of backlog along with the low level
of new orders received in the quarter. The increase in domestic operating
revenue during the nine and three month periods of fiscal 1997 from the same
periods in fiscal 1996 is due
<PAGE> 8
Page 8 FORM 10-Q
to the Company's recognition of revenue on the NASA contract received in the
second quarter of fiscal 1997 and recognition of revenue on the two domestic
product development contracts received in late fiscal 1996.
Management expects a significant portion of the Company's revenue to be
generated from the international market in fiscal 1997 and future years. To
mitigate foreign currency transaction losses, international contracts are
denominated in U.S. dollars and large standard product contracts are generally
secured by irrevocable letters of credit. The Company also receives
substantial deposits on many large contracts with international customers.
BUSINESS DEVELOPMENT
Growth Plan
One challenge facing the Company is to develop additional markets that will
allow future growth in revenues and profits. In early fiscal 1995, management
developed a three-pronged growth plan to add revenue and profits to the
Company's current core business. Since that time, management has concentrated
its efforts on the two areas of the plan with the most near-term potential.
The first growth area involves the use and sale of airborne digital cameras
(ADC) developed by the Company for the mapping of infrastructure within narrow
corridors. Examples of the types of infrastructure that would be mapped with
such a system include gas pipelines, electrical distribution systems, railroads
and highways. The Company is currently developing an enhanced version of the
ADC and is investigating various image processing systems that may be bundled
with the ADC for delivery to its customers and for use by the Company in
performing services for customers. The Company completed three contracts in
fiscal 1996 for which it utilized the ADC. The Company believes that there is
a sizable market for data that can be produced with its current ADC and
believes that the completion of the enhanced ADC will give the Company added
capabilities, increasing the size of the potential market. In the fourth
quarter of fiscal 1996, the Company entered into a marketing alliance with a
major company which provides infrastructure maintenance services to electric
and gas utilities and railroads in the United States and Canada. Although the
Company has not received any such contracts in fiscal 1997, the marketing by
the Company's partner in the first nine months of fiscal 1997 has generated
market interest which the Company hopes will generate orders before the end of
the year. The Company is also continuing to pursue various alternatives to
obtain the additional funding necessary to bring these services to market.
However, there can be no assurance that such funding will be obtained. See
"Liquidity and Sources of Capital".
The other growth area involves performing domestic environmental surveys to
provide a better applications market for its airborne multispectral scanners.
In order to exploit this market, the Company must perform specific applications
and show the results to be reliable and cost-effective. To date, the Company
has completed several contracts in this area and continues to pursue other
demonstration projects.
<PAGE> 9
Page 9 FORM 10-Q
Although implementation of the growth plan began in fiscal 1995, material
revenue impact is not expected until fiscal 1998 at the earliest. These
strategies are intended to reduce fluctuations in the Company's revenue and
earnings and enhance the Company's profitability and stockholder value.
However, the Company's implementation of these growth initiatives has been
slowed by the small size of the Company's staff, by its current financial
position and by the lack of solid market information caused by the Company's
limited resources. The Company is seeking partners and additional financing to
help bring these services into the market more quickly. See "Liquidity and
Sources of Capital".
New Orders and Backlog
In the nine months ended April 30, 1997, the Company received orders in the
amount of approximately $2,250,000 as compared to approximately $2,410,000 in
the comparable period of fiscal 1996. Approximately $2,242,000 of the bookings
received by the Company in the first nine months of fiscal 1997 were for
standard products, with the remainder for product development orders. The
Company's backlog at the end of the third quarter was approximately $1,085,000,
compared to approximately $1,452,000 at the end of the comparable period in
fiscal 1996. Approximately $873,000 of the April 30, 1997 backlog is for
standard products, with the majority of the balance being related to the two
Phase II Small Business Innovation Research (product development) contracts
awarded during fiscal 1996.
The Company is engaged in negotiations for several standard product orders
which have not yet been finalized. One of these contracts has encountered
export license delays, but management is hopeful that the issues causing the
delay will be settled before the end of the fiscal year. However, there can
be no assurance that these orders will be received. The Company has begun
production for some of these standard product orders and has costly
subcomponents for one of the potential orders in stock.
The Company's ability to retain its line of credit and continue operations
depends upon the receipt of additional significant orders during the remainder
of fiscal 1997 or early fiscal 1998, in addition to the orders already received
in fiscal 1997. Management is hopeful that such orders will be received
although no assurances can be given. See "Liquidity and Sources of Capital".
The results of operations for future periods are dependent upon the receipt and
timing of future orders and the success of management's growth strategy.
COST OF REVENUE
In the first nine months of fiscal 1997, cost of revenue as a percentage of
revenue decreased with respect to standard product revenue, product development
revenue and overall revenue as compared to the same period in fiscal 1996 due
primarily to economies of scale resulting from the higher revenues in fiscal
1997 and more efficient operations with a reduced workforce. In the third
quarter of fiscal 1997, cost of revenue increased as a percentage of revenue
for standard products and overall revenue compared to the same period in fiscal
1996 due to the recognition of increased labor costs for system testing and
training on the orders currently in backlog.
<PAGE> 10
Page 10 FORM 10-Q
The cost of revenue percentage for the remainder of fiscal 1997 will be
dependent upon the timing and mix of future contracts. See "Business
Development - New Orders and Backlog".
RESEARCH AND DEVELOPMENT
Research and development expense declined in the nine and three month periods
of fiscal 1997 as compared to the same periods one year earlier primarily due
to a significant portion of the ADC enhancements being completed in the first
nine months of fiscal 1996. The higher research and development expense in
the first nine months of fiscal 1996 was also due to the higher than normal
overhead rates which resulted from the Company operating significantly below
capacity.
SELLING AND ADMINISTRATIVE EXPENSE
Selling and administrative expense decreased in the nine month period of fiscal
1997 compared to the same period in fiscal 1996, primarily due to the Company's
fiscal 1996 third quarter staffing reductions. Selling and administrative
expense increased in the third quarter of fiscal 1997 compared to the same
period in fiscal 1996, primarily due to agents' commissions.
INTEREST
Interest expense was slightly lower in the nine and three months periods of
fiscal 1997 compared to the same periods in fiscal 1996 due principally to the
Company's reduced borrowings.
LIQUIDITY AND SOURCES OF CAPITAL
The Company's primary sources of liquidity were funds from operations and
borrowings under a secured line of credit. The Company's line of credit
provides for borrowings of up to $1,550,000, with an availability formula
allowing borrowings of up to $950,000 based on the value of the real estate,
with the remaining available borrowings based on 50% of the value of certain
receivables specified in the line of credit agreement. The line of credit is a
demand note which is secured by substantially all of the Company's assets and
contains no financial covenants. The interest rate on both the line of credit
and the related mortgage is at one and one-half percent above the bank's prime
rate.
As of April 30, 1997, borrowings under the line of credit formula were limited
to approximately $1,349,000 pursuant to the availability formula. At that
date, the Company had an outstanding balance of $557,000 under the line of
credit and an additional $238,000 of the line reserved for a standby letter of
credit. The mortgage continues to require the Company to make monthly payments
of $3,583 for both principal and interest and to make a balloon payment on
November 1, 2000.
The bank is permitted under the line of credit agreement to declare such
indebtedness due and payable at any time and is not obligated to make further
advances at any time. If the Company is unable to borrow amounts necessary to
fund its operations or is required by the bank to repay the line of credit, its
financial position would be materially and adversely affected and the Company
<PAGE> 11
Page 11 FORM 10-Q
may have no choice but to cease operations. Moreover, the Company must
continue to significantly increase its backlog during the remainder of fiscal
1997 and in fiscal 1998 in order to generate sufficient cash flow to sustain
its operations.
In order to provide additional working capital and retire current debt, the
Company is attempting to sell its building and lease back a portion of the
facility from the new owner. There can be no assurance that the building can
be sold at a price acceptable to the Company or that an acceptable lease-back
agreement can be negotiated. If the Company must relocate, management is
confident that a suitable facility can be found and that the Company's business
will not be materially disrupted. The sale of the building is expected to
result in the repayment of all currently outstanding indebtedness to the
Company's bank lender and the termination of the existing line of credit.
Management believes that a new line of credit supported by receivables and
other assets of the Company can be negotiated with the current bank lender, or
a substitute bank, which will be adequate to support the Company's working
capital needs, provided that the Company's backlog increases significantly over
the current level. The Company might also negotiate a line of credit secured
by the irrevocable letters of credit received on large orders from
international customers. However, any new line of credit is likely to permit
substantially less borrowing than the current line of credit. There can be no
assurance that the Company will be able to acquire a replacement line of credit
at all or that the level of borrowing permitted under any replacement line of
credit will be adequate for the Company's working capital needs. The Company
is also actively pursuing additional equity financing through discussions with
potential investors possessing related technological and/or marketing
capabilities that can help the Company develop new markets for its
infrastructure mapping capability using the ADC. However, there can be no
assurance that such financing can be obtained.
Working capital increased to $225,000 at April 30, 1997 from $213,000 at July
31, 1996, due primarily to increased receivables generated from the orders
received in the first nine months of fiscal 1997 offset by the reduction in
inventory due to the utilization of inventory parts for these orders. Funds
from billed receivable collections and from customer deposits were used for
payments on the line of credit.
Current liabilities increased in the first nine months of fiscal 1997 largely
due to the increase in accrued commissions related to the standard product
order received in the first quarter. Cash flow from operating activities was
$333,000 during the first nine months of fiscal 1997 as compared to $77,000 in
the comparable period of fiscal 1996, due primarily to the $139,000 sale of
special equipment, the $104,000 reduction of inventory, the $109,000 increase
in accounts payable and accrued expenses and the $86,000 increase in customer
deposits related to orders received during the period.
The Company expects to invest approximately $50,000 during the remainder of
fiscal 1997 for capital expenditures, primarily for equipment and software
relating to the Company's growth plan. Due to its current financial position,
the Company intends to reduce internal research and development expenses and to
keep marketing and other administrative costs to a minimum until its financial
condition improves significantly.
<PAGE> 12
Page 12 FORM 10-Q
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
PART II - OTHER INFORMATION
All items omitted are not applicable or the answers thereto are negative.
Item 6(a): Exhibits
Exhibit No. Description
------- --- -----------
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DAEDALUS ENTERPRISES, INC.
Date: June 6, 1997 by: /S/ THOMAS R. ORY
---------------- ---------------------------------------
Thomas R. Ory, President & CEO
(Duly Authorized Officer)
Date: June 6, 1997 by: /S/ JANE E. BARRETT
---------------- ---------------------------------------
Jane E. Barrett, Vice President-Finance
(Principal Financial & Accounting Officer)
<PAGE> 13
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
------- --- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> APR-30-1997
<CASH> 57,455
<SECURITIES> 0
<RECEIVABLES> 947,595
<ALLOWANCES> 2,500
<INVENTORY> 535,744
<CURRENT-ASSETS> 32,005
<PP&E> 2,876,689
<DEPRECIATION> 1,709,614
<TOTAL-ASSETS> 2,739,042
<CURRENT-LIABILITIES> 1,345,487
<BONDS> 0
0
0
<COMMON> 5,340
<OTHER-SE> 1,388,215
<TOTAL-LIABILITY-AND-EQUITY> 2,739,042
<SALES> 669,644
<TOTAL-REVENUES> 673,519
<CGS> 470,603
<TOTAL-COSTS> 470,603
<OTHER-EXPENSES> 252,285
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,053
<INCOME-PRETAX> (63,422)
<INCOME-TAX> 0
<INCOME-CONTINUING> (63,422)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (63,422)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
