<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X Quarterly report pursuant to Section 13 or 15 (d) of the Securities
- --- Exchange Act of 1934
For the quarterly period ended April 30, 1997.
Transition report pursuant to Section 13 or 15 (d) of the Securities
- --- Exchange Act of 1934
For the transition period from _______ to _______
Commission File Number 0-14443
WASTE TECHNOLOGY CORP.
- -------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 13-2842053
- -------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Incorporation
or Organization) Identification No.)
5400 Rio Grande Avenue
Jacksonville, Florida 32254
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(904) 355-5558
- -------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether 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, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
At May 31, 1997, Registrant had outstanding 2,431,551 shares of its
Common Stock.
Transitional small business disclosure format check one:
Yes No X
----- -----
1
<PAGE>
WASTE TECHNOLOGY CORP.
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
o Balance Sheets as of April 30, 1997 and October 31, 1997...........3
o Statements of Income for the three months..........................5
ended April 30, 1997 and 1996
o Statements of Changes in Stockholders' Equity......................7
for the period from October 31, 1995 to April 30, 1997
o Statements of Cash Flows for the three months......................8
ended April 30, 1997 and 1996
o Notes to Financial Statements.....................................10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS........................13
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
PART II. OTHER INFORMATION
o Signatures........................................................16
2
<PAGE>
WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
04/30/97 10/31/96
Unaudited
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $93,186 $140,000
Accounts receivable, net of allowance
for doubtful accounts of $91,000 1,379,312 1,410,956
Inventories 2,940,400 3,162,208
Prepaid expense and other current assets 6,229 43,208
Deferred income tax asset - -
Total current assets 4,419,127 4,756,372
Property, plant and equipment at cost 3,656,741 3,633,276
Less: accumulated depreciation 1,231,531 1,104,633
Net property, plant & equipment 2,425,210 2,528,643
Real estate held for sale - -
Other assets:
Loan to joint venture, including
accrued interest - -
Intangible assets, net 64,018 67,152
Other assets 16,593 18,049
Total other assets 80,611 85,201
TOTAL ASSETS $6,924,948 $7,370,216
</TABLE>
See accompanying notes
3
<PAGE>
WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
04/30/97 10/31/96
Unaudited
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Revolving promissory note $771,652 $531,652
Current maturities of long-term debt 610,319 663,842
Capital Lease Obligation 14,887 14,281
Accounts payable 1,028,355 1,031,224
Accrued liabilities 496,344 498,284
Customer deposits 378,850 683,324
Total current liabilities 3,300,407 3,422,607
Accrued legal fees 355,166 315,696
Long-term debt 193,892 210,324
Capital Lease Obligation, less current maturities 693,892 701,568
Minority interest in equity of subsidiary 505,035 509,369
Total liabilities 5,048,392 5,159,564
Stockholders' equity
Common stock, par value $.01
25,000,000 shares authorized;
2,763,314 shares issued 27,634 27,634
Preferred stock, par value $.0001,
10,000 shares authorized, none issued - -
Additional paid-in capital 6,066,356 6,066,356
Accumulated deficit (2,877,241) (2,588,935)
3,216,749 3,505,055
Less: Treasury stock, 331,763 shares at cost 419,306 419,306
Less: Note receivable from shareholders 920,887 875,097
Total stockholders' equity 1,876,556 2,210,652
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $6,924,948 $7,370,216
</TABLE>
See accompanying notes
4
<PAGE>
WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
Three months ended: 04/30/97 04/30/96
<S> <C> <C>
Net Sales $2,248,147 $3,951,750
Cost of Sales 1,867,171 3,086,156
---------- ----------
Gross Profit 380,976 865,594
Operating Expenses:
Selling 253,551 425,872
General and Administrative 396,329 526,833
---------- ----------
Total operating expenses 649,880 952,705
Operating Income (268,904) (87,111)
Other Income (Expenses):
Interest and Dividends 14,216 12,094
Interest Expense (51,847) (32,538)
Other Income 2,477 6,550
Other Expense - (8,208)
Net Gain on Disposal of Fixed Assets - 14,626
---------- ----------
Total Other Income (Expenses) (35,154) (7,476)
Less minority interest in income of
consolidated subsidiary (8,023) (9,000)
---------- ----------
Income before income taxes (296,035) (85,587)
Income Tax Provision (benefit)
Current 2,100 12,900
Deferred - -
NET INCOME ($298,135) ($98,487)
Earnings per share (0.12) (0.04)
Average number of shares and equivalent 2,431,551 2,431,551
</TABLE>
See accompanying notes
5
<PAGE>
WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
Six months ended: 04/30/97 04/30/96
<S> <C> <C>
Net Sales $5,648,121 $7,129,377
Cost of Sales 4,511,788 5,243,202
---------- ----------
Gross Profit 1,136,333 1,886,175
Operating Expenses:
Selling 501,803 774,146
General and Administrative 850,302 1,009,542
---------- ----------
Total operating expenses 1,352,105 1,783,688
Operating Income (215,772) 102,487
Other Income (Expenses):
Interest income 29,278 27,252
Interest Expense (95,445) (51,447)
Other Income 4,299 6,700
Other Expense - (8,208)
Net Gain on Disposal of Fixed Assets - 14,626
---------- ----------
Total Other Income (Expenses) (61,868) (11,077)
Less minority interest in income of
consolidated subsidiary (4,334) 4,000
---------- ----------
Income before income taxes (273,306) 87,410
Income tax provision (benefit)
Current 15,000 25,800
Deferred - (80,000)
NET INCOME ($288,306) $141,610
Earnings per share (0.12) 0.05
Average number of shares and equivalent 2,431,551 2,697,493
</TABLE>
6
<PAGE>
WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for six months ended April 30, 1997
<TABLE>
<CAPTION>
Common Stock
Par Value $.01 Authorized
25,000,000 Treasury Stock
NUMBER ADDITIONAL NUMBER TOTAL
OF SHARES PAR PAID-IN ACCUMULATED OF STOCKHOLDERS'
ISSUED VALUE CAPITAL DEFICIT SHARES COST OTHER EQUITY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
October 31,1995 2,763,314 $27,634 $6,069,995 ($2,027,894) $331,763 ($419,306) ($663,011) $2,987,418
Adjustment of Note
Receivable from
shareholder as a
reduction of
stockholder's equity - - - - - - (212,086) (212,086)
Dissolution of
non-operating
subsidiaries - - (3,639) 4,639 - - - 1,000
Net income (loss) - - - (565,680) - - - (565,680)
----------- ----------- ----------- ------------ ----------- ------------ ----------- -----------
Balance at
October 31,1996 2,763,314 $27,634 $6,066,356 ($2,588,935) $331,763 ($419,306) ($875,097) $2,210,652
Adjustment of Note
Receivable from
shareholder as a
reduction of
stockholder's equity - - - - - - (45,790) (45,790)
Net income (loss) - - - (288,306) - - - (288,306)
----------- ----------- ----------- ------------ ----------- ------------ ----------- -----------
Balance at
April 30, 1997 2,763,314 $27,634 $6,066,356 ($2,877,241) $331,763 ($419,306) ($920,887) $1,876,556
=========== =========== =========== ============ =========== ============ =========== ===========
</TABLE>
7
<PAGE>
WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For Three Months Ended
04/30/97 04/30/96
<S> <C> <C>
Cash flow from operating activities:
Net (loss)income ($298,135) ($98,487)
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Write-down on investment in joint venture 0 0
Loss on disposal of property held for sale 0 0
Gain from sale of equipment 0 0
Dissolution of non-operating subsidiaries 0 1,000
Depreciation and amortization 65,044 43,449
Provision for doubtful accounts 0 0
Insurance premiums paid on behalf of Company president 0 0
Minority interest in income of subsidiary (8,023) (9,000)
Deferred income taxes 0 0
Increase (decrease) from changes in:
Accounts receivable 796,603 (489,314)
Inventories (193,353) (202,427)
Prepaid expenses and other current assets (30,375) 33,374
Other assets (5,272) (14,774)
Accounts payable (347,877) 362,716
Accrued liabilities and legal fees 116,544 24,007
Customer deposits 138,712 (338,045)
Reserve for legal settlement 0 0
Total adjustments 532,003 (589,014)
Net cash (used in) provided by operating
activities 233,868 (687,501)
Cash flows from investing activities:
Increase in notes receivable from shareholders (32,892) 10,911
Purchase of property and equipment (18,974) (442,437)
Proceeds from sale of property held for resale 0 0
Proceeds from sale of equipment 0 0
Net cash used in investing activities (51,866) (431,526)
Cash flows from financing activities:
Proceeds from debt (100,000) 1,170,000
Issuance of common stock 0 0
Principal payments of long-term debt agreements &
capital leases (38,751) (47,500)
Cash flows used in financing activities (138,751) 1,122,500
Net (decrease) increase in cash 43,251 3,473
Cash at beginning of period 49,935 3,160
Cash at end of period 93,186 6,633
Supplemental schedule of disclosure of cash flow information
Cash paid during period for:
Interest 51,847 32,538
Income taxes 0 0
</TABLE>
8
<PAGE>
WASTE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For Six Months Ended
04/30/97 04/30/96
<S> <C> <C>
Cash flow from operating activities:
Net (loss)income ($288,306) $141,610
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Write-down on investment in joint venture 0 0
Loss on disposal of property held for sale 0 9,648
Gain from sale of equipment 0 0
Dissolution of non-operating subsidiaries 0 1,000
Depreciation and amortization 130,032 75,853
Provision for doubtful accounts 0 0
Insurance premiums paid on behalf of Company president 0 0
Minority interest in income of subsidiary (4,334) 4,000
Deferred income taxes 0 (80,000)
Increase (decrease) from changes in:
Accounts receivable 31,644 (497,443)
Inventories 221,808 (907,393)
Prepaid expenses and other current assets 36,979 (13,461)
Other assets 1,456 (8,194)
Accounts payable (2,869) 490,037
Accrued liabilities and legal fees 37,530 (43,112)
Customer deposits (304,474) (515,279)
Reserve for legal settlement 0 0
Total adjustments 147,772 (1,484,344)
Net cash (used in) provided by operating
activities (140,534) (1,342,734)
Cash flows from investing activities:
Increase in notes receivable from shareholders (45,790) 822
Purchase of property and equipment (23,465) (1,178,385)
Proceeds from sale of property held for resale 0 194,466
Proceeds from sale of equipment 0 0
Net cash used in investing activities (69,255) (983,097)
Cash flows from financing activities:
Proceeds from debt 240,000 1,420,000
Issuance of common stock 0 0
Principal payments of long-term debt agreements &
capital leases (77,025) (201,878)
Cash flows used in financing activities 162,975 1,218,122
Net (decrease) increase in cash (46,814) (1,107,709)
Cash at beginning of period 140,000 1,114,342
Cash at end of period 93,186 6,633
Supplemental schedule of disclosure of cash flow information
Cash paid during period for:
Interest 95,445 51,447
Income taxes 0 9,000
</TABLE>
9
<PAGE>
Waste Technology Corp. and Subsidiaries
Notes to Consolidated Financial Statements
1. Basis of Presentation:
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
three-month period ended April 30, 1997 are not necessarily indicative of
the results that may be expected the year ending October 31, 1997. For
further information, refer to the Company's Annual Report on form 10KSB/A
for the year ended October 31, 1996 and the Management Discussion included
in this form 10QSB.
2. Accounting Policies:
Stock-Based Compensation - In 1997, the Company will adopt SFAS No. 123,
"Accounting for Stock-Based Compensation." This standard establishes a
fair value method for accounting for stock-based compensation plans either
through recognition or disclosure. The Company intends to adopt this
standard by disclosing the pro forma net income and earnings per share
amounts assuming the fair value method was adopted on November 1, 1996.
The adoption of this standard will not impact its results of operations,
financial position or cash flows.
3. Earnings (Loss) Per Common and Common Equivalent Share:
Earnings (loss) per common and common equivalent share are calculated
using the weighted average number of common share outstanding during each
year and on the net additional number of shares which would be issuable
upon the exercise of stock options, assuming that the Company used the
proceeds received to purchase additional shares at market value in the
case of income. Options are not considered in loss periods as they would
be antidilutive.
4. Long-Term Debt:
Long-term debt consists of the following:
April 30, 1997 1996
Term note payable to bank at prime
rate plus, due in equal monthly
installments of $9,028, plus
interest through August 2002. $ 577,778 $323,333
10
<PAGE>
Notes to Consolidated Financial Statements, Continued
4. Long-Term Debt, Continued:
<TABLE>
<CAPTION>
April 30, 1997 1996
<S> <C> <C>
Revolving promissory note payable to bank in the
amount of $1,000,000. Interest at prime payable
monthly. All amounts borrowed are due in full
July 7, 1997. 771,652 700,000
Term note payable to Appling County, Georgia at
4.0 % due in equal monthly installments of $3,417,
including interest through July 2003. 226,433 -
--------- ---------
1,575,863 1,023,833
Amounts classified as current 1,381,971 895,000
--------- ---------
$ 193,892 $128,333
========= =========
</TABLE>
The bank's prime rate at April 30, 1997 was 8.25%. The carrying value of
the Company's debt approximates fair value.
The term note payable to bank and the revolving promissory note contain
certain covenants, whereby the Company must maintain, among other things,
specified levels of minimum net worth and working capital, and maintain a
specified ratio of maximum debt to worth, and current ratio. The term note
payable contains cross default provisions as related to the revolving
promissory note and other debt agreements.
The Company violated covenants related to minimum net worth and maximum
debt to worth. As of the date of issuance of these financial statements,
the lender has not waived these covenant violations nor has it demanded
repayment. Management plans to negotiate an extension of the revolving
debt and covenant requirements prior to the expiration date of the debt or
obtain alternative financing. However, no assurance an be given that the
Company will be successful. If the Company were unable to negotiate an
extension or obtain alternative financing and the lender called the debt,
management would be required to shut down and/or sell certain assets of
the Company. Management believes its available collateral to be sufficient
so as acceptable financing can be obtained.
The Company has pledged substantially all of its assets as collateral
under the term loan and revolving loan agreement.
11
<PAGE>
Notes to Consolidated Financial Statements, Continued
4. Long-Term Debt, Continued:
Contractual maturities are as follows:
Aggregate
Period ending April 30 Obligation
---------------------- ----------
1998 $ 912,526
1999 142,200
2000 143,580
2001 145,016
2002 146,511
Beyond 86,030
----------
$1,579,863
==========
5. Capital Lease:
During 1996, the International Press and Shear (IPS) subsidiary entered
into a lease agreement for its manufacturing facility, which has been
accounted for as a capital lease, as the ownership of the facility is
transferred to IPS when the lease obligation is satisfied. Lease payments
of $6,135 per month are based on a note with an interest rate of 8.25%.
Principal balance and accrued interest are due on the 15th anniversary
of the note.
12
<PAGE>
Notes to Consolidated Financial Statements, Continued
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations: Three Month Comparisons
For the second quarter of fiscal 1997 the Company had net sales of $2,248,147
as compared to $3,951,750 for the second quarter of 1996, a decrease of 43.1%.
The decrease in sales was caused by lower shipments at all operating units of
the Company and was directly related to continuing weakness in the corrugated
board and paper markets for recycled materials.
Consolidated net income was a loss in the second quarter of $298,135 versus a
loss of $98,487 in the same quarter in the prior year. Earnings per share was
$(.12) and $(.04) for the second quarter 1997 and 1996 respectively. The loss
in the second quarter was the result of the lower shipments mentioned above.
Due to the lower shipments experienced in fiscal 1997, the Company has taken
actions which have reduced controllable selling and administrative costs. For
the quarter ending April 30, 1997, selling expense and administration costs are
$172, 321, 40.5% and $130,504, 24.8% below the same quarter in the prior year
respectively.
Results of Operations: Six Month Comparisons
Net sales decreased from $7,129,377 in the first half of 1996 to $5,648,121 in
the first half of 1997, a decrease of 20.8%. All operating divisions of the
Company had lower shipments in the first half of 1997 versus the first half of
1996.
Net income for the first six months of 1997 was a loss of $288,306 versus a
profit of $141,610 in the corresponding period in 1996. The loss is primarily
the result of the lower shipments in 1997 versus 1996. For the year to date
results, the Company's Baxley, Georgia subsidiary, International Press and
Shear Corporation (IPS), was the cause of the overall loss for the period. The
losses incurred by the new subsidiary were the result of costs related to a
start-up operation and the continuing weakness in the corrugated board and
paper prices in the recycled products markets. Also, the first half results for
1996 included income of $80,000 due to the recording of a deferred tax asset
which was reversed in the fourth quarter of 1996. The deferred tax asset was
reversed due to the results of operations in 1996 and current short-term
expectations.
The IPS operations have been pared down to a level which is commensurate with
the current corrugated and paper recycling market conditions. This subsidiary
is now running efficiently and it is the objective of the Company to get IPS to
a profitable or near break-even level by the end of the fiscal 1997.
13
<PAGE>
Notes to Consolidated Financial Statements, Continued
Results of Operations: Six Month Comparisons, Continued:
The backlog as of May 31, 1997 was $3,670,000 as compared with $3,103,000 as of
May 31, 1996, an increase of 18.3%. Therefore, with this backlog, the second
half of fiscal 1997 is anticipated to show improved results over the first
half.
Financial Condition:
Net working capital decreased from $1,333,765 at October 31, 1996 to $1,118,720
at April 30, 1997. This decrease in working capital is primarily the result of
lower inventory and a reduction in customer deposits during the period.
The term note with SouthTrust Bank was renewed in August 1996, increased by
$375,167 and extended to August 2002. The original note balance of $418,333 at
October 31, 1996 was due in November 1997. Monthly payments on the original
note were $15,833 per month, plus interest at the prime rate + 1%. The new note
is due in equal monthly installments of $9,018, plus interest at the prime
rate. The entire balance of this term note was classified as a current
liability because the term loan has callable provisions relating to the
revolving note described below.
The revolving note payable to SouthTrust in the amount of $1,000,000 was
renewed in July 1996 at the prime rate. Interest is payable monthly and all
amounts borrowed are due in full on July 7, 1997. The balance due at January
31, 1997 was $871,652 and decreased to $771,652 at April 30, 1997. At April 30,
1997, the Company is in violation of the covenants of the loan agreement
related to minimum net worth and maximum debt to worth. As of the filing date,
the lender has not waived these covenant violations nor has it demanded
repayment. While no assurance can be given, management believes its available
collateral to be sufficient to allow the Company to renegotiate an extension of
the revolving debt and its covenant requirements prior to its expiration date
or obtain alternative financing. It is anticipated that the note will be
renewed in July 1997.
For the year ended October 31, 1996 and the quarter ended January 31, 1997 the
Company had negative cash flow from operations, but did have positive cash flow
from operations in the quarter ending April 30, 1997. Management has taken
actions to improve cash flows from operations primarily by reducing personnel
to a minimum level and cutting operating costs at the IPS subsidiary where
possible. Management anticipated that the IPS subsidiary will attain or exceed
the sales levels of 1996 and with the cost structure in place this subsidiary
should perform substantially better in 1997 than in 1996. However, if orders at
IPS are not sufficient to sustain a minimum cash outflow rate, management will
take further action as necessary to maintain the liquidity position of the
entire company.
14
<PAGE>
Notes to Consolidated Financial Statements, Continued
Financial Condition, Continued:
Our auditors, Coopers & Lybrand, have stated in the "Report of Independent
Accountants" to the shareholders of Waste Technology Corporation that there is
"substantial doubt" about the Company's ability to continue as a going concern.
While the Company understands why the accountants report had to include the
explanatory paragraph, (the absence of a loan default waiver), and though the
Company's Management and Board of Directors has substantial concern, it
believes that it has several viable options to continue as a going concern for
the following reasons:
1. The Company has the ability to take actions to reduce the operating and
carrying costs of its IPS subsidiary to a level which will not jeopardize
the liquidity of the company.
2. The Company violated covenants related to minimum net worth and maximum
debt to worth. As of the date of issuance of this report, the lender has
not waived these covenant violations nor has it demanded repayment.
Management plans to negotiate an extension of the revolving debt and
covenant requirements prior to the expiration date of the debt or obtain
alternative financing. However, no assurance can be given that the Company
will be successful. If the Company were unable to negotiate an extension
or obtain alternative financing and the lender called the debt, Management
would be required to shut-down and/or sell certain assets of the Company.
Management believes its available collateral to be sufficient so as
acceptable financing can be obtained.
The Company has no commitments for any material capital expenditures. Other
than as set forth above, there are no unusual or infrequent events or
transactions or significant economy changes which materially effect the amount
of reported income from continuing operations.
Inflation:
The costs of the Company and its subsidiaries are subject to the general
inflationary trends existing in the general economy. The Company believes that
expected pricing by its subsidiaries for balers will be able to include
sufficient increases to offset any increase in costs due to inflation.
15
<PAGE>
Notes to Consolidated Financial Statements, Continued
PART II-OTHER INFORMATION
None.
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
undersigned hereto duly authorized.
Dated: June 13, 1997 WASTE TECHNOLOGY CORPORATION
BY: /s/Ted C. Flood
-------------------------------
Ted C. Flood, President
(Chief Executive Officer)
BY: /s/William E. Nielsen
-------------------------------
William E. Nielsen
Chief Financial Officer
(Principal Financial and
Accounting Officer)
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted
from the financial statements and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<CASH> 93,186
<SECURITIES> 0
<RECEIVABLES> 1,470,312
<ALLOWANCES> 91,000
<INVENTORY> 2,940,400
<CURRENT-ASSETS> 4,419,127
<PP&E> 3,656,741
<DEPRECIATION> 1,231,531
<TOTAL-ASSETS> 6,924,948
<CURRENT-LIABILITIES> 3,300,407
<BONDS> 0
0
0
<COMMON> 27,634
<OTHER-SE> 1,848,922
<TOTAL-LIABILITY-AND-EQUITY> 6,924,948
<SALES> 2,248,147
<TOTAL-REVENUES> 2,248,147
<CGS> 1,867,171
<TOTAL-COSTS> 2,517,051
<OTHER-EXPENSES> (16,693)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,847
<INCOME-PRETAX> (296,035)
<INCOME-TAX> 2,100
<INCOME-CONTINUING> (298,135)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (298,135)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
