<PAGE>
<PAGE>
_________________________________________________________________
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the quarter ended Commission File Number
March 31, 1997 0-13154
FCS LABORATORIES, INC.
(Exact name of Registrant as specified in its charter)
Arizona 95-2568559
(State of Incorporation) (I.R.S Employer ID Number)
2330 S. Industrial Park Ave., Tempe, Arizona 85282
(Address of principal executive offices) (Zip Code)
(602) 966-7248
(Registrant's telephone number, including area code)
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.
(1) Yes /X/ No / /
(2) Yes /X/ No / /
Number of shares outstanding as of May 23, 1997:
5,841,145 shares of Common Stock, no par value.
_________________________________________________________________
_________________________________________________________________<PAGE>
<PAGE>
PART I, Financial Information
FCS LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, September 30,
1997 1996
------------ ------------
Current Assets:
Cash $ 5,003 $ 924
Accounts receivable, net of
allowance for doubtful
accounts of $25,384 and
$23,854, respectively 244,588 227,316
Inventories 557,248 626,786
Other current assets 11,235 18,516
------------ ------------
Total Current Assets 818,074 873,542
Property, Plant and Equipment, net 681,447 692,542
Deposits and Other Assets, net of
Amortization of $12,188 and
$9,990, respectively 27,327 26,218
------------ ------------
Total Assets $ 1,526,848 $ 1,592,302
============ ============
See accompanying notes to consolidated financial statements.
-2-<PAGE>
<PAGE>
PART I, Financial Information, continued
FCS LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
March 31, September 30,
1997 1996
------------ ------------
Current Liabilities:
Accounts payable $ 928,833 $ 860,572
Accrued expenses 889,602 859,022
Short-term debt including
current portion of long-
term debt 441,185 510,109
------------ ------------
Total Current Liabilities 2,259,620 2,229,703
------------ ------------
Other Liabilities:
Long-term debt 86,802 88,002
------------ ------------
Total Liabilities $ 2,346,422 $ 2,317,705
------------ ------------
Shareholders' Equity (Deficit)
Common Stock, no par value:
6,000,000 shares authorized;
5,836,145 shares issued and
outstanding (Note 3) 4,060,163 4,060,163
Accumulated deficit (4,879,737) (4,785,566)
Total Shareholders' Equity ------------ ------------
(Deficit) (819,574) ( 725,403)
Total Liabilities and Share- ------------ ------------
holders' Equity (Deficit) $ 1,526,848 $ 1,592,302
============ ============
See accompanying notes to consolidated financial statements.
-3-<PAGE>
<PAGE>
PART I, Financial Information, continued
FCS LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months
Ended March 31,
--------------------------
1997 1996
------------ -----------
Sales $ 1,013,564 $ 1,212,046
Cost of Sales 447,792 451,396
------------ ------------
Gross profit 565,772 760,650
Selling, General and
Administrative Expense 607,178 771,948
Depreciation and Amortization Expense 3,246 15,910
Interest Expense 49,519 96,913
Other Income --- 188,374
------------ ------------
Income (Loss) from Continuing
Operations (94,171) 64,253
Extraordinary Gain --- 1,221,604
------------ ------------
Net Income (Loss) $ ( 94,171) $ 1,285,857
============ ============
Net Income (Loss) per Share:
Income (Loss) from Continuing
Operations $ (.02) $ .01
Extraordinary Gain --- .21
------------ ------------
Net Income (Loss) per Share $ (.02) $ .22
============ ============
Weighted Average Shares Outstanding 5,836,145 5,823,577
See accompanying notes to consolidated financial statements.
-4-<PAGE>
<PAGE>
PART I, Financial Information, continued
FCS LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months
Ended March 31,
--------------------------
1997 1996
------------ -----------
Sales $ 535,222 $ 574,909
Cost of Sales 222,989 192,139
------------ ------------
Gross profit 312,233 382,770
Selling, General and
Administrative Expense 321,974 379,007
Depreciation and Amortization Expense 1,623 7,910
Interest Expense 24,540 46,593
Other Income --- 188,374
------------ ------------
Income (Loss) from Continuing
Operations ( 35,904) 137,634
Extraordinary Gain --- 1,221,604
------------ ------------
Net Income (Loss) $ ( 35,904) $ 1,359,238
============ ============
Net Income (Loss) per Share:
Income (Loss) from Continuing
Operations $ (.01) $ .02
Extraordinary Gain --- .21
------------ ------------
Net Income (Loss) per Share $ (.01) $ .23
============ ============
Weighted Average Shares Outstanding 5,836,145 5,836,145
See accompanying notes to consolidated financial statements.
-5-<PAGE>
<PAGE>
PART I, Financial Information, continued
FCS LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock
------------------------
Accumulated
Shares Amount Deficit
--------- ------------ ------------
Balance at
September 30,
1996 5,836,145 $ 3,970,610 $(4,785,566)
Net income for
the period --- --- (94,171)
Balance at
March 31, --------- ----------- -----------
1997 5,836,145 $ 3,970,610 $(4,879,737)
========= =========== ===========
Shares to
be issued
(Note 3) 250,000 89,553 ---
Adjusted Balance
at March 31, --------- ----------- -----------
1997 6,086,145 $ 4,060,163 $(4,879,737)
========= =========== ===========
See accompanying notes to consolidated financial statements.
-6-<PAGE>
<PAGE>
PART I, Financial Information, continued
FCS LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months
Ended March 31,
---------------------------
1997 1996
------------ -----------
Cash Flows from Operating Activities:
Net income (loss) $ ( 94,171) $ 1,285,857
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Extraordinary gain on debt
accommodation --- (1,221,604)
Sale of portion of business --- (626,842)
Valuation reserve on
French assets --- 342,810
Expense the reserve for
currency exchange --- 95,658
Depreciation and amortization 16,612 26,985
Effect of changes in foreign
currency exchange rates --- (144)
Increase of common stock in lieu
of cash payments --- 99,553
Provision for losses on
accounts receivable 8,100 8,400
Changes in assets and liabilities:
Decrease (increase) in
accounts receivable (25,372) 40,050
Decrease (increase) in
inventory 69,538 (7,945)
Decrease in other current
assets 7,281 4,318
Decrease (increase) in
other assets (3,306) 11,159
Increase (decrease) in accounts
payable and accrued expenses 98,841 (244,672)
------------ ------------
Total adjustments 171,694 (1,472,274)
Net cash provided by ------------ ------------
(used in) operating activities 77,523 (186,417)
-continued-
-7-<PAGE>
<PAGE>
PART I, Financial Information, continued
FCS LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Six Months
Ended March 31,
---------------------------
1997 1996
------------ ------------
Cash Flows from Investing Activities:
Sale of portion of business $ --- $ 626,842
Purchases of property, plant and
equipment (3,320) ( 542)
Net cash provided by (used in) ----------- ------------
investing activities (3,320) 626,300
Cash Flows from Financing Activities:
Net repayment of short-term
revolving debt (37,301) (122,404)
Retirement of short-term debt --- (200,000)
Proceeds from issuance of
long-term debt --- 100,000
Payments on long-term debt and
installment obligations (32,823) (54,142)
Net cash used in ----------- ------------
financing activities (70,124) (276,546)
Effect of Exchange Rate
Changes on Cash --- (141)
------------ ------------
Increase in Cash 4,079 163,196
Cash at Beginning of
Six month Period 924 6,106
Cash at End of ------------ ------------
Six Month Period $ 5,003 $ 169,302
============ ============
See accompanying notes to consolidated financial statements.
-8- <PAGE>
<PAGE>
PART I, Financial Information, continued
FCS LABORATORIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1: BASIS OF PRESENTATION
The condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to Rules and
Regulations of the Securities and Exchange Commission. Certain
information normally included in footnote disclosure in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations. All adjustments necessary to assure
a fair statement of the results have been recorded and such
adjustments are of a normal recurring nature. The Company
believes the disclosure on the included condensed statements and
footnotes is adequate and that the information taken as a whole
is not misleading.
NOTE 2: INVENTORIES
The components of inventories are as follows:
March 31, September 30,
1997 1996
------------ -------------
Raw material $ 27,535 $ 52,406
Work in process 529,713 574,380
------------ ------------
Total $ 557,248 $ 626,786
============ ============
NOTE 3: COMMON STOCK
At March 31, 1997, there were 5,836,145 shares of common
stock issued and outstanding. An additional 250,000 shares will
be issued upon approval by the shareholders of an increase in the
number of shares authorized.
-9-<PAGE>
<PAGE>
PART I, Financial Information, continued
FCS LABORATORIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
FIRST SIX MONTHS RESULTS OF OPERATIONS
Sales
During the first six months of fiscal 1997 which ended March
31, 1997, sales decreased $198,482 or 16.4 percent below the same
period of the prior year. The decrease was primarily due to a
change in channels of distribution for its "retail" domestic
animal health product line.
Approximately $62,715 of this sales decline was due to a
decline of products and services for humans, due in large part to
extensive staffing reductions, discussed in more detail below
under "Operating Expenses." Also the restrictive insurance
reimbursement policies of major insurance companies adopted
several years ago, while now in the process of reversal, still
impact sales negatively. The new generation of antihistamines
launched by major pharmaceutical companies in the same time frame
as the reimbursement policies noted above combined with those
policies to exacerbate the decline. As allergy testing becomes
more routine and less specialized, many physicians are now
sending samples to their own local laboratories for testing, thus
further compounding the problem. Physician customers are
increasingly resistant to splitting allergy samples from other
serum samples sent to the local laboratory for testing. The
Company expects to use existing resources to target new potential
allergy customers in an attempt to minimize this negative sales
impact.
In the field of animal health, the Company has serviced in
parallel both the veterinarian, through the provision of
services, as well as the veterinarian's local laboratory, through
the sale of diagnostic kit products. The Company made this
strategic decision so that, to the extent the resistance to
sample splitting becomes a factor in the veterinary field, any
negative impact would be minimized because of its parallel
activities of both performing testing services in its own testing
laboratory, as well as selling kits to other laboratories.
More recently the Company decided to in fact put its primary
emphasis on diagnostic test kits in the field of animal health.
As a result, the Company developed and since 1992 has
manufactured and distributed a test strip for use in the
veterinarian's office for screening canine patients suspected of
having allergies. In 1993 the Company completed development of a
-10-<PAGE>
<PAGE>
PART I, Financial Information, continued
FCS LABORATORIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations, continued
FIRST SIX MONTHS RESULTS OF OPERATIONS, continued
test kit for allergen-specific IgE in canine serum for use in
reference laboratories. In 1994, this was superseded by a faster
test which also included a test for allergen-specific IgG, a
second substance relevant in the diagnosis of allergy. In
addition, in 1994 the Company acquired the rights to a test for a
molecule critical to proper blood coagulation processes, and
began manufacturing and distributing test kits and performing the
test in its own laboratory. Also late in 1994 the Company
obtained distribution rights to and launched a kit for the
detection of dermatophytes in dogs, cats, and horses and began
manufacturing and distributing a series of test kits for horses.
The Company decided to sell most of its "retail" animal
health activities and during March, 1996, the Company sold to an
independent third party, that portion of its business relating to
the provision of canine allergy testing services and
immunotherapy treatment products directly to veterinarians. That
portion of FCS's business involving the sale of diagnostic kits
to other laboratories that provide such testing services and the
sale of immunotherapy treatment to such laboratories and
distributors of such products was not impacted by the
transaction. The buyer also agreed to purchase its requirements
of the test kits necessary to provide such services and of
immunotherapy treatment products from FCS for a period of four
years. The buyer must purchase $168,000 of products from the
Company each quarter.
During the period, sales of products and services for
animals decreased $135,767 or 21.6 percent. Although unit sales
volume of products and services increased, this was more than
offset by a decrease in sales dollars due to the changes in
channels of distribution noted above, the sales to veterinarians
having been replaced since the date of the transaction by sales
to the buyer at a transfer price lower than that price previously
charged veterinarians. The buyer has greater resources than the
Company and thus in future periods the impact on sales should be
positive.
Sales of test kits and other products for animals sold
abroad or through other laboratories other than the buyer
referenced above increased slightly compared to the prior
-11-<PAGE>
<PAGE>
PART I, Financial Information, continued
FCS LABORATORIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations, continued
FIRST SIX MONTHS RESULTS OF OPERATIONS, continued
year. Because of the Company's limited resources, it was
determined that the Company could not continue to pursue
international distribution of its products without assistance.
Thus during 1995 the responsibility for all international
distribution of animal healthcare products was transferred to DMS
Laboratories. The transfer prices to DMS are from 27 percent to
38 percent below the Company's price to domestic distributors or
customers. These discounts reduced the dollars of sales below
the level that would otherwise have been reported, reducing sales
in dollars of the veterinary products as well as increasing the
cost of sales percentage. With the introduction of the new
products described earlier, the Company anticipates continued
growth in worldwide sales of kits as well as sales of testing
services and treatment products to veterinarians in the U.S.
Cost of Sales
Cost of sales decreased $3,604 below the year earlier level
and cost of sales as a percentage of sales was 44.2 percent,
compared to 37.2 percent reported in the prior year period. The
increase in percentage was entirely due to the change in sale
prices to the domestic distributor noted above.
Operating Expenses
Operating expenses were reduced $224,828 from the prior
year. Selling, general and administrative expenses were
decreased by $164,770 or 21.3 percent below the year-earlier
levels. Late in 1995 the Company implemented major staffing
reductions, and additional reductions were implemented upon the
sale of part of its retail animal health activities. These
reductions may impact the Company's ability to promptly complete
its plan of transition to a predominantly animal healthcare
business from a predominantly human health business, from a
predominantly service business to a predominantly product
business and to expand its technical base beyond allergy and
related diseases. Interest expense was reduced $47,394 or 48.9
percent due to lower debt levels.
Other Activities
As noted earlier, the Company sold a portion of its business
during the month of March, 1996. As consideration for the sale,
FCS received $500,000 and $250,000 in unconditional and
-12-<PAGE>
<PAGE>
PART I, Financial Information, continued
FCS LABORATORIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations, continued
FIRST SIX MONTHS RESULTS OF OPERATIONS, continued
assignable promissory notes of the buyer. After sale of the
notes at a discount, and closing costs on the transactions, the
Company reported other income of $626,842 in the period from this
transaction.
The Company decided in January 1996 to discontinue all
operations in France and to cease making payments to creditors
under its reorganization plan. As a result, Iatric SA, one of
the Company's subsidiaries in France, received notification dated
February 15, 1996 that it had been liquidated by order of the
French bankruptcy court. The other three French subsidiaries
were not subject to the liquidation order. The Company recorded
a reserve of $342,810 which equals the carrying value of the
assets in excess of the liabilities of its subsidiaries in
France. Because all operations utilizing foreign currencies have
been reserved, the cumulative foreign currency translation
adjustment was liquidated, resulting in a $95,658 write off. The
reserve and the liquidation of the cumulative foreign currency
translation adjustment totaled $438,468 and this amount is
reported in the financial statements partially offsetting the
other income from the sale of a portion of its retail animal
health activities. The Company will continue to own certain
assets in France, primarily a building and land. If in the
future these assets are able to be sold, a gain will be recorded
at that time.
The Company also had loans from CEPME, a French bank. The
proceeds from these loans were used to fund the launch of the
French operations in 1985 and 1986. In March 1996, utilizing
funds from the sale described earlier, the Company and CEPME
reached an agreement to make a one-time payment of $79,177 in
full satisfaction of $601,349, including accrued interest of
$158,540 owed to CEPME. This resulted in an extraordinary gain
of $522,172.
In addition, utilizing the funds from the sale discussed
earlier, the Company reached an accommodation with Swiss Bank
Corporation in which the bank accepted $100,000 in cash and
$100,000 due in December 1998 in full satisfaction of $700,582 of
principal and accrued interest. The note is non-interest bearing
-13-<PAGE>
<PAGE>
PART I, Financial Information, continued
FCS LABORATORIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations, continued
FIRST SIX MONTHS RESULTS OF OPERATIONS, continued
and recorded in the balance sheet discounted for interest at 9
percent. The extraordinary gain resulting from this transaction
equaled $500,582. Also, several providers of materials and
services agreed to a payment in the amount of $23,369 in full
satisfaction of $222,218 of amounts owed resulting in an
extraordinary gain of $198,850.
Other income of $188,374 is comprised of the $626,842 gain
on sale of a portion of its retail animal health activities,
offset by the $342,810 reserves in France and the liquidation of
the cumulative foreign currency translation adjustment in the
amount of $95,658. The extraordinary gains totaling $1,221,604
are comprised of the debt accommodations with CEMPE ($522,172),
Swiss Bank Corporation ($500,582) and several providers of
materials and services ($198,850). The total of the other income
and extraordinary gains is $1,409,978.
Net Income (Loss)
These factors outlined above resulted in a net loss of
$94,171 in the current period compared to a net income of
$1,285,857 in the year-earlier period.
SECOND QUARTER RESULTS OF OPERATIONS
During the quarter, sales decreased $39,687 or 6.9 percent.
Sales of products and services for humans decreased $37,562 or
13.2 percent due to the reasons discussed earlier. Sales to the
veterinary marketplace were substantially unchanged from the
prior period with decreases resulting from the changes in
channels of distribution offset by an increase in unit sales
volume.
Before the gains on the special transactions discussed
above, losses from operations were reduced from $50,740 during
the second quarter of 1996 to $35,904 in the current quarter.
Thus the Company reported a net loss in the quarter of
$35,904. Due to the special transactions discussed earlier, the
Company reported in the prior year period other income of
$188,374 and extraordinary gains of $1,221,604, resulting in net
income of $1,359,238.
-14-<PAGE>
<PAGE>
PART I, Financial Information, continued
FCS LABORATORIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations, continued
LIQUIDITY AND CAPITAL RESOURCES
During the six months ending March 31, 1997, funds were
provided by a decrease in inventories and an increase in accounts
payable and accrued expenses. These funds were used to reduce
debt levels and to provide working capital to fund a temporary
increase in accounts receivable. During the same period of the
prior year, funds were provided by the sale of a portion of the
Company's veterinary business. These funds were used to make
payments on accounts payable and accrued expenses, to reduce its
bank debt, and to reach agreement with its foreign banks and
suppliers on discounted payment of amounts owed.
At March 31, 1997 current assets equaled $818,074, current
liabilities equaled $2,259,620 and the current ratio equaled .36.
The Company's total liabilities exceeded total assets by
$819,574.
Management believes that the Company's future success is
dependent upon permanently reversing the sales decline and
increasing sales through the launch of new products and through
the use of new distribution channels and/or raising or generating
additional capital. The Company is aggressively pursuing new
product opportunities within the cash constraints imposed by the
present financial situation of the Company. In addition, the
Company is actively pursuing both debt and equity capital.
However, there can be no assurance of the success of either of
these programs.
The Company had available from Bank of America lines of
credit for working capital purposes, subject to certain
restrictions based upon the amounts of accounts receivable which
secure such borrowing. As of March 31, 1997, the Company had
borrowed $152,382 under the line of credit and had an additional
$13,230 available. In addition, the Company has $131,982 of term
loans from Bank of America. The agreement, which covers both the
credit line and term loans, will expire October 31, 1997.
During the fiscal year, certain of the financial ratio
covenants in the agreement with Bank of America were not met by
the Company. The Company expects that it will continue to be out
of compliance with certain financial covenants until a new loan
agreement is executed.
-15-<PAGE>
<PAGE>
PART I, Financial Information, continued
FCS LABORATORIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations, continued
LIQUIDITY AND CAPITAL RESOURCES, continued
The Company also has a loan from M&I Thunderbird Bank which
is secured by land and buildings in Arizona. The loan, which
totals $92,689 becomes due in its entirety in July 1997.
All borrowings from these banks will soon be due and
payable. The outstanding amounts total $377,053. The Company
does not possess the financial resources to repay these amounts
at the present time and has made periodic arrangements to extend
such loan agreements in the past. The Company will attempt to
continue to reach periodic arrangements.
-16-<PAGE>
<PAGE>
PART II, Other Information
FCS LABORATORIES, INC. AND SUBSIDIARIES
Item 5. Other Information
The United States Food & Drug Admnistration (FDA) has
recently implemented a new level of regulation for companies
manufacturing so-called "allergenic extracts," that is
immunotherapy, for human use. The Company has advised the FDA
that it strongly supports this decision and is of the opinion
that allergenic extracts should be produced to the standards of
pharmaceutical products, packaged like pharmaceutical products
and priced like pharmaceutical products. It has urged the entire
industry to support this decision.
The Company is one of the first to be asked to achieve this
level of control. In order to do this expeditiously, the Company
has decided, after meeting with the FDA and reviewing these
requirements in detail, to accept a temporary license suspension
while it implements changes to its procedures, upgrades certain
personnel and, perhaps, modifies certain aspects of its
facilities. The Company is not recalling any products previously
sold. The Company has arranged to purchase from another
manufacturer human immunotherapy on an interim basis so as to
maintain its program of an integrated Allergy Management System
of testing and treatment. This arrangement will impact gross
profit to a yet undetermined degree during this interim period.
Production of animal health products is not impacted.
The Company is also in the process of refinancing the
mortgage on its land and buildings. This, if completed, will
assist the Company in paying certain overdue taxes, upgrading the
GMP's of its production discussed above, and accelerating
Research and Development on certain new products. As part of the
refinancing process, the Company received an appraisal, by an
appraiser chosen by a potential lender, of approximately $1
million on its land and buildings. These assets are currently
carried on its balance sheet for a net value of approximately
$500,000.
-17-<PAGE>
<PAGE>
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 authorized officers.
FCS, Laboratories, Inc.
/S/ Nicholas A. Gallo, III
Nicholas A. Gallo, III
Chairman and member of
the Board of Directors
and President
/S/ Richard C. Mayo
Richard C. Mayo
Treasurer and
Chief Financial Officer
and Director
Date: May 30, 1997
-18-<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The condensed financial statements included herein have been prepared by
the Company without audit. Certain information normally included in
footnote disclosure in financial statements prepared in accordance with
GAAP have been condensed or omitted pursuant to the Rules and Regulations
of the Securities and Exchange Commission.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 5003
<SECURITIES> 0
<RECEIVABLES> 244588
<ALLOWANCES> 25384
<INVENTORY> 557248
<CURRENT-ASSETS> 818074
<PP&E> 2942257
<DEPRECIATION> 2260810
<TOTAL-ASSETS> 1526848
<CURRENT-LIABILITIES> 2259620
<BONDS> 86802
0
0
<COMMON> 4060163
<OTHER-SE> (4879737)
<TOTAL-LIABILITY-AND-EQUITY> 1526848
<SALES> 1013564
<TOTAL-REVENUES> 1013564
<CGS> 447792
<TOTAL-COSTS> 447792
<OTHER-EXPENSES> 659943
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49519
<INCOME-PRETAX> (94171)
<INCOME-TAX> 0
<INCOME-CONTINUING> (94171)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (94171)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
