SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended July 31, 1996 Commission file No. 0-14880
Microlog Corporation
(Exact name of registrant as specified in its charter).
State of Incorporation: Virginia
I.R.S. Employer Identification No.: 52-0901291
20270 Goldenrod Lane
Germantown, Maryland 20876
(Address of principal executive offices).
Registrant's Telephone No., Including Area Code: 301-428-9100
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
---- ----
As of September 16, 1996, 4,190,034 shares of common stock were outstanding.
<PAGE>
MICROLOG CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
July 31, 30, October 31,
1996 1995
--------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 330,38 $ 922,763
Receivables, Net 4,765,254 3,046,160
Inventories 2,083,219 1,436,889
Other Current Assets 204,664 110,365
-------------- -------------
Total Current Assets 7,383,526 5,516,177
Fixed Assets, Net 3,493,599 3,006,528
Licenses, Net 438,095 523,810
Other Assets 119,903 232,491
Goodwill, Net 857,613 146,710
-------------- -------------
Total Assets $ 12,292,736 $ 9,425,716
=============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Portion Of Long-term Debt $ 0 $ 45,455
Borrowings Under Line-of-credit Agreement 825,000 0
Accounts Payable 1,384,016 1,388,122
Accrued Compensation And Related Expenses 1,842,318 2,103,316
Other Accrued Expenses 1,204,913 1,230,310
------------- -------------
Total Current Liabilities 5,256,247 4,767,203
Deferred Officers' Compensation 260,288 269,218
Other Liabilities 140,848 227,641
------------- -------------
Total Liabilities 5,657,383 5,264,062
------------- -------------
Stockholders' Equity:
Serial Preferred Stock, $.01 Par Value, 1,000,000 Shares
Authorized, No Shares Issued 0 0
Common Stock, $.01 Par Value, 10,000,000 Shares
Authorized, 4,790,921 And 4,507,968 Shares Issued 47,909 45,079
Capital In Excess Of Par Value 15,903,643 15,015,344
Treasury Stock, At Cost, 601,870 Shares (1,176,537) (1,176,537)
Accumulated Deficit (8,139,662) (9,722,232)
-------------- -------------
Total Stockholders' Equity 6,635,353 4,161,654
-------------- -------------
Total Liabilities And Stockholders' Equity $ 12,292,736 $ 9,425,716
============== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
MICROLOG CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months For The Nine Months
Ended July 31, Ended July 31,
1996 1995 1996 1995
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 6,565,486 $ 5,555,881 $ 19,017,967 $ 16,291,586
---------- ----------- ---------- -----------
Costs And Expenses:
Cost Of Sales 3,836,296 3,136,909 11,005,084 9,481,745
Selling, General And Administrative 1,645,296 1,645,997 4,891,010 4,640,277
Research And Development 513,348 389,938 1,460,024 1,165,240
---------- ----------- ---------- -----------
5,994,940 5,172,844 17,356,118 15,287,262
Operating Income 570,546 383,037 1,661,849 1,004,324
Net Other Income (Expense) (3,678) (21,345) (44,298) (76,121)
---------- ----------- ---------- -----------
Income before income taxes 566,868 361,692 1,617,551 928,203
Provision for income taxes 20,581 0 34,981 0
---------- ----------- ---------- -----------
Net income 546,287 361,692 1,582,570 928,203
Accumulated deficit:
at beginning of period (8,685,949) (10,845,519) (9,722,232) (11,109,363)
---------- ----------- ---------- -----------
at end of period $(8,139,662) $(10,483,827) $ (8,139,662) $ (10,181,160)
========== =========== ========== ===========
Weighted average shares outstanding 4,710,080 4,132,927 4,549,534 3,977,955
---------- ----------- ---------- -----------
Income Per Common Share $ 0.12 $ $.09 $ 0.35 $ 0.23
========== =========== ========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
MICROLOG CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the For the
Nine Months Nine Months
Ended Ended
July 31, 1996 July 31, 1995
------------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,582,570 $ 928,203
Adjustments to reconcile net income to net cash
Provided by (used in) operating activities:
Depreciation 428,760 338,588
Amortization of goodwill and other 149,296 206,035
Loss from disposition of fixed assets 2,732 3,009
Changes in assets and liabilities net of effects from
purchase of phonatic International B.V.
Receivables (1,719,094) (206,706)
Inventories (646,330) (372,168)
Other current assets (94,299) 8,818
Accounts payable and accrued expenses (290,501) (14,940)
Deferred officers' compensation (8,930)
Other liabilities (86,793) (148,474)
---------------- -----------------
Net cash (used in) provided by operating activities (682,589) 742,365
---------------- -----------------
Cash flows from investing activities:
Purchases of fixed assets (918,563) (458,210)
Payment for purchase of Phonatic International B.V. (774,484)
Other assets 112,588 22,171
---------------- --------------------
Net cash (used in) investing activities (1,580,459) (436,039)
---------------- --------------------
Cash flows from financing activities:
Reduction of long-term debt (45,455) (519,864)
Net borrowings under line-of-credit agreement 825,000
Issuance of common stock 891,129 9,475
---------------- --------------------
Net cash provided by (used in) financing activities 1,670,674 (510,389)
---------------- --------------------
Cash and cash equivalents:
Net increase (decrease) during period (592,374) (204,063)
Balance at beginning of period 922,763 1,166,194
---------------- --------------------
Balance at end of period $ 330,389 $ 962,131
================= ====================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
MICROLOG CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1996 (UNAUDITED) AND OCTOBER 31, 1995
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of Microlog Corporation as of July 31, 1996 and October 31,
1995, and the results of its operations and cash flows for the nine month period
ended July 31, 1996. The results of operations presented are not necessarily
indicative of the results that may be expected for the fiscal year ending
October 31, 1996.
The significant accounting principles and practices followed by the Company are
set forth in the Notes to Consolidated Statements in Microlog Corporation's
Annual Report on Form 10-K for the year ended October 31, 1995.
Note 1 - Inventories
Inventories consist of the following: (UNAUDITED)
July 31, October 31,
1996 1995
-------------- --------------
Components and finished goods $ 2,029,362 $ 1,999,192
Work-in-process 554,792 492,312
-------------- --------------
2,584,154 2,491,504
Less: reserve for obsolescence (500,935) (1,054,615)
$ 2,083,219 $ 1,436,889
============== ==============
Note 2 - Fixed Assets
The cost of property and equipment consists of the following:
<TABLE>
<CAPTION>
(Unaudited)
July 31, October 31,
1996 1995
-------------- --------------
<S> <C> <C>
Land $ 520,000 $ 520,000
Buildings and improvements 2,548,478 2,532,567
Furniture and equipment 4,073,292 3,621,890
Vehicles 23,642 23,642
Leasehold improvements 185,828 211,021
-------------- --------------
7,351,240 6,909,120
Less: accumulated depreciation and amortization (3,857,641) (3,902,592)
-------------- --------------
$ 3,493,599 $ 3,006,528
============== ==============
</TABLE>
5
<PAGE>
NOTE 3 - RESTRUCTURING OF OPERATIONS
The following table sets forth the Company's restructuring reserves for the nine
months ended July 31, 1996.
<TABLE>
<CAPTION>
Asset
Writedowns Facilities Other Total
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Reserve balance, October 31, 1995 $ 10,402 $ 174,889 $ 52,459 $ 237,750
Cash Payments (44,934) (52,459) $ (97,393)
Non-cash items (10,402) $ (10,402)
------------------------------------------------------------------
Reserve balance, July 31, 1996 $ 0 $ 129,955 $ 0 $ 129,955
==================================================================
</TABLE>
6
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Microlog Corporation designs, manufactures, markets, and supports a complete
line of UNIX and DOS-based voice processing systems and application solutions
which allow users to store, retrieve and transmit digitized voice messages and
to access information on computer data bases. The Company's voice processing
products include the VCS Intela, Retail Solutions (APRS(R)), VCS 3500, and
CALLSTAR models, which are comprised of specially configured
microprocessor-based hardware platforms and versatile proprietary applications
software that enables the systems to perform multiple voice processing
applications.
The Company also provides performance analysis and technical and administrative
support services ("performance analysis") through its wholly-owned subsidiary,
Old Dominion Systems Inc. of Maryland, primarily to the Applied Physics
Laboratory ("APL"), a prime contractor to the U.S. Navy.
The percentage of the Company's sales generated by the Company's two business
segments has varied significantly from period to period, but the Company
anticipates that any significant growth in sales will be derived primarily from
increases in sales from voice processing operations.
The following table sets forth for the periods indicated the percentage of
revenues of certain items from the Company's condensed consolidated statements
of income and retained earnings:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Voice processing 60.9% 64.2% 62.6% 61.6%
Performance analysis and support services 39.1% 35.8% 37.4% 38.4%
------- ------- ------- -------
Total 100.0% 100.0% 100.0% 100.0%
Costs and expenses
Cost of sales 58.4% 56.5% 57.9% 58.2%
Selling, general and administrative 25.1% 29.6% 25.7% 28.4%
Research and development 7.8% 7.0% 7.7% 7.2%
-------- -------- -------- --------
Total 91.3% 93.1% 91.3% 93.8%
------- ------- ------- -------
Operating income 8.7% 6.9% 8.7% 6.2%
Interest and other expense, net 0.1% 0.4% 0.2% 0.5%
------- ------- -------- --------
Income before income taxes 8.6% 6.5% 8.5% 5.7%
Provision for income taxes 0.3% 0.0% 0.3% 0.0%
------- -------- -------- -------
Net income 8.3% 6.5% 8.2% 5.7%
======= ======= ======= ======
</TABLE>
7
<PAGE>
RESULTS OF OPERATIONS
The Company had net income of $546,000 ($.12 per share) for the quarter ended
July 31, 1996 and net income of $1,583,000 ($.35 per share) for the nine months
ended July 31, 1996. This compares to net income of $362,000 ($.09 per share)
and $928,000 ($.23 per share), respectively, for the comparable periods in
fiscal 1995. The increase in earnings is primarily attributable to increases
both in voice processing sales and performance analysis and support services
sales.
NET SALES
Net sales for the quarter ending July 31, 1996 were $6.6 million, which
represents an increase of 18% as compared to $5.6 million of net sales in the
quarter ending July 31, 1995. Net sales were $19.0 million for the nine months
ended July 31, 1996, which represents an increase of 17% as compared to $16.3
million of net sales for the nine months ended July 31, 1995. The increase in
net sales is primarily attributable to increases in both voice processing net
sales and performance analysis and support services sales.
VOICE PROCESSING NET SALES
Net sales of voice processing products were $4.0 million for the quarter ended
July 31, 1996, which represents an 11% increase from voice processing net sales
of $3.6 million for the quarter ended July 31, 1995. Net sales were $11.9
million for the nine months ended July 31, 1996, which represents a 19% increase
from voice processing net sales for the nine months ended July 31, 1995 of $10.0
million. The increase in sales for the quarter ended July 31, 1996 is primarily
attributable to increases of 30% and 14% in sales of the Company's products and
services to government and international customers. For the nine months ended
July 31, 1996, the increase in sales were primarily attributable to increases of
11%, 153%, and 37% of sales of the Company's products and services to
government, commercial, and international customers. Sales to commercial
customers consisted primarily of sales of Microlog's Retail Solutions products
to a small number of large multiple unit customers. The growth in international
sales is attributable primarily to an increase in sales through certain of
Microlog's international distributors and sales by Microlog's new European
subsidiary, Microlog Europe, which was acquired in late June 1996 as discussed
below.
As of July 31, 1996, the Company had a backlog of existing orders for voice
processing systems totaling $3.1 million. By comparison, the backlog as of July
31, 1995 was $3.3 million. The Company has experienced fluctuations in its
backlog during the past several fiscal years, attributable primarily to the
seasonality of governmental purchases. Of the $3.1 million of backlog at July
31, 1996, approximately $1.3 million is expected to be recognized as sales
beyond fiscal 1996. Although the Company believes that its entire backlog of
orders consists of firm orders, because of the possibility of customer changes
in delivery schedules and delays inherent in the government contracting process,
the Company's backlog as of any particular date may not be indicative of actual
sales for any future period.
PERFORMANCE ANALYSIS AND SUPPORT SERVICES NET SALES
Net sales from performance analysis and support services were $2.6 million for
the quarter ended July 31, 1996 which represents a 30% increase as compared to
$2.0 million for the same period in fiscal 1995. Net sales were $7.1 million for
the nine months ended July 31, 1996, which represents a 13% increase as compared
to $6.3 million for the same period in fiscal 1995. The increases are primarily
attributable to increases in the level of work authorized under existing
contracts from Johns Hopkins Applied Physics Laboratory (APL), the Company's
principal customer for these services.
The Company is seeking to diversify its operations for performance analysis and
support services by seeking contracts in non-defense related areas. Because of
the lower profit margins allowed on contracts for performance analysis and
support services and the Company's limited success to date in obtaining new
contracts with contractors and agencies other than APL, the Company believes
that this segment of its business is not likely to generate a substantial
increase in profitability. Nevertheless, the Company believes that its
performance analysis contracts are likely to continue to provide a stable source
of sales for the Company. The Company does not anticipate that any additional
changes in defense priorities or spending will result in any material adverse
affect over the remainder of this fiscal year on its net sales from performance
analysis and support services nor alter the
8
<PAGE>
manner in which it procures contracts for such services. However, there is no
assurance that changes in defense priorities or continuing budget reductions
will not cause such an effect during the fiscal year or thereafter.
As of July 31, 1996, the Company had a backlog of funding on existing contracts
for performance analysis and support services totaling $6.5 million. By
comparison, the backlog as of July 31, 1995 was $3.9 million. The increase in
backlog is primarily attributable to a significant multi-year award and
increased funding levels on existing or new contracts. The Company anticipates
that these services will be provided during the next three fiscal years. Of the
$6.5 million of backlog at July 31, 1996, approximately $4.1 million is expected
to be recognized as sales beyond fiscal 1996. Because of the delays inherent in
the government contracting process or possible changes in defense priorities or
spending, the Company's backlog as of any particular date may not be indicative
of actual sales for any future period. Although the Company believes that its
backlog of funding on existing contracts is firm, the possibility exists that
funding for some contracts on which the Company is continuing to work, in the
expectation of renewal, may not be authorized (and the Government has the right
to cancel contracts at any time), although to date this has not occurred.
COSTS AND EXPENSES
Cost of sales was $3.8 million or 58.4% of net sales for the quarter ended July
31, 1996, and $11.0 million or 57.9% of net sales for the nine months ended July
31, 1996. Cost of sales was $3.1 million or 56.5% of net sales for the quarter
ended July 31, 1995, and $9.5 million or 58.2% of net sales for the nine months
ended July 31, 1995. The increase in cost of sales as a percentage of net sales
for the quarter ended July 31, 1996, as compared to the quarter ended July 31,
1995, is primarily attributable to the higher percentage of performance analysis
and support services net sales as compared to voice processing net sales.
Performance analysis and support services have a significantly higher cost of
sales than voice processing.
Selling, general and administrative expenses were $1.6 million or 25.1% of net
sales for the quarter ended July 31, 1996, as compared to $1.6 million or 29.5%
of net sales for the quarter July 31, 1995. For the nine months ended July 31,
1996, selling, general and administrative expenses were $4.9 million or 25.7% of
net sales, as compared to $4.6 million or 28.4% of net sales for the same nine
month period last year. The Company expects that the decrease in selling,
general and administrative expenses as a percentage of net sales will continue
to be the trend for the balance of fiscal 1996. As sales increase selling,
general and administrative expenses remain fixed.
Research and development expenses reflect costs associated with the development
of applicable software and product enhancements for the Company's voice
processing systems. Research and development expenses were $513,000 or 7.8% of
net sales for the quarter ended July 31, 1996, as compared to $390,000 or 7.0%
of net sales for the quarter ended July 31, 1995. For the nine months ended July
31, 1996, research and development expenses were $1.5 million or 7.7% of net
sales, as compared to $1.2 million or 7.2% of net sales for the nine months
ended July 31, 1995. The Company expects that research and development expenses
during fiscal 1996 will be more than those incurred in fiscal 1995 as the
Company continues to develop new products and enhance its existing products. The
Company believes that the process of establishing technological feasibility with
its new products is completed approximately upon release of the products to its
customers. Hence, the Company does not anticipate capitalizing engineering
development costs.
INTEREST AND OTHER EXPENSE, NET
Net other expense was $4,000 and $44,000 for the quarter and nine months ended
July 31, 1996 as compared to $21,000 and $76,000 for the same periods last year.
Net other expense consisted primarily of closing costs on the lines of credit
facilities and interest expense on short term borrowings, net of miscellaneous
income.
PROVISION FOR INCOME TAXES
Net operating loss and tax credit carry forwards for income tax reporting
purposes of approximately $9.0 million and $156,000, respectively, at October
31, 1995, will be available to offset taxes generated from future taxable
income. These potential future tax benefits have not been reflected in the
financial statements since realization is not assured. Tax expense for the
quarter and nine months ended July 31, 1996 relates to state income taxes,
alternative minimum tax for federal income taxes, and foreign taxes due by
Microlog Europe.
9
<PAGE>
FACTORS THAT MAY EFFECT FUTURE RESULTS OF OPERATIONS
Various paragraphs of this Item 2 (Management's Discussion and Analysis of
Financial Condition and Results of Operations) contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Actual results could differ materially from those projected in the
forward-looking statements as a result of the factors set forth below and
elsewhere in this document.
The Company believes that in the future its results of operations could be
affected by factors such as the introduction by the Company of new and enhanced
products and services, market acceptance of new voice processing products and
enhancements of existing products, growth in the voice processing market in
general, competition, commitments to automation by potential large purchasers of
the Company's Retail Solutions products, fluctuations in the buying cycles of
governmental customers, changes in general economic conditions, and changes in
the U.S. defense industry and their impact on the prime contractor for which the
Company provides performance analysis and support services.
The Company believes that its ability to meet revenue targets principally will
determine the Company's profitability for each fiscal quarter. The Company's
backlog on a quarterly basis generally will not be large enough to assure that
the Company will meet its revenue targets for a particular quarter, and delivery
of backlog depends upon a number of factors, as discussed above. Further, a
large percentage of any quarter's shipments have traditionally been booked in
the last month of the quarter. Consequently, quarterly revenues and operating
results will depend on the volume and timing of new orders received during a
quarter, which is difficult to predict.
ACQUISITION OF PHONATIC INTERNATIONAL B.V.
On June 28, 1996, the Company acquired Phonatic International B.V. of the
Netherlands. The Company is changing the name of Phonatic to Microlog Europe, a
wholly owned subsidiary of Microlog Corporation of Maryland. To acquire
Phonatic, the Company issued 64,920 shares of its common stock valued at
approximately $584,000 and paid cash of $233,000 (in August 1996), and incurred
$34,000 in transaction costs. The acquisition has been accounted for as a
purchase and therefore only activity subsequent to the acquisition date was
included in consolidated results. The excess of the purchase price over the fair
value of net assets acquired totaled $775,000.
This amount is being amortized on a straight-line basis over six years.
LIQUIDITY AND CAPITAL RESOURCES
Working capital as of July 31, 1996 was $2,100,000 as compared to $749,000 as of
October 31, 1995. The increase in working capital is primarily attributable to
the Company's net income in the first nine months of 1996, as well as proceeds
from the issuance of common stock upon the exercise of employee stock options.
Cash and cash equivalents as of July 31, 1996 were $330,000, as compared to
$923,000 as of October 31, 1995. The decline in cash is primarily attributable
to purchases of fixed assets of $919,000, and inventories of $646,000, offset by
net borrowings of $825,000 under the Company's line of credit to meet working
capital requirements. The purchases of fixed assets consisted primarily of
$466,000 associated with an upgrade to the Company's computer netware, which
will continue over the next several quarters, and the capitalization of $370,000
of equipment associated with spare parts used to maintain the Company's products
at remote sites.
The outstanding borrowings under the line of credit at July 31, 1996 were
$825,000.
Accounts receivable as of July 31, 1996 were $4.8 million, as compared to $3.0
million as of October 31, 1995. The increase in accounts receivable is due to
the higher level of revenue for the most recent nine months. Net fixed assets as
of July 31, 1996 were $3.5 million, as compared to $3.0 million as of October
31, 1995. The increase is due to the purchase of fixed assets discussed above,
net of depreciation and amortization
Goodwill as of July 31, 1996 was $858,000, as compared to $147,000 at October
31, 1995. The increase is due to the acquisition of Phonatic International B.V.
discussed above.
10
<PAGE>
In December 1995, the Company entered into a new line of credit facility with a
bank. The Company can borrow up to 70% of its eligible accounts receivable to a
maximum of $2,000,000. The line of credit bears interest at the bank's prime
rate plus 1.25% and contains a 1/2 of 1% commitment fee on the average unused
portion of the line. The Company paid a one-time origination fee of $10,000 in
December 1995. The line of credit is secured by accounts receivable and
substantially all other assets of the Company. It subjects the Company to a
number of restrictive covenants, including a requirement to maintain a minimum
consolidated tangible net worth, a ratio of total liabilities to tangible net
worth, and a current ratio, and prohibits the Company from entering into mergers
or acquisitions, paying of dividends and incurring certain additional
indebtedness without the approval of the bank.
In April 1996, the Company added a $1,000,000 loan facility to its existing
$2,000,000 line of credit. The facility is secured by the Company's principal
headquarters building, bears interest at the bank's prime rate plus 0.5%, and
contains a 0.5% fee on the average unused portion of the loan. This loan
agreement contains the same restrictive covenants as the $2,000,000 line of
credit, and the agreements for the line of credit and loan facility contain
cross default provisions. The loan agreement allows the Company, at its option,
to make monthly interest-only payments on the outstanding principal balance, but
all outstanding amounts are due in full on February 28, 1998.
ITEM 1 Legal Proceedings
None.
ITEM 2 Changes in Securities
None.
ITEM 3 Submission of Matters to a Vote of Security
ITEM 4 Other Information
None.
ITEM 5 Exhibits and Reports on Form 8-K
SIGNATURES
Pursuant to the requirements 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.
MICROLOG CORPORATION
BY /s/ Richard A. Thompson
----------------------------------
Richard A. Thompson
President and Chief Operating Officer
BY /s/ Steven R. Delmar
---------------------------------
Steven R. Delmar
Executive Vice President and
Chief Financial Officer
September 16, 1996
DATE
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUL-31-1996
<EXCHANGE-RATE> 1
<CASH> 330,389
<SECURITIES> 0
<RECEIVABLES> 4,964,965
<ALLOWANCES> 199,711
<INVENTORY> 2,083,219
<CURRENT-ASSETS> 7,383,526
<PP&E> 7,351,240
<DEPRECIATION> 3,857,641
<TOTAL-ASSETS> 12,292,736
<CURRENT-LIABILITIES> 5,256,247
<BONDS> 0
0
0
<COMMON> 47,909
<OTHER-SE> 6,587,444
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<SALES> 6,565,486
<TOTAL-REVENUES> 6,565,486
<CGS> 3,836,296
<TOTAL-COSTS> 5,994,940
<OTHER-EXPENSES> 3,678
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,189
<INCOME-PRETAX> 566,868
<INCOME-TAX> 20,581
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 546,287
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
