<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended October 31, 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 0-19705
LINKON CORPORATION
(Exact name of small business issuer as specified in its charter)
Nevada 13-3469932
------ ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
140 Sherman Street,
Fairfield, Connecticut 06430
----------------------------
(Address of principal executive offices)
(203) 319-3175
--------------
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
-----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding at December 12, 1997
- --------------------------------------- --------------------------------
Common Stock, Par Value $.001 Per Share 10,896,252
Transitional Small Business Disclosure Format (Check one):
Yes ; No X
----- -----
<PAGE>
LINKON CORPORATION
FORM 10-QSB
QUARTERLY REPORT
For the Three Months Ended October 31, 1997
Page to Page
------------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet October 31, 1997 and 1996 3 - 4
And January 31, 1997
Consolidated Statements of Operations - Nine Months
Ended October 31, 1997 and 1996 5
Consolidated Statements of Operations - Three Months
Ended October 31, 1997 and 1996 6
Consolidated Statements of Cash Flows Three Months
Ended October 31, 1997 and 1996 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 11
Exhibit I - Calculation of Earnings per Share 12
PART II. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
<PAGE>
PART 1- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LINKON CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(Unaudited)
A S S E T S
-----------
<TABLE>
<CAPTION>
October 31, October 31, January 31,
1997 1996 1997
---- ---- ----
<S> <C> <C> <C>
Current Assets
- --------------
Cash and Cash Equivalents $ 65,823 $ 133,064 $ 630,726
Certificate of Deposit -- 66,808 --
Accounts Receivable (Net of Allowance) 508,485 900,129 433,498
Notes Receivable 51,000 51,000 51,000
Other Receivables -- 29,019 3,359
Inventory 447,668 1,090,218 628,498
Prepaid Expenses 42,929 54,200 58,513
----------- ---------- ----------
Total Current Assets 1,115,905 2,324,438 1,805,594
----------- ---------- ----------
Machinery & Equipment
- ---------------------
Machinery & Equipment, at cost 1,309,830 1,061,500 1,262,341
Equipment under Capital Leases 123,157 156,965 123,156
----------- ---------- ----------
1,432,987 1,218,465 1,385,497
Less: Accumulated Depreciation (1,022,902) (818,006) (869,902)
----------- ---------- ----------
Machinery & Equipment, Net 410,085 400,459 515,595
----------- ---------- ----------
Other Assets
- ------------
Software (Net of Amortization) 963,340 989,885 990,668
Investments, at cost 34,613 34,613 34,613
Prepaid Financing Costs 20,914 31,371 28,756
Deferred Offering Costs -- -- --
Security Deposits 8,195 7,696 8,195
----------- ---------- ----------
Total Other Assets 1,027,062 1,063,565 1,062,232
----------- ---------- ----------
$2,553,052 $3,788,462 $3,383,421
=========== ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this report.
3
<PAGE>
LINKON CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
October 31, October 31, January 31,
1997 1996 1997
---- ---- ----
<S> <C> <C> <C>
Current Liabilities
- -------------------
Accounts Payable $ 713,352 $ 962,274 $ 656,127
Bank Loan Payable -- 45,229 --
Taxes Payable 793 14,928 5,000
Interest Payable 208,613 133,750 86,111
Accrued Expenses 315,020 59,757 148,132
---------- --------- ---------
Total Current Liabilities 1,237,778 1,215,938 895,370
---------- --------- ---------
Long Term Liabilities
- ---------------------
Notes Payable, Net 1,303,448 1,262,903 1,291,810
---------- --------- ---------
Commitments and Contingencies -- -- --
- -----------------------------
Stockholders' Equity
- --------------------
Common Stock, $.001 Par Value,
25,000,000 shares authorized,
10,896,252 shares issued and
outstanding 10,897 10,754 10,867
Capital in Excess of Par Value 9,374,266 9,129,970 9,329,296
Retained Earnings
(Accumulated Deficit) (9,373,337) (7,831,103) (8,143,922)
---------- --------- ---------
Total Stockholders' Equity 11,826 1,309,621 1,196,241
---------- --------- ---------
$ 2,553,052 $ 3,788,462 $ 3,383,421
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this report.
4
<PAGE>
LINKON CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended October 31, Ended October 31,
1997 1996
---- ----
<S> <C> <C>
Gross Revenues $2,444,223 $2,117,127
Cost of Goods - Sold Product 1,172,928 1,049,999
- Software amortization 289,098 170,649
---------- ----------
1,462,026 1,220,648
---------- ----------
Gross Margin On Sales 982,197 896,479
Selling, General and
Administrative Expenses 1,844,720 1,490,225
Research and Development 198,513 261,242
---------- ----------
2,043,233 1,751,467
---------- ----------
Operating Income (Loss) (1,061,036) (854,988)
Other Income (Expense)
Interest Income 25 5,938
Gain (Loss) on Foreign Currency
Translation -- (445)
Gain on Sale of Securities -- 679,909
Interest Expense ( 164,404) (189,598)
---------- ----------
( 164,379) 495,804
---------- ----------
Income (Loss) Before Income Taxes (1,225,415) (359,184)
Income Taxes 4000 5,523
---------- ----------
Net Income (Loss) $(1,229,415) $ (364,707)
========== ==========
Income (Loss)Per Share $ (.11) $ (.03)
Weighted Average Number of Shares
Outstanding 10,888,752 10,753,252
Fully Diluted Income(Loss) Per Share $ (.11) $ (.03)
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this report.
5
<PAGE>
LINKON CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended October 31, Ended October 31,
1997 1996
---- ----
<S> <C> <C>
Gross Revenues $ 916,173 $ 1,252,146
Cost of Goods Sold - Product 388,019 672,916
- Software amortization 96,366 56,883
---------- ----------
484,385 729,799
---------- ----------
Gross Margin On Sales 431,788 522,347
Selling, General and
Administrative Expenses 557,457 544,906
Research and Development 72,846 100,033
---------- ----------
630,303 644,939
---------- ----------
Operating Income(Loss) ( 198,515) (122,592)
Other Income (Expense)
Interest Income 0 1,775
Interest Expense ( 59,581) (70,772)
---------- ----------
( 59,581) (68,997)
---------- ----------
Income(Loss) Before Income Taxes ( 258,096) (191,589)
Income Taxes 4000 0
----------- ----------
Net Income(Loss) $ ( 262,096) $ (191,589)
========== ==========
Income(Loss) Per Share $(.02) $(.02)
Weighted Average Number of Shares
Outstanding 10,888,752 10,753,252
Fully Diluted Income(Loss) Per Share $(.02) $(.02)
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this report.
6
<PAGE>
LINKON CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Nine Months Ended October 31,
1997 1996
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
-------------------------------------
Net Income (Loss) $(1,229,415) $ (364,707)
Add: Adjustments to Reconcile Net Loss to
Net Cash Used in Operating Activities:
Depreciation & Amortization 453,736 304,009
Gain on Sale of Securities -- (679,909)
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable ( 74,987) (288,742)
(Increase) Decrease in Other Receivables 3,359 22,194
(Increase) Decrease in Inventory 180,830 (201,563)
(Increase) Decrease in Prepaid Expenses 15,584 ( 26,794)
(Increase) Decrease in Software ( 261,770) ( 232,386)
(Increase) Decrease in Prepaid Financing Cost 7,842 7,842
(Increase) Decrease in Security Deposits -- 12,235
Increase (Decrease) in Accounts Payable 57,225 ( 41,851)
Increase (Decrease) in Accrued Expenses 166,888 52,485
Increase in Interest Payable 122,502 33,750
Increase (Decrease) in Taxes Payable ( 4,207) ( 3,180)
---------- ----------
Net Cash Used in Operating Activities ( 562,413) (1,406,617)
---------- ----------
Cash Flows From Investing Activities:
- -------------------------------------
Cash Paid to Purchase Equipment ( 47,490) ( 15,492)
Proceeds from Sale of Securities 0 1,020,000
Investment in Non-Marketable Securities 0 479
---------- ----------
Net Cash Provided by (Used in) Investing Activities ( 47,490) 1,004,987
---------- ----------
Cash Flows from Financing Activities:
- -------------------------------------
Proceeds from Sale of Common Stock 45,000 --
Borrowings(Payments) on Bank Debt -- 14,999
---------- ----------
Net Cash Provided by (Used in) Financing Activities 45,000 14,999
---------- ----------
Net Increase (Decrease) in Cash ( 564,903) ( 386,631)
Cash and Cash Equivalents at Beginning of Period 630,726 586,503
---------- ----------
Cash and Cash Equivalents at End of Period $ 65,823 $ 199,872
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this report.
7
<PAGE>
LINKON CORPORATION
------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
October 31, 1997
----------------
1) In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments(consisting of only normal recurring
accruals) necessary to present fairly the financial position as of October 31,
1997 and 1996, and January 31, 1997, and the results of operations for the nine
month and three month periods ended October 31, 1997 and 1996 and cash flows for
the nine month periods ended October 31, 1997 and 1996.
The accounting policies followed by the Company are set forth in Note 3 to
the Company's financial statements in the Linkon Corporation Annual Report on
Form 10-KSB for the fiscal year ended January 31, 1997.
2) ANALYSIS OF STOCKHOLDERS' EQUITY:
----------------------------------
Capital
Outstanding in Excess Accumulated
Shares Amount of Par Value Deficit
Balance January 31, 1997 10,866,252 $10,867 $9,329,296 $(8,143,922)
Issuance of 30,000 $ 30 $ 44,970 --
Common Stock, Net of
Expenses
Loss for Nine Months
Ended October 31, 1997 -- -- -- (1,229,415)
---------- ------- ---------- -----------
Balance October 31, 10,896,252 $10,897 $9,374,266 $(9,373,337)
========== ======= ========== ===========
3) RECLASSIFICATION OF THE AMORTIZATION OF CAPITALIZED SOFTWARE COSTS:
-------------------------------------------------------------------
During the quarter ending October 31, 1996 the Company reclassified the
amortization of capitalized software costs from the Research & Development
category to Cost of Goods Sold.
Due to this reclassification the Company has restated all financial statements
being presented to take account of this reclassification for prior periods. This
reclassification had no effect on the results of operations or net loss being
reported on the income statements being presented. All information provided in
the following Management's Discussion and Analysis of Financial Condition and
Results of Operations is being presented after taking into consideration this
reclassification.
4) RESTATEMENT OF SELLING, GENERAL and ADMINISTRATIVE EXPENSES, RESEARCH and
-------------------------------------------------------------------------
DEVELOPMENT EXPENSES, and INTEREST EXPENSE FOR THE THREE AND NINE MONTH
-----------------------------------------------------------------------
PERIODS ENDING OCTOBER 31, 1996
------------------------------
The Company has restated the above expenses for 1996 to correct
misclassification of expenses recorded in the 3 month period ending October 31,
1996. Selling, General and Administrative Expenses for the three month period
was restated to $544,906 from $487,056, and for the nine month period was
restated to $1,490,225 from $1,341,009. Research and Development expenses for
the three month period was restated to $100,033 from $134,883, and for the nine
month period was restated to $261,242 from $409,858. Interest expense for the
three month period was restated to $70,772 from $93,772, and for the nine month
period was restated to $189,598 from $212,598.
This restatement of expenses for the three month and nine month periods ending
October 31, 1996 has no effect on the results of operations or net loss as
previously reported.
5) FINANCING OF OPERATIONS:
------------------------
See Management's Discussion and Analysis- Liquidity and Capital Resources as to
the Company's need for additional capital and any plans for the future financing
of its operations.
8
<PAGE>
ITEM 2
------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Net Income (Loss)
- -----------------
The Company reported a net loss of $1,229,415 for the first nine months of
fiscal 1998 as compared to a net loss of $364,707 for the same period during the
prior year, notwithstanding an increase in gross revenues of 15% for the same
period (see "Revenues" below). This increase in the net loss reported by the
Company was due to the following factors:
Selling, General and Administrative expenses increased from $1,490,225 in
the first nine months of fiscal year 1997 to $1,844,720 in the same nine months
of fiscal year 1998. This is discussed more fully under the section entitled
"Selling, General and Administrative Expenses" below.
Gross Margin decreased from 42% in the first nine months of fiscal year
1997 to 40% in the same nine months of fiscal year 1998. This is more fully
discussed under the section entitled "Cost of Goods Sold" below.
The Company had $679,909 of other income during the first nine months of
fiscal 1997 from the sale of its investment in Concentric Network Corporation,
which income did not recur during the corresponding period of fiscal 1998.
For the three months ended October 31, 1997, the Company reported a net loss of
$262,096 as compared to a net loss of $191,589 for the three month period ended
October 31, 1996. This increase in net loss of $70,507, or 37%, was primarily
caused by the 27% decrease in gross revenues for the third quarter of fiscal
1998 when compared to the third quarter of fiscal 1997.(See "Revenues" below.)
Revenues
- --------
For the nine months ended October 31, 1997 revenues increased by $327,096
from the nine month period ended October 31, 1996, an increase of 15%. This
increase was due mainly to increased shipments to AT&T, the Company's largest
customer. During the nine months ended October 31, 1997, the Company shipped
approximately $1.5M of the Escape(TM) Platform and associated services to AT&T.
The Company's total order backlog as of 10/31/97 was approximately $180,000, and
as of 12/12/97 was approximately $100,000. Substantially the entire backlog was
for products scheduled to be shipped during the fourth quarter of fiscal 1998.
For the three months ended October 31, 1997, revenues decreased $335,973
from the three month period ended October 31, 1996, a decrease of 27%. This was
as a result of shipments against a large order to AT&T during the three month
period ended October 31, 1996.
During the nine months ended October 31, 1997, the Company introduced
LinkNet(TM), its new Internet Telephony (Voice and Fax over the Internet)
product. A small but increasing quantity of initial shipments of this product
were made during the first nine months of fiscal 1998, and the Company expects
sales of this product to increase during the fourth quarter of fiscal 1998.
The Company continues to concentrate on developing and expanding its
customer base and is currently working on several new projects for other major
customers which it anticipates will diversify its customer base and increase
revenues in both the near and long-term. While the certainty of these new
projects becoming future revenues for the Company cannot be measured at this
point in time, the management of the Company is encouraged by the inquiries it
is receiving concerning its products.
Cost of Goods Sold
- ------------------
Cost of goods sold for products, consisting of parts, supplies and
manufacturing costs for the Company's hardware and software products, including
software amortization, were $1,462,026 and $1,220,648, or 60% and 58% of
revenues, for
9
<PAGE>
the nine months ended October 31, 1997 and 1996 respectively. Cost of goods sold
were $484,385 and $729,799, or 53% and 58% of revenues for the three months
ended October 31, 1997 and 1996 respectively. Management attributes the changes
in cost of goods sold to random changes in product mix from period to period,
rather than material developments in the Company's business. The cost of goods
sold varies with each product line, with software having little or no material
cost (approximately 5-10%). The primary costs incurred by the Company are for
materials and equipment relating to its hardware products, which also carry
lower profit margins than the Company's software products. The Company
manufactures and assembles all hardware through contracted third party suppliers
under the direct supervision of the Company's management.
While management continues to believe that its products can ultimately be
sold with a less than 50% cost of goods sold, management also realizes the need
to gain market share for its products and will, for the near term, be aggressive
in its pricing policy. However, management also believes that the cost of sales
will go down as customers begin to order enhanced software features, which
features carry significantly lower costs than the Company's hardware products,
and as well as a result of research and development projects aimed at increasing
efficiency while reducing cost.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, General and Administrative expenses for the nine months ended
October 31, 1997 and 1996 were $1,844,720 and $1,490,225 respectively. This
constituted approximately 75% and 70% of revenues for the nine months ended
October 31, 1997 and 1996 respectively. Selling, General and Administrative
expenses for the three months ended October 31, 1997 and 1996 were $557,457 and
$544,906 respectively. This constituted approximately 61% and 39% of revenues
for the three months ended October 31, 1997 and 1996 respectively. This increase
was due primarily to increases in staffing in Sales, Marketing and Customer
Support, expenditures for Marketing and Advertising programs for the Escape(TM)
and LinkNet(TM) products, and legal and administrative costs associated with the
Company's shareholders meeting held on March 25, 1997.
Research, Development and Software
- ----------------------------------
The Company incurred research, development and software costs of approximately
$198,513 and $261,242 for the nine months ended October 31, 1997 and 1996
respectively. The Company incurred research, development and software costs of
approximately $72,846 and $100,033 for the three months ended October 31, 1997
and 1996 respectively. This decrease was primarily due to the Company's
determination to reduce these costs in fiscal 1998 in light of the Company's
continuing losses, and to a decrease in salaries as a result of attrition.
These amounts consist of internal salaries, outside consulting services,
equipment and fixed overhead costs. The Company expects research, development
and software costs to increase in future periods as finances permit.
Liquidity and Capital Resources
- -------------------------------
To date, the Company has funded operations from the receipt of proceeds
from private placements of debt and equity, including the exercise of warrants,
interest earned from the investment of such proceeds in interest earning assets,
and revenues from operations. During the fiscal year ended January 31, 1997 the
Company received $169,439 in net proceeds, after payment of offering related
expenses, from exercises of warrants and from the sale of its common stock.
During the first nine months of fiscal 1998, the Company raised approximately
$45,000 of net proceeds from the exercises of warrants. These amounts were
primarily used to fund operations.
During the first nine months of fiscal 1998, net cash used in operating
activities was approximately $562,000. As a result, on October 31, 1997, the
Company held cash and cash equivalents of approximately $66,000, down from cash
of approximately $631,000 as of January 31, 1997, and had a working capital
deficit (current assets minus current liabilities) of approximately $121,873,
down from a working capital surplus of approximately $910,000 as of January 31,
1997 (although as of December 12, 1997 the Company had a cash balance of
approximately $700,000 based upon collection of orders shipped after 10/31/97).
The Company's cash flow and liquidity continues to be severely impaired due to
ongoing losses from operations. While the Company's Maestro System has begun to
gain acceptance in the market, the Company is also finding strong interest at
large call centers with the Company's Escape(TM) Platform and with its new
LinkNet(TM) Internet Telephony products. While the Company believes that this
will be a good market for the Company's products over time, the complexity of
the Escape(TM) and LinkNet(TM) products, and the size of the orders, requires
longer lead times from first inquiry to sale than with the Company's other
10
<PAGE>
products. While the Company's management continues to believe that in the near
future the Company will be cash flow positive from its operations as its
products continue to gain acceptance and popularity in the marketplace, there
can be no assurances either that such will in fact occur or exactly when the
Company may reach such a cash flow position.
Based primarily on the strength of its recent purchase orders from AT&T ,
the Company has begun to be able to finance its operations through receivables
financing, secured by purchase orders from creditworthy customers. In May of
1997 the Company was able to consumate a factoring arrangement with Boston
Financial and Equity Corporation to finance receivables from AT&T and other
customers as required. The Company is also currently pursuing alternative
financiers to secure asset based funding and purchase order financing to finance
future orders from customers as required (although no such arrangement is in
place as of this date).
Provided the Company's Maestro(TM) System continues to gain market
acceptance, the Company believes that, in the future, it will be able to rely
less on private equity financings and the exercise of warrants by existing
warrant holders and more on cash flow generated from revenues from increased
hardware and software sales to fund its continuing operations. However, due to
the planned introduction of new and improved products, and the anticipated
growth due to, among other things, the manufacturing of hardware and software
products and the expansion of operations, management anticipates that there will
be a continued need for cash resources from sources other than operations to
meet, among other things, anticipated commitments for raw materials, increased
marketing activities, and personnel.
The Company does not currently contemplate any significant capital
expenditures during fiscal 1998. The Company does not believe that there are
any contingencies which would have a material adverse effect on the Company's
financial condition, future operating results or liquidity.
Statements throughout this report that state the Company's or its
management's intentions, beliefs, expectations or predictions of the future are
forward looking statements. It is important to note that the Company's actual
results could differ materially from those projected in such forward looking
statements.
11
<PAGE>
EXHIBIT I
LINKON CORPORATION
------------------
CALCULATION OF EARNINGS PER SHARE
---------------------------------
(Unaudited)
Nine Months Nine Months
Ended Ended
October 31, 1997 October 31, 1996
---------------- ----------------
Loss for the Period $ (1,229,415) $ (364,707)
============ ==========
Weighted Number of Shares Outstanding 10,888,752 10,753,252
============ ==========
Loss Per Share: $ (.11) $ (.03)
============ ==========
12
<PAGE>
LINKON CORPORATION
------------------
PART II. OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
Exhibit
No. Description of Document
-----------------------
27 Financial Data Schedule for the period ended
October 31, 1997(1)
____________
(1) Submitted separately, electronically.
____________
b. Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended October 31,
1997.
13
<PAGE>
LINKON CORPORATION
------------------
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
LINKON CORPORATION
Registrant
DATED: December 15, 1997 /s/ Lee W. Hill
---------------
BY: LEE W. HILL
CHIEF EXECUTIVE OFFICER
DATED: December 15, 1997 /s/ Thomas V. Cerabona
-----------------------
BY: THOMAS V. CERABONA
VICE PRESIDENT OF OPERATIONS
PRINCIPAL ACCOUNTING OFFICER
14
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description of Document
-----------------------
27 Financial Data Schedule for the period ended
October 31, 1997(1)
____________
(1) Submitted separately, electronically.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM YHE
COMPANY'S CONSOLIDATED BALANCE SHEET DATED AS OF OCTOBER 31, 1997 AND THE
COMPANY'S CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED OCTOBER
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS AND THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> Oct-31-1997
<CASH> 65,823
<SECURITIES> 0
<RECEIVABLES> 565,226
<ALLOWANCES> 5,741
<INVENTORY> 447,668
<CURRENT-ASSETS> 1,115,905
<PP&E> 1,432,987
<DEPRECIATION> 1,022,902
<TOTAL-ASSETS> 2,553,052
<CURRENT-LIABILITIES> 1,237,778
<BONDS> 1,303,448
<COMMON> 10,897
0
0
<OTHER-SE> 11,826
<TOTAL-LIABILITY-AND-EQUITY> 2,553,052
<SALES> 2,444,223
<TOTAL-REVENUES> 2,444,223
<CGS> 1,462,026
<TOTAL-COSTS> 1,462,026
<OTHER-EXPENSES> 2,043,233
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 164,379
<INCOME-PRETAX> (1,225,415)
<INCOME-TAX> 4,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,229,415)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
