FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended October 31, 1996
Commission File No. 2-33256
TOROTEL, INC.
(Exact name of small business issuer as specified in its charter)
MISSOURI 44-0610086
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
13402 SOUTH 71 HIGHWAY, GRANDVIEW, MISSOURI 64030
(Address of principal executive offices)
(816) 761-6314
(Issuer's telephone number)
NONE
(Former name, former address and former fiscal year, if change since last
report)
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 and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
As of December 12, 1996, there were 2,807,767 shares of Common Stock,
$.50 Par Value, outstanding.
TOROTEL, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of October 31, 1996 1
Consolidated Statements of Operations for the six months
ended October 31, 1996 and 1995 2
Consolidated Statements of Operations for the three months
ended October 31, 1996 and 1995 3
Consolidated Statements of Cash Flows for the six months
ended October 31, 1996 and 1995 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis or Plan of Operation 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 13
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEET (Unaudited)
As of October 31, 1996
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 169,000
Accounts receivable, net (Note 2) 2,075,000
Inventories (Notes 2 and 3) 3,058,000
Prepaid expenses and other current assets 158,000
5,460,000
Property, plant and equipment, net 1,888,000
Deferred tax asset (Note 4) 228,000
Other assets 70,000
$ 7,646,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (Note 5) $ 1,178,000
Current maturity of note payable to former officer 94,000
Trade accounts payable 1,042,000
Accrued liabilities 789,000
3,103,000
Long-term debt, less current maturities (Note 5) 1,141,000
Note payable to former officer 313,000
Commitments and contingencies (Note 6) -
Stockholders' equity (Note 7):
Common stock, at par value 1,439,000
Capital in excess of par value 8,671,000
Retained earnings (deficit) (6,816,000)
3,294,000
Less treasury stock, at cost 205,000
3,089,000
$ 7,646,000
</TABLE>
The accompanying notes are an integral part of these statements.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Six Months Ended October 31,
<TABLE>
<S> <C> <C>
1996 1995
Net sales (Note 2) $ 7,835,000 $ 8,255,000
Cost of goods sold 5,699,000 5,919,000
Gross profit 2,136,000 2,336,000
Operating expenses:
Engineering 405,000 466,000
Selling, general and administrative 1,716,000 1,375,000
2,121,000 1,841,000
Earnings from operations 15,000 495,000
Other income (expense):
Interest expense (127,000) (169,000)
Other, net (12,000) (3,000)
(139,000) (172,000)
Earnings (loss) before provision
for income taxes and cumulative
effect of change in method
of accounting (Note 2) (124,000) 323,000
Provision for income taxes (Note 4) - 110,000
Earnings (loss) before cumulative
effect of change in
method of accounting (Note 2) (124,000) 213,000
Cumulative effect of change in
method of accounting (Note 2) (506,000) -
Net earnings (loss) $ (630,000) $ 213,000
Earnings (loss) per common and
common equivalent share:
Earnings (loss) before
cumulative effect $ (.04) $ .08
Cumulative effect (.18) -
$ (.22) $ .08
Weighted average common and
common equivalent
shares outstanding 2,798,000 2,801,000
The pro forma amounts assuming the new method of accounting had been applied
retroactively are as follows:
Net earnings (loss) $ (124,000) $ 273,000
Earnings (loss) per share $ (.04) $ .10
</TABLE>
The accompanying notes are an integral part of these statements.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended October 31,
<TABLE>
<S> <C> <C>
1996 1995
Net sales (Note 2) $ 3,768,000 $ 4,021,000
Cost of goods sold 2,751,000 2,982,000
Gross profit 1,017,000 1,039,000
Operating expenses:
Engineering 210,000 237,000
Selling, general and administrative 989,000 664,000
1,199,000 901,000
Earnings (loss) from operations (182,000) 138,000
Other income (expense):
Interest expense (57,000) (82,000)
Other, net (1,000) (2,000)
(58,000) (84,000)
Earnings (loss) before provision
for income taxes (240,000) 54,000
Provision (credit) for income
taxes (Note 4) (40,000) 18,000
Net earnings (loss) $ (200,000) $ 36,000
Earnings (loss) per common and
common equivalent share $ (.07) $ .01
Weighted average common and
common equivalent
shares outstanding 2,806,000 2,851,000
The pro forma amounts assuming the new method of accounting had been applied
retroactively are as follows:
Net earnings (loss) $ (200,000) $ 17,000
Earnings (loss) per share $ (.07) $ .01
</TABLE>
The accompanying notes are an integral part of these statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended October 31,
<TABLE>
<S> <C> <C>
1996 1995
Cash flows from operating activities:
Net earnings (loss) $ (630,000) $ 213,000
Adjustments to reconcile net earnings
to net cash
provided by operations:
Gain from disposition of asset - (1,000)
Depreciation and amortization 152,000 138,000
Deferred tax asset - 110,000
Increase (decrease) in cash flows from
operations
resulting from changes in:
Accounts receivable 1,227,000 457,000
Inventories (590,000) (108,000)
Prepaid expenses and other assets (98,000) (69,000)
Trade accounts payable 156,000 (145,000)
Accrued liabilities 279,000 72,000
Accrued interest on note payable to
former officer - (71,000)
1,126,000 383,000
Net cash provided by operating activities 496,000 596,000
Cash flows from investing activities:
Capital expenditures (199,000) (145,000)
Proceeds from disposition of assets - 1,000
Net cash used in investing activities (199,000) (144,000)
Cash flows from financing activities:
Borrowings against credit line 3,834,000 8,496,000
Payments against credit line (4,174,000) (8,702,000)
Proceeds from issuance of long-term debt 113,000 -
Principal payments on long-term debt (44,000) (269,000)
Payments on capital lease obligations (7,000) (7,000)
Proceeds from issuance of common stock 51,000 35,000
Acquisition of treasury stock (50,000) -
Net cash used in financing activities (277,000) (447,000)
Net increase (decrease) in cash $ 20,000 $ 5,000
Cash at beginning of year 149,000 101,000
Cash at end of October $ 169,000 $ 106,000
Supplemental Disclosures of Cash
Flow Information
Cash paid during the period for:
Interest $ 164,000 $ 241,000
Income taxes $ - $ -
</TABLE>
The accompanying notes are an integral part of these statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements
reflect the normal recurring adjustments which are, in the opinion of
management, necessary to present fairly the company's financial position at
October 31, 1996, and the results of operations for the three and six months
ended October 31, 1996.
The financial statements contained herein should be read in
conjunction with the company's financial statements and related notes filed
on Form 10-KSB for the year ended April 30, 1996.
Note 2 - Change in Accounting Method for Revenue Recognition
Historically, nearly all of Torotel Products' business came from U.S.
military contracts, which were accounted for using the percentage of
completion method for revenue recognition. However, as Torotel Products
continues to successfully move into the commercial market, its military
business has decreased. Because of this market shift, management
believes it is more practical to use the accrual method to recognize revenue.
In addition, management believes that the new method will standardize the
accounting functions between the company's subsidiaries so that a common
computer system can be used.
The new method has been applied to contracts in process effective
May 1, 1996, resulting in a cumulative effect charge of $506,000 (18 cents
per share), which has been included in the net loss for the six months ended
October 31, 1996. The pro forma amounts as shown on the consolidated
statements of operations include the effect of retroactive application of the
new method on net sales, cost of goods sold, sales commissions, and
related income taxes.
The effect of the change on the first quarter of fiscal 1997 was to
increase earnings before cumulative effect of change in accounting
$101,000 (3 cents per share) to $116,000 (3 cents per share), and to
decrease net earnings $440,000 (16 cents per share) to a net loss of $
430,000 (15 cents per share).
Note 3 - Inventories
The components of inventories are summarized as follows:
<TABLE>
<S> <C>
Raw materials $ 1,562,000
Work in process 1,302,000
Finished goods 194,000
$ 3,058,000
</TABLE>
Note 4 - Income Taxes
The net deferred tax asset included in the accompanying
consolidated balance sheet at October 31, 1996, includes the tax effects of
temporary differences and carryforwards which are the source of the
deferred asset, less a valuation allowance.
The components of the net deferred tax asset are summarized as
follows:
<TABLE>
<S> <C>
Net operating loss carryforwards $ 1,490,000
Inventory valuation reserve 270,000
Tax credit carryforwards 378,000
Property, plant and equipment 170,000
Other 98,000
2,406,000
Less valuation allowance 2,178,000
$ 228,000
</TABLE>
The tax credit and operating loss carryforwards expire in various
amounts in the years 1997 through 2011.
Note 5 - Long-term Debt
The company has entered into an arrangement with Phillipsburg
National Bank & Trust Company (PNBT) whereby PNBT will individually
finance 90 percent of the total cost of any capital equipment purchases.
Under the terms of the arrangement, each individual loan will have a five-
year term, the outstanding balance will bear interest at a annual fixed rate
equivalent to 1% over the bank's prime rate at the inception of each loan,
and each loan will require monthly principal and interest payments. In
addition, any funds borrowed under this arrangement will reduce the
aggregate amount of the revolving credit line as provided under the credit
agreement. At October 31, 1996, the company had two equipment loans
under this arrangement. These loans originated on September 12, 1996,
and October 24, 1996, in the amount of $39,000 and $54,000, respectively.
The outstanding balances of these loans bear interest at 9.25% per annum.
The loan dated September 12 requires monthly principal and interest
payments of $817, and expires September 12, 2001. The loan dated
October 24 requires monthly principal and interest payments of $1,140, and
expires October 24, 2001. As a result of these loans, funds available under
the company's revolving credit line have been reduced from $2,500,000 to
$2,407,000.
The company has a $500,000 note with Bank IV, N.A. dated
November 29, 1994. Under the terms of the note, the company is required
to comply with certain financial covenants. At April 30, 1996, the company
was in violation of an annual financial coverage ratio covenant contained in
the note. As of the filing of this Form 10-QSB, the bank has not determined
whether it will waive compliance with the subject provision as of April 30,
1996. One of the bank's remedies is to demand full payment of the
outstanding balance. Accordingly, the outstanding balance of $471,000 has
been classified as current in the accompanying consolidated balance sheet.
Note 6 - Commitments and Contingencies
On November 25, 1996, the company disclosed that Torotel
Products, Inc. in all likelihood failed to perform some required "thermal
shock" testing as frequently as required, and has inaccurately certified that
all required testing had been performed. The company's new management,
which discovered the discrepancies, has made immediate corrections and
now believes Torotel Products is in full compliance with the testing
requirements.
The company has made voluntary disclosure to the United States
Department of Defense (DOD) under the DOD Voluntary Disclosure
Program and expects to cooperate actively with any governmental
investigation. The investigation by the company's management into the
reporting discrepancies is continuing.
As a result of these apparent testing failures and false certifications,
parties to certain of Torotel Products' material contracts could have various
rights and remedies against Torotel Products. In addition, the DOD could
have similar claims against Torotel Products. The successful assertion of
some or all of these claims would have a material adverse effect on Torotel
and its business and assets, as well as its revenues and income from
continuing operations.
Note 7 - Proposed Stock Sale
On September 16, 1996, the company announced that it had
entered into a letter of intent for the possible sale of 1,990,050 shares of
common stock for $2.0 million to Brockson Investment Company, Phoenix,
Arizona. In connection with this sale, Brockson also would purchase at the
same per-share price, or acquire voting rights with respect to, stock from the
founder's family shareholders of the company. As a result of these
transactions, Brockson would acquire and control more than 50 percent of
the outstanding Torotel shares. These transactions are subject to, among
other things, due diligence, the negotiation and execution of definitive
agreements, and the approval of Torotel's shareholders.
Due to the contingency nature of the testing discrepancies discussed
in Note 6 of Notes to Consolidated Financial Statements, the transaction
with Brockson is under review.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
The discussion and analysis of the results of operations includes the
operations of Torotel, Inc., and its subsidiaries, Torotel Products, Inc. and
OPT Industries, Inc.
SIX MONTHS ENDED OCTOBER 31, 1996 VERSUS SIX MONTHS
ENDED OCTOBER 31, 1995
Net sales decreased 5%. The net sales of Torotel Products
decreased 9% from $3,631,000 to $3,299,000 due primarily to a lower
backlog position at the beginning of the fiscal year. OPT's net sales
decreased slightly from $4,624,000 to $4,536,000.
Gross profit as a percentage of net sales decreased slightly. The
gross profit percentage of Torotel Products decreased slightly due primarily
to higher material costs which resulted from the product mix. This increase
was partially offset by lower fixed production costs. The gross profit
percentage of OPT decreased slightly due primarily to higher material costs
which resulted from the product mix. This increase was partially offset by
improved labor efficiencies and lower fixed production costs.
Engineering expenses decreased 13%. The engineering expenses
of Torotel Products decreased 33% from $226,000 to $151,000 due to lower
payroll costs associated with a cutback in personnel. The engineering
expenses of OPT increased 6% from $240,000 to $254,000 due to higher
payroll costs.
Selling, general and administrative (SG&A) expenses increased
25%. The SG&A expenses of Torotel, Inc. increased 52% from $122,000 to
$186,000 due primarily to a $36,000 bonus award pursuant to the Incentive
Compensation Plan, a $14,000 increase in travel costs, and a $13,000
increase in professional fees. The SG&A expenses of Torotel Products
increased 27% from $772,000 to $980,000 due primarily to restructuring
charges of $257,000, a $15,000 charge for proper disposal of certain
hazardous materials, and a $13,000 increase in education and training costs.
These increases were offset partially by a $77,000 decrease in sales
commissions. The SG&A expenses of OPT increased 14% from $481,000
to $550,000 due primarily to a $54,000 increase in payroll costs and a
$147,000 increase in advertising costs.
Interest expense decreased 25%. The interest expense of Torotel,
Inc. decreased 12% from $24,000 to $21,000 due to a lower interest-bearing
balance on the note payable to a former officer. The interest expense of
Torotel Products decreased 19% from $53,000 to $43,000 due to a lower
aggregate borrowing level, and lower interest rates associated with
decreases in the prime lending rate and in the rate above prime being
charged under a new lending arrangement. The interest expense of OPT
decreased 31% from $92,000 to $63,000 due to a lower aggregate borrowing
level, and lower interest rates associated with decreases in the prime lending
rate and in the rate above prime being charged under a new lending
arrangement.
For the reasons discussed above, consolidated pretax earnings
decreased from a profit of $323,000 to a loss of $124,000. The pretax loss
of Torotel, Inc. increased from a loss of $146,000 to a loss of $207,000. The
pretax earnings of Torotel Products decreased from a profit of $6,000 to a
loss of $243,000. The pretax earnings of OPT decreased from $463,000 to
$326,000.
Provision for income taxes decreased due to lower pretax earnings.
THREE MONTHS ENDED OCTOBER 31, 1996 VERSUS THREE MONTHS
ENDED OCTOBER 31, 1995
Net sales decreased 6%. The net sales of Torotel Products
decreased 15% from $1,818,000 to $1,538,000 due primarily to a lower
backlog position at the beginning of the quarter. OPT's net sales increased
slightly from $2,203,000 to $2,230,000.
Gross profit as a percentage of net sales increased slightly. The
gross profit percentage of Torotel Products increased slightly due primarily
to improved labor efficiencies and lower fixed production costs. These
decreases were partially offset by higher material costs which resulted from
the product mix. The gross profit percentage of OPT increased slightly due
primarily to improved labor efficiencies and lower fixed production costs.
These decreases were partially offset by higher material costs which resulted
from the product mix.
Engineering expenses decreased 11%. The engineering expenses
of Torotel Products decreased 32% from $117,000 to $80,000 due to lower
payroll costs associated with a cutback in personnel. The engineering
expenses of OPT increased 8% from $120,000 to $130,000 due to higher
payroll costs.
Selling, general and administrative (SG&A) expenses increased
49%. The SG&A expenses of Torotel, Inc. increased 64% from $70,000 to
$115,000 due primarily to a $36,000 bonus award pursuant to the Incentive
Compensation Plan and a $7,000 increase in travel costs. The SG&A
expenses of Torotel Products increased 70% from $355,000 to $605,000
due primarily to restructuring charges of $257,000, a $43,000 increase in
legal fees, and a $15,000 charge for proper disposal of certain hazardous
materials. These increases were offset partially by a $54,000 decrease in
sales commissions and a $11,000 decrease in payroll costs. The SG&A
expenses of OPT increased 13% from $239,000 to $269,000 due primarily
to a $25,000 increase in payroll costs and a $5,000 increase in advertising
costs.
Interest expense decreased 30%. The interest expense of Torotel,
Inc. remained unchanged at $11,000. The interest expense of Torotel
Products decreased 19% from $26,000 to $21,000 due to lower interest rates
associated with decreases in the prime lending rate and in the rate above
prime being charged under a new lending arrangement.. The interest
expense of OPT decreased 44% from $45,000 to $25,000 due to a lower
aggregate borrowing level, and lower interest rates associated with
decreases in the prime lending rate and in the rate above prime being
charged under a new lending arrangement.
For the reasons discussed above, consolidated pretax earnings
decreased from a profit of $54,000 to a loss of $240,000. The pretax loss of
Torotel, Inc. increased from a loss of $81,000 to a loss of $126,000. The
pretax earnings of Torotel Products decreased from a loss of $28,000 to a
loss of $281,000. The pretax earnings of OPT increased from $163,000 to
$167,000.
Provision for income taxes decreased due to lower pretax earnings.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the company has relied on funds generated internally
and bank borrowings to meet its normal operating requirements and to
service bank indebtedness. While years of cost control programs
have allowed both Torotel Products and OPT to produce sufficient margins
and cash flow, this is not enough to promote growth. To facilitate further
expansion, the Board of Directors and management are working on a long-
term strategic plan for Torotel.
During the six months ended October 31, 1996, the company's
operating activities generated $496,000 in cash flow. Corporate related
matters used $279,000. The operations of Torotel Products provided
$235,000 due primarily to a lower level of receivables associated with the
accounting change discussed in Note 2 of Notes to Consolidated Financial
Statements, and a higher level of payables and accrued liabilities. OPT's
operations provided $540,000 due primarily to pretax earnings and a lower
level of receivables. Management's objective is to continue strengthening
the company's liquidity position through improved operations and asset
management.
Investing activities used $199,000 in cash flow for capital
expenditures for production and engineering equipment. For the balance of
the fiscal year, the company anticipates additional investments of
approximately $125,000 for capital expenditures.
Financing activities used $277,000 in cash flow due primarily to
reductions in the revolving credit line. At October 31, 1996, the company
had used $630,000 of its revolving credit line and had $1,777,000 available
for future cash requirements, based on the lender's borrowing base formula.
As discussed in
Note 5 of Notes to Consolidated Financial Statements, the company was in
violation of an annual financial coverage ratio covenant under the terms of a
note payable to Bank IV, N.A. As of the filing of this Form 10-QSB, the bank
has not determined whether it will waive compliance with the subject
provision as of April 30, 1996. One of the remedies available to the bank is
to demand full payment of the outstanding balance, which is $471,000 at
October 31, 1996. While the company has the liquidity available to pay-off
the note, management believes another source of financing can be obtained
in the event such demand is made.
The company believes that inflation will have only a minimal effect
on future operations since such effects will be offset by sales price increases
which are not expected to have a significant effect upon demand.
OTHER
Except for historical information contained herein, certain of the
matters discussed above are forward-looking statements that are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those set forth in the forward-looking statements, including
the company's dependence on timely development, introduction and
customer acceptance of new products, the impact of competition and price
erosion as well as supply and manufacturing constraints, and other risks and
uncertainties (see Note 6 of Notes to Consolidated Financial Statements).
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Stockholders' Meeting was held in Kansas City,
Missouri, on September 16, 1996, to elect a Board of Directors. At the
meeting, there were 1,957,467 shares voting in the election, with nominees
needing 978,734 shares to be elected.
Shareholders elected the following individuals to a one-year term on
the Board of Directors, with the number of shares voting "FOR" each
nominee indicated.
<TABLE>
<S> <C>
Dale H. Sizemore, Jr. 1,948,975
Ronald L. Benjamin 1,949,278
Christian T. Hughes 1,949,678
Dr. Thomas L. Lyon, Jr. 1,949,154
Richard A. Sizemore 1,948,975
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit 18 -- Letter re Change in Accounting Principle (see Page 12)
Exhibit 27 -- Financial Data Schedule (electronic filings only)
b) Reports on Form 8-K -- There was one report filed on Form 8-K
during the three months ended
October 31, 1996. The report, dated September 17,1996,
included information on the
possible sale of 1,990,050 shares of common stock for $2.0
million to Brockson Investment
Company of Phoenix, Arizona, as required by Item 5 of
Form 8-K.
EXHIBIT 18
GRANT THORNTON LLP
(Date)
Board of Directors
Torotel, Inc.
As stated in Note 2 to the condensed consolidated financial statements of
Torotel, Inc. and Subsidiaries (the "Company") for the three months ended
October 31, 1996, the Company changed its accounting policy for
recognizing revenue from the percentage of completion method to the
accrual method. Management believes the newly adopted accounting
principle is preferable in the circumstances because of the shift in the
Company's product mix away from government contracts and commercial
contracts made to buyers specifications towards commercial items of a
standard nature. In addition, management believes that the new method will
standardize the accounting functions between the Company's subsidiaries so
that a common computer system can be used. This will help provide
management with more timely and useful information to use a tool in
managing the Company. At your request, we have reviewed and discussed
with management the circumstances, business judgment, and planning that
formed the basis for making this change in accounting principle.
It should be recognized that professional standards have not been
established for selecting among alternative principles that exist in this area
or for evaluating the preferability of alternative accounting principles.
Accordingly, we are furnishing this letter solely for purposes of the
Company's compliance with the requirements of the Securities and
Exchange Commission, and it should not be used or relied on for any other
purpose.
Based on our review and discussion, we concur with management's
judgment that the newly adopted accounting principle is preferable in the
circumstances. In formulating this position, we are relying on management's
business planning and judgment, which we do not find unreasonable.
We have not audited any consolidated financial statements of Torotel, Inc.
and Subsidiaries as of any date or for any period subsequent to April 30,
1996. Accordingly, we are unable to express an opinion on whether the
method of accounting for the effect of the change is in conformity with
generally accepted accounting principles or it the financial information
included in Part I of this Form 10-QSB is fairly presented.
Very truly yours,
/s/ Grant Thornton LLP
SIGNATURES
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.
Torotel, Inc.
(Registrant)
Date: December 18, 1996 /s/ H. James Serrone
H. James Serrone
Vice President of Finance and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TOROTEL, INC. AND SUBSIDIARIES CONTAINED IN ITS
QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED OCTOBER 31,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> OCT-31-1996
<CASH> 169,000
<SECURITIES> 0
<RECEIVABLES> 2,163,000
<ALLOWANCES> 88,000
<INVENTORY> 3,058,000
<CURRENT-ASSETS> 5,460,000
<PP&E> 4,456,000
<DEPRECIATION> 2,568,000
<TOTAL-ASSETS> 7,646,000
<CURRENT-LIABILITIES> 3,082,000
<BONDS> 0
<COMMON> 1,439,000
0
0
<OTHER-SE> 1,475,000
<TOTAL-LIABILITY-AND-EQUITY> 7,646,000
<SALES> 7,835,000
<TOTAL-REVENUES> 7,835,000
<CGS> 5,699,000
<TOTAL-COSTS> 7,820,000
<OTHER-EXPENSES> 12,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 127,000
<INCOME-PRETAX> (124,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (124,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (506,000)
<NET-INCOME> (630,000)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
