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, 1997 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 8, 1997, 4,229,966 shares of common stock were outstanding.
<PAGE>
MICROLOG CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
July 31 October 31,
1997 1996
----------------- -----------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 942,744 $ 1,170,603
Receivables, net 6,877,676 4,259,841
Inventories, net 1,940,018 2,218,306
Deferred tax asset 950,000 650,000
Other current assets 489,297 208,551
----------------- -----------------
Total current assets 11,199,735 8,507,301
Fixed assets, net 3,716,597 3,886,371
Licenses, net 323,810 409,524
Other assets 46,088 101,788
Goodwill, net 658,113 807,738
----------------- -----------------
Total assets $ 15,944,343 $ 13,712,722
================= =================
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 61,180 $ 54,740
Borrowings under line-of-credit agreement -- 1,400,000
Accounts payable 2,119,215 962,715
Accrued compensation and related expenses 2,455,513 1,874,691
Other accrued expenses 1,078,013 1,070,973
----------------- -----------------
Total current liabilities 5,713,921 5,363,119
Long-term debt 141,680 202,860
Deferred officers' compensation 277,935 267,921
Other liabilities 31,440 112,184
----------------- -----------------
Total liabilities 6,164,976 5,946,084
----------------- -----------------
Stockholders' equity:
Serial preferred stock, $.01 par value, 1,000,000 shares
authorized, no shares issued -- --
Common stock, $.01 par value, 10,000,000 shares authorized,
4,831,253 and 4,792,004 shares issued 48,312 47,920
Capital in excess of par value 16,018,211 15,904,753
Treasury stock, at cost, 601,870 shares (1,176,537) (1,176,537)
Accumulated deficit (5,110,619) (7,009,498)
----------------- -----------------
Total stockholders' equity 9,779,367 7,766,638
----------------- -----------------
Total liabilities and stockholders' equity $ 15,944,343 $ 13,712,722
================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MICROLOG CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months For The Nine Months
Ended July 31, Ended July 31,
1997 1996 1997 1996
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 8,842,228 $ 6,565,486 $ 23,174,944 $ 19,017,967
--------------- --------------- --------------- ----------------
Costs and expenses:
Cost of sales 5,467,737 3,836,296 14,040,615 11,005,084
Selling, general and administrative 1,842,763 1,645,296 4,714,195 4,891,010
Research and development 1,020,364 513,348 2,747,754 1,460,024
--------------- --------------- --------------- ----------------
8,330,864 5,994,940 21,502,564 17,356,118
--------------- --------------- --------------- ----------------
Operating income 511,364 570,546 1,672,380 1,661,849
Net other income (expense) 10,519 (3,678) (66,704) (44,298)
--------------- --------------- --------------- ----------------
Income before income taxes 521,883 566,868 1,605,676 1,617,551
Benefit (provision) for income taxes 92,658 (20,581) 293,203 (34,981)
--------------- --------------- --------------- ----------------
Net income 614,541 546,287 1,898,879 1,582,570
Accumulated deficit:
at beginning of period (5,725,160) (8,685,949) (7,009,498) (9,722,232)
--------------- --------------- --------------- ----------------
at end of period $ (5,110,619) $ (8,139,662) $ (5,110,619) $ (8,139,662)
=============== =============== =============== ================
Weighted average shares outstanding 4,501,527 4,710,080 4,528,759 4,549,534
--------------- --------------- --------------- ----------------
Income per common share $ 0.14 $ 0.12 $ 0.42 $ 0.35
=============== =============== =============== ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MICROLOG CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Nine Months Nine Months
Ended Ended
July 31, 1997 July 31, 1996
---------------------- ----------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,898,879 $ 1,582,570
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation 647,367 428,760
Deferred officers' compensation 10,014 (8,930)
Amortization of goodwill and licensing agreement 235,339 149,296
Loss on disposition of fixed assets -- 2,732
Deferred tax benefit (300,000) --
Consulting expense funded through stock options granted 50,000 --
Changes in assets and liabilities:
Receivables (2,617,835) (1,719,094)
Inventories 278,288 (646,330)
Other current assets (280,746) (94,299)
Accounts payable 1,156,500 (290,501)
Accrued compensation and related expenses 580,822 0
Other accrued expenses (73,704) (86,793)
---------------------- ----------------------
Net cash provided by (used in) operating activities 1,584,924 (682,589)
---------------------- ----------------------
Cash flows from investing activities:
Purchases of fixed assets (477,593) (918,563)
Payment for purchase of Phonatic International B.V. -- (774,484)
Other assets 55,700 112,588
---------------------- ----------------------
Net cash (used in) investing activities (421,893) (1,580,459)
---------------------- ----------------------
Cash flows from financing activities:
Reduction in long-term debt (54,740) (45,455)
Net borrowings (payments) under line-of-credit agreement (1,400,000) 825,000
Issuance of common stock 63,850 891,129
---------------------- ----------------------
Net cash (used in) provided by financing activities (1,390,890) 1,670,674
---------------------- ----------------------
Cash and cash equivalents:
Net increase (decrease) during period (227,859) (592,374)
Balance at beginning of period 1,170,603 922,763
---------------------- ----------------------
Balance at end of period $ 942,744 $ 330,389
====================== ======================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MICROLOG CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1997 (unaudited) and OCTOBER 31, 1996
General
- -------
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial position of Microlog Corporation and
its subsidiaries at July 31, 1997 and October 31, 1996, and the results of their
operations and their cash flows for the nine month period ended July 31, 1997.
The results of operations presented are not necessarily indicative of the
results that may be expected for the fiscal year ending October 31, 1997.
The significant accounting principles and practices followed by the Company are
set forth in the Notes to Consolidated Financial Statements in Microlog
Corporation's Annual Report on Form 10-K for the year ended October 31, 1996.
<TABLE>
<CAPTION>
Note 1 - Inventories (Unaudited)
- --------------------
July 31, October 31,
Inventories consist of the following: 1997 1996
----------------- ------------------
<S> <C> <C>
Components and finished goods $ 1,795,519 $ 1,951,370
Work-in-process 546,354 519,554
----------------- ------------------
2,341,873 2,470,924
Less: reserve for obsolescence (401,855) (252,618)
----------------- ------------------
$ 1,940,018 $ 2,218,306
================= ==================
</TABLE>
<TABLE>
<CAPTION>
Note 2 - Fixed Assets
- ----------------------
(Unaudited)
Fixed assets consist of the following: July 31, October 31,
1997 1996
----------------- ------------------
<S> <C> <C>
Land $ 520,000 $ 520,000
Buildings and improvements 2,511,266 2,511,266
Furniture and equipment 3,590,396 3,119,150
Vehicles 23,642 23,642
Leasehold improvements 176,096 176,096
----------------- ------------------
6,821,400 6,350,154
Less: accumulated depreciation and amortization (3,104,803) (2,463,783)
----------------- ------------------
$ 3,716,597 $ 3,886,371
================= ==================
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Microlog Corporation designs, develops, markets, and supports a complete line of
UNIX and DOS-based voice processing systems and applications 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 SOLUTION (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 consolidated statements of income
and retained earnings:
PERCENTAGE OF TOTAL REVENUES
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Voice processing 61.6% 60.9% 60.4% 62.6%
Performance analysis and support services 38.4% 39.1% 39.6% 37.4%
------ ------- ------- -------
Total 100.0% 100.0% 100.0% 100.0%
Costs and expenses
Cost of sales 61.8% 58.4% 60.6% 57.9%
Selling, general, and administrative 20.9% 25.1% 20.4% 25.7%
Research and development 11.5% 7.8% 11.9% 7.7%
------- ------- ------- -------
Total 94.2% 91.3% 92.8% 91.3%
------- ------- ------- -------
Operating income 5.8% 8.7% 7.2% 8.7%
Net other income (expense) 0.1% (0.1%) (0.3%) (0.2%)
------- -------- -------- --------
Income before income taxes 5.9% 8.6% 6.9% 8.5%
Benefit (provision) for income taxes 1.0% (0.3%) 1.3% (0.3%)
------- -------- ------- --------
Net income 6.9% 8.3% 8.2% 8.2%
======= ======= ======= ======
</TABLE>
<PAGE>
RESULTS OF OPERATIONS
The Company had net income of $615,000 ($.14 per share) for the quarter ended
July 31, 1997 and net income of $1,899,000 ($.42 per share) for the nine months
ended July 31, 1997. These results included income tax benefits for the three
and nine month periods of $100,000 ($.02 per share) and $300,000 ($.07 per
share) respectively, associated with the expected future realization of the
Company's net operating loss carryforwards that management believes is more
likely than not to be realized. By comparison, the Company had net income of
$546,000 ($.12 per share), and $1,583,000 ($.35 per share) for the comparable
periods in fiscal 1996. Neither of the comparable periods included an income tax
benefit. Without the income tax benefit, the company would have had a small
decrease in earnings for the comparable three month periods, but would have had
a small increase for the comparable nine month periods.
NET SALES
Net sales for the quarter ended July 31, 1997 were $8.8 million, which
represented an increase of 33% as compared to $6.6 million of net sales for the
quarter ended July 31, 1996. Net sales for the nine months ended July 31, 1997
were $23.2 million, which represented an increase of 22% as compared to $19.0
million of net sales for the nine months ended July 31, 1996. This increase was
attributable to an increase in voice processing net sales and performance
analysis and support services sales.
VOICE PROCESSING NET SALES
Voice processing net sales for the quarter ended July 31, 1997 were $5.4
million, which represented an increase of 35% as compared to $4.0 million of net
sales for the quarter ended July 31, 1996. The net sales for the nine months
ended July 31, 1997 were $14.0 million, which represented an increase of 18% as
compared to $11.9 million of net sales for the nine months ended July 31, 1996.
The increase in sales for the comparable nine month periods was primarily
attributable to an increase of 104% in sales to commercial customers and an
increase of 28% in sales to international customers, offset by a decrease of 69%
in sales to distributors. The increase in commercial sales was primarily due to
the continuation of ongoing business with a large retail pharmacy chain as part
of a large procurement. The increase in international sales was primarily due to
additional sales from new value added resellers in France and the Netherlands.
The decrease in sales to distributors was due to the Company's decision to focus
its sales and marketing efforts on its interactive information response products
and to de-emphasize its CALLSTAR product line because of declining profit
margins.
As of July 31, 1997, the Company had a backlog of existing orders for voice
processing systems totaling $5.4 million. The backlog, as of July 31, 1996, was
$3.1 million. Of the $5.4 million of backlog at July 31, 1997, approximately
$1.2 million will be recognized as sales beyond fiscal 1997. The Company has
experienced fluctuations in its backlog at various times during the past two
fiscal years attributable primarily to the seasonality of government purchases.
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
Performance analysis and support services net sales for the quarter ended July
31, 1997 were $3.4 million, which represented an increase of 31% as compared to
$2.6 million of net sales for the quarter ended July 31, 1996. The net sales for
the six months ended July 31, 1997 were $9.2 million, which represented an
increase of 30% as compared to $7.1 million of net sales for the nine months
ended July 31, 1996. Based upon these recent increases in sales and the growth
in backlog, the Company expects to sustain a higher level of performance
analysis and support services net sales for the remainder of fiscal 1997. This
increase was attributable to the addition of new contracts as well as increases
in the level of work authorized under existing contracts from the John Hopkins
University Applied Physics Laboratory (APL), the company's principal customer
for these services.
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 changes in defense priorities or spending will result in
any material adverse affect over the next fiscal year on its net sales from
performance analysis and support services nor alter
<PAGE>
the 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, 1997, the Company had a backlog of funding on existing contracts
for performance analysis and support services totaling $7.3 million. By
comparison, the backlog as of July 31, 1996 was $6.5 million. The increase in
backlog was primarily attributable to the renewal of a large multi-year contract
in the second quarter of fiscal 1997. Of the $7.3 million of backlog at July 31,
1997, approximately $4.2 million will be recognized as sales beyond fiscal 1997.
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 $5.5 million or 61.8% of net sales for the quarter ended July
31, 1997 as compared to $3.8 million or 58.4% of net sales for the quarter ended
July 31, 1996. Cost of sales was $14.0 million or 60.6% of net sales for the
nine months ended July 31, 1997 as compared to $11.0 million or 57.9% of net
sales for the nine months ended July 31, 1996. The increase in cost of sales as
a percentage of net sales was primarily attributable to the higher percentage of
products sales of voice processing products as compared to services sales.
Products sales have a significantly higher cost of sales than services sales.
Selling, general and administrative expenses were $1.8 million or 20.9% of net
sales for the quarter ended July 31, 1997 as compared to $1.6 million or 25.1%
of net sales for the quarter ended July 31, 1996. Selling, general and
administrative expenses were $4.7 million or 20.4% of net sales for the nine
months ended July 31, 1997 as compared to $4.9 million or 25.7% of net sales for
the nine months ended July 31, 1996. The decrease in selling, general, and
administrative expenses as a percentage of revenue was primarily attributable to
an increase in net sales. The increase in the amount of expenses for the
comparable quarters was primarily due to the hiring of additional sales
personnel for the quarter ended July 31, 1997.
Research and development expenses were $1.0 million or 11.5% of net sales for
the quarter ended July 31, 1997 as compared to $513,000 or 7.8% of net sales for
the quarter ended July 31, 1996. Research and development expenses were $2.7
million or 11.9% of net sales for the nine months ended July 31, 1997 as
compared to $1.5 million or 7.7% of net sales for the nine months ended July 31,
1996. The increase was primarily due to the hiring of additional personnel as
the company continues to develop new products and enhance its existing products.
Research and development expenses reflect costs associated with the development
of applicable software and product enhancements for the Company's voice
processing systems. 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.
NET OTHER INCOME / EXPENSE
Net other income was $10,000 for the quarter ended July 31, 1997 and consisted
primarily of interest income on cash and cash equivalents. Net other expense was
$67,000 for the nine months ended July 31, 1997. Net other expense was $4,000
and $44,000 for the quarter and nine months ended July 31, 1996. Net other
expense consisted primarily of closing costs on the lines of credit facilities
and interest expense on short term borrowings.
PROVISION FOR INCOME TAXES
For the quarter ended July 31, 1997, the Company increased its deferred tax
asset to $950,000, reflecting the benefit of approximately $2.8 million in loss
carryforwards, by recording a tax benefit of $100,000. Although realization is
not assured, management believes that it is more likely than not that all of the
deferred tax asset will be realized.
The Company has exhausted its ability to carry losses back for income tax
refunds. Net operating loss and tax credit carry forwards for income tax
reporting purposes of approximately $9.3 million and $178,000, respectively,
will be available to offset taxes generated from future taxable income through
2008 and 2007. Management believes that the future tax
<PAGE>
benefits associated with $6.5 million of its net operating loss carryforwards is
not more likely than not assured. Accordingly, no such benefit has been
reflected in the Financial Statements.
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 will primarily
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.
LIQUIDITY AND CAPITAL RESOURCES
Working capital as of July 31, 1997 was $5.5 million as compared to $3.1 as of
October 31, 1996. The increase in working capital was primarily attributable to
the net income in the first nine months of the year. Cash and cash equivalents,
as of July 31, 1997 were $943,000 as compared to $1.2 million as of October 31,
1996, but the outstanding debt against the Company's line of credit was reduced
by $1.4 million during that period. Accounts receivable as of July 31, 1997 was
$6.9 million as compared to $4.3 million as of October 31, 1996. The increase in
accounts receivable is due to the higher level of revenue for the most recent
three months and the timing of shipments during the quarter.
Goodwill as of July 31, 1997 was $658,000 as compared to $808,000 at October 31,
1996. Net fixed assets as of July 31, 1997 were $3.7 million as compared to $3.9
million as of October 31, 1996.
In February 1997, the Company renewed its line of credit facility with its bank
which allows the Company to borrow up to 70% of its eligible receivables to a
maximum of $2,000,000. The line of credit bears interest at the bank's prime
rate plus 1.25% (9.75% at July 31, 1997), and contains a 1/2 of 1% commitment
fee on the average unused portion of the line. The line expires on February 28,
1998 and subjects the Company to a number of restrictive covenants, including a
requirement to maintain a minimum consolidated tangible net worth, a maximum
ratio of total liabilities to tangible net worth, and a minimum current ratio.
There are restrictions on mergers or acquisitions, payment of dividends, and
certain restrictions on additional borrowings. The line is secured by all of the
Company's tangible assets. At July 31, 1997, there was no outstanding debt
against this line of credit.
In February 1997, the Company also renewed its $1,000,000 loan facility. The
line of credit bears interest at the bank's prime rate plus 0.5% (9.00% at July
31, 1997), and contains a 0.5% fee on the average unused portion of the loan.
The line expires on February 28, 1999, and 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, 1999. The line is secured by the Company's principal headquarters
building. At July 31, 1997, there was no outstanding debt against this line of
credit.
The Company believes that it will not need additional financial resources beyond
those presently expected to be available during fiscal 1997.
<PAGE>
On June 30, 1996, the Company entered into a contract to purchase a new
management information system including a five year maintenance plan. The
purchase, including maintenance, is being financed by the vendor over a five
year term at an annual interest rate of 8%. The financing terms require five
annual payments of $140,000 each, including interest, beginning on June 30,
1996. Two annual payments have been made to date. The final payment is due on
June 30, 2000.
In the third quarter of fiscal 1997, the Company entered into a consulting
agreement with The Parthenon Group, Inc. ("Parthenon"), a strategic marketing
and consulting organization. The Company has agreed to grant to Parthenon
non-statutory options to purchase up to 195,000 shares of the common stock of
Microlog at an exercise price of $5 per share. 40,000 options became exercisable
in the third quarter of fiscal 1997 upon Parthenon's commencement of their work.
Future options will become exercisable based on the achievement of certain
average closing prices of Microlog's common stock on the Nasdaq National Market.
The expense associated with these options will be recorded over the term of the
engagement which is estimated to be approximately six months. $50,000 was
recorded as consulting expense in the third quarter of fiscal 1997.
ITEM 1 Legal Proceedings
None
ITEM 2 Changes in Securities None.
ITEM 3 Submission of Matters to a Vote of Security Holders None.
ITEM 4 Other Information
None.
ITEM 5 Exhibits and Reports on Form 8-K None.
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 Executive Officer
BY /s/ Steven R. Delmar
Steven R. Delmar
Executive Vice President and Chief Financial
Officer
September 15, 1997
------------------
DATE
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> MAY-1-1997
<PERIOD-END> JUL-31-1997
<EXCHANGE-RATE> 1
<CASH> 942,744
<SECURITIES> 0
<RECEIVABLES> 7,208,388
<ALLOWANCES> 330,712
<INVENTORY> 1,940,018
<CURRENT-ASSETS> 11,199,735
<PP&E> 6,821,401
<DEPRECIATION> 3,104,802
<TOTAL-ASSETS> 15,944,343
<CURRENT-LIABILITIES> 5,713,921
<BONDS> 0
48,312
0
<COMMON> 0
<OTHER-SE> 9,731,055
<TOTAL-LIABILITY-AND-EQUITY> 15,944,343
<SALES> 8,842,228
<TOTAL-REVENUES> 8,842,228
<CGS> 5,467,737
<TOTAL-COSTS> 8,330,864
<OTHER-EXPENSES> 10,519
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,675
<INCOME-PRETAX> 521,883
<INCOME-TAX> (92,658)
<INCOME-CONTINUING> 614,541
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 614,541
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
