FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended January 31, 1997
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 March 3, 1997, 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 January 31, 1997 1
Consolidated Statements of Operations for the nine months
ended January 31, 1997 and 1996 2
Consolidated Statements of Operations for the three months
ended January 31, 1997 and 1996 3
Consolidated Statements of Cash Flows for the nine months
ended January 31, 1997 and 1996 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 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEET (Unaudited)
As of January 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 214,000
Accounts receivable, net (Note 2) 1,968,000
Inventories (Notes 2 and 3) 2,937,000
Prepaid expenses and other current assets 86,000
5,205,000
Property, plant and equipment, net 1,845,000
Deferred tax asset (Note 4) 228,000
Other assets 128,000
$ 7,406,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (Note 5) $ 1,335,000
Current maturity of note payable to former officer 97,000
Trade accounts payable 908,000
Accrued liabilities 487,000
2,827,000
Long-term debt, less current maturities (Note 5) 1,121,000
Note payable to former officer 288,000
Commitments and contingencies (Notes 6 and 7) -
Stockholders' equity (Note 7):
Common stock, at par value 1,439,000
Capital in excess of par value 8,671,000
Accumulated deficit (6,735,000)
3,375,000
Less treasury stock, at cost 205,000
3,170,000
$ 7,406,000
</TABLE>
The accompanying notes are an integral part of these statements.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Nine Months Ended January 31,
<TABLE>
<S> <C> <C>
1997 1996
Net sales (Note 2) $11,341,000 $11,943,000
Cost of goods sold 8,296,000 8,788,000
Gross profit 3,045,000 3,155,000
Operating expenses:
Engineering 570,000 695,000
Selling, general and administrative 2,313,000 2,228,000
2,883,000 2,923,000
Earnings from operations 162,000 232,000
Other income (expense):
Interest expense (191,000) (244,000)
Other, net (14,000) 516,000
(205,000) 272,000
Earnings (loss) before provision for income taxes
and cumulative effect of change in method
of accounting (Note 2) (43,000) 504,000
Provision for income taxes (Note 4) - 172,000
Earnings (loss) before cumulative effect of change
in method of accounting (Note 2) (43,000) 332,000
Cumulative effect of change in method of
accounting (Note 2) (506,000) -
Net earnings (loss) $ (549,000) $ 332,000
Earnings (loss) per common and common
equivalent share:
Earnings (loss) before cumulative effect $ (.02) $ .12
Cumulative effect (.18) -
$ (.20) $ .12
Weighted average common and common equivalent
shares outstanding 2,801,000 2,808,000
The pro forma amounts assuming the new method of
accounting had been applied retroactively are as
follows:
Net earnings (loss) $ (43,000) $ 546,000
Earnings (loss) per share $ (.02) $ .19
</TABLE>
The accompanying notes are an integral part of these statements.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended January 31,
<TABLE>
<S> <C> <C>
1997 1996
Net sales (Note 2) $ 3,506,000 $ 3,688,000
Cost of goods sold 2,597,000 2,869,000
Gross profit 909,000 819,000
Operating expenses:
Engineering 165,000 229,000
Selling, general and administrative 597,000 853,000
762,000 1,082,000
Earnings (loss) from operations 147,000 (263,000)
Other income (expense):
Interest expense (64,000) (75,000)
Other, net (2,000) 519,000
(66,000) 444,000
Earnings before provision for income taxes 81,000 181,000
Provision for income taxes (Note 4) - 62,000
Net earnings $ 81,000 $ 119,000
Earnings per common and common equivalent share $ .03 $ .04
Weighted average common and common equivalent
shares outstanding 2,820,000 2,847,000
The pro forma amounts assuming the new method of
accounting had been applied retroactively are as
follows:
Net earnings $ 81,000 $ 273,000
Earnings per share $ .03 $ .10
</TABLE>
The accompanying notes are an integral part of these statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended January 31,
<TABLE>
<S> <C> <C>
1997 1996
Cash flows from operating activities:
Net earnings (loss) $ (549,000) $ 332,000
Adjustments to reconcile net earnings to net
cash provided by operations:
Gain from disposition of asset - (1,000)
Depreciation and amortization 245,000 214,000
Deferred tax asset - 172,000
Increase (decrease) in cash flows from
operations resulting from changes in:
Accounts receivable 1,334,000 676,000
Inventories (469,000) (29,000)
Prepaid expenses and other assets (84,000) (75,000)
Trade accounts payable 22,000 (118,000)
Accrued liabilities (23,000) (64,000)
Accrued interest on note payable to former
officer - (60,000)
1,025,000 715,000
Net cash provided by operating activities 476,000 1,047,000
Cash flows from investing activities:
Capital expenditures (249,000) (161,000)
Proceeds from disposition of assets - 1,000
Net cash used in investing activities (249,000) (160,000)
Cash flows from financing activities:
Borrowings against credit line 4,394,000 12,533,000
Payments against credit line (4,574,000) (13,058,000)
Proceeds from issuance of long-term debt 113,000 -
Principal payments on long-term debt (87,000) (405,000)
Payments on capital lease obligations (9,000) (10,000)
Proceeds from issuance of common stock 51,000 36,000
Acquisition of treasury stock (50,000) -
Net cash used in financing activities (162,000) (904,000)
Net increase (decrease) in cash $ 65,000 $ (17,000)
Cash at beginning of year 149,000 101,000
Cash at end of January $ 214,000 $ 84,000
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest $ 225,000 $ 308,000
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
January 31, 1997, and the results of operations for the three and nine
months ended January 31, 1997.
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 nine months
ended January 31, 1997. 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 $ 1,564,000
Work in process 1,241,000
Finished goods 132,000
$ 2,937,000
</TABLE>
Note 4 - Income Taxes
The net deferred tax asset included in the accompanying
consolidated balance sheet at January 31, 1997, 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
In September 1996, the company 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 January 31, 1997, 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, and at
October 31, 1996 and January 31, 1997, the company was in violation of a
quarterly net worth 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 provisions as of January 31, 1997. One of the bank's
remedies is to demand full payment of the outstanding balance.
Accordingly, the outstanding balance of $467,000 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.
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.
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. For the nine month period ended
January 31, 1997, the company has incurred legal costs of $142,000 for this
investigation.
Note 7 - Pending Stock Sale
On January 24, 1997, the company announced that it had entered
into a definitive agreement to sell 2,173,861 newly issued shares of common
stock (which would represent approximately 44 percent of the then-
outstanding shares) to Brockson Technologies Group LLC for approximately
$2.2 million. In connection with this sale, Brockson also will purchase, at
the same price per share, 510,506 shares of Torotel common stock from the
founder's family shareholders of Torotel. After purchasing these shares,
Brockson will then own more than 50 percent of the outstanding Torotel
shares. Pursuant to this agreement, Brockson also will have the contingent
right to receive, for no further consideration, additional shares of common
stock from the company in the event that Torotel experiences any
extraordinary costs or expenses related to the product testing failures
discussed in Note 6 of Notes to the Consolidated Financial Statements.
These transactions are subject to, among other things, Brockson
obtaining financing, the approval of Torotel shareholders, and regulatory
approvals. The founder's family shareholders of Torotel have agreed to vote
all of their shares in favor of the transaction with Brockson.
Brockson Technologies Group LLC of Phoenix, Arizona, whose
principals have manufacturing, operational and marketing experience in the
electronics industry, plans to provide growth avenues for the company with
new products and synergistic acquisitions.
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.
NINE MONTHS ENDED JANUARY 31, 1997 VERSUS NINE MONTHS
ENDED JANUARY 31, 1996
Net sales decreased 5%. The net sales of Torotel Products
decreased 7% from $5,034,000 to $4,693,000 due primarily to lower
shippable bookings during the first six months of fiscal 1997. The current
year's net sales were approximately $140,000 lower than planned due to an
engineering process change being developed jointly by Boeing North
American, Inc. and Torotel Products, which resulted in no January shipments
of the potted coil assembly for the Hellfire II missile. The development work
is ongoing and will result in reduced shipments of the potted coil assembly in
the fourth quarter. OPT's net sales decreased 4% from $6,909,000 to
$6,648,000 due primarily to lower sales of magnetic components.
Gross profit as a percentage of net sales increased slightly. The
gross profit percentage of Torotel Products increased 2% due primarily to
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 offset partially by improved labor efficiencies
and lower fixed production costs.
Engineering expenses decreased 18%. The engineering expenses
of Torotel Products decreased 34% from $326,000 to $216,000 due to lower
payroll costs associated with a cutback in personnel. The engineering
expenses of OPT decreased 4% from $369,000 to $354,000 due primarily to
a $23,000 credit for an adjustment to the liability for compensated absences.
Selling, general and administrative (SG&A) expenses increased 4%.
The SG&A expenses of Torotel, Inc. increased 24% from $204,000 to
$252,000 due primarily to a $36,000 bonus award pursuant to the Incentive
Compensation Plan, a $16,000 increase in travel costs, and a $22,000
increase in professional fees. These increases were offset partially by a
$26,000 decrease from a non-recurring charge in 1996 associated with the
company's 401(k) plan for non-union employees. The SG&A expenses of
Torotel Products decreased slightly from $1,284,000 to $1,276,000 due
primarily to a $145,000 decrease in sales commissions, a $89,000 decrease
in payroll costs due to a reduction in personnel, a $37,000 decrease in
professional fees, and a $12,000 decrease in bank charges. These
decreases were offset partially by a one-time restructuring charge of
$251,000, a $15,000 charge for the proper disposal of certain outdated
hazardous materials, and a $9,000 increase in education and training costs.
The SG&A expenses of OPT increased 6% from $740,000 to $785,000 due
primarily to a $60,000 increase in payroll costs. This increase was offset
partially by a $23,000 credit for an adjustment to the liability for
compensated absences.
Interest expense decreased 22%. The interest expense of Torotel,
Inc. decreased 11% from $35,000 to $31,000 due to a lower interest-bearing
balance on the note payable to a former officer. The interest expense of
Torotel Products decreased 11% from $76,000 to $68,000 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. This decrease was offset partially by the effect of a
higher aggregate borrowing level.The interest expense of OPT decreased
31% from $133,000 to $92,000 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.
Sundry non-operating income decreased due to a $510,000 gain in
fiscal 1996 from the final settlement on a business income and contents
insurance claim which resulted from a fire at Torotel Products' facility in
March 1995.
For the reasons discussed above, consolidated pretax earnings
decreased from a profit of $504,000 to a loss of $43,000. The pretax loss of
Torotel, Inc. increased from a loss of $239,000 to a loss of $284,000. The
pretax earnings of Torotel Products decreased from a profit of $185,000 to a
loss of $185,000. The pretax earnings of OPT decreased from $558,000 to
$426,000.
Provision for income taxes decreased due to lower pretax earnings.
THREE MONTHS ENDED JANUARY 31, 1997 VERSUS THREE MONTHS
ENDED JANUARY 31, 1996
Net sales decreased 5%. The net sales of Torotel Products
decreased slightly from $1,403,000 to $1,394,000. The recent quarter's net
sales were approximately $140,000 lower than planned due to an
engineering process change being developed jointly by Boeing North
American, Inc. and Torotel Products, which resulted in no January shipments
of the potted coil assembly for the Hellfire II missile. The development work
is ongoing and will result in reduced shipments of the potted coil assembly in
the fourth quarter. OPT's net sales decreased 8% from $2,285,000 to
$2,112,000 due primarily to a lower sales of magnetic components.
Gross profit as a percentage of net sales increased 4%. The gross
profit percentage of Torotel Products increased 10% due primarily to
improved labor efficiencies and lower fixed production costs. The gross
profit percentage of OPT decreased 1% due primarily to lower sales volume.
Engineering expenses decreased 28%. The engineering expenses
of Torotel Products decreased 35% from $100,000 to $65,000 due to lower
payroll costs associated with a cutback in personnel. The engineering
expenses of OPT decreased 22% from $129,000 to $100,000 due primarily
to a $23,000 credit for an adjustment to the liability for compensated
absences.
Selling, general and administrative (SG&A) expenses decreased
30%. The SG&A expenses of Torotel, Inc. decreased 18% from $82,000 to
$67,000 due primarily to a $26,000 decrease from a non-recurring charge in
1996 associated with the company's 401(k) plan for non-union employees.
This decrease was offset partially by a $7,000 increase in travel costs and a
$4,000 increase in professional fees. The SG&A expenses of Torotel
Products decreased 42% from $511,000 to $296,000 due primarily to a
$86,000 decrease in professional fees, a $68,000 decrease in sales
commissions, a $33,000 decrease in payroll costs, a $10,000 decrease in
bank charges, and a $6,000 reduction in the restructuring charge recorded in
the second quarter ended October 31, 1996. The SG&A expenses of OPT
decreased 10% from $260,000 to $234,000 due primarily to a $23,000 credit
for an adjustment to the liability for compensated absences.
Interest expense decreased 15%. The interest expense of Torotel,
Inc. decreased 9% from $11,000 to $10,000 due to a lower interest-bearing
balance on the note payable to a former officer. The interest
expense of Torotel Products increased 9% from $23,000 to $25,000 due to a
higher aggregate borrowing level. This increase was offset partially by 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 29% from $41,000 to $29,000 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.
Sundry non-operating income decreased due to a $510,000 gain in
fiscal 1996 from the final settlement on a business income and contents
insurance claim which resulted from a fire at Torotel Products' facility in
March 1995.
For the reasons discussed above, consolidated pretax earnings
decreased from $181,000 to $81,000. The pretax loss of Torotel, Inc.
decreased from a loss of $93,000 to a loss of $77,000. The pretax earnings
of Torotel Products decreased from $179,000 to $58,000. The pretax
earnings of OPT increased from $95,000 to $100,000.
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 has approved the pending stock sale
discussed in Note 7 of Notes to the Consolidated Financial Statements.
During the nine months ended January 31, 1997, the company's
operating activities generated $476,000 in cash flow. Corporate related
matters used $431,000. The operations of Torotel Products provided
$238,000 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. OPT's operations provided
$669,000 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 $249,000 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 $50,000 for capital expenditures.
Financing activities used $162,000 in cash flow due primarily to
reductions in the revolving credit line. At January 31, 1997, the company
had used $790,000 of its revolving credit line and had $1,617,000 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 is in violation of certain financial covenants 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
provisions. One of the remedies available to the bank is to demand full
payment of the outstanding balance, which is $467,000 at January 31, 1997.
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 27 -- Financial Data Schedule (electronic filings only)
b) Reports on Form 8-K -- There were two reports filed on Form 8-K
during the three months ended January 31, 1997, as required by Item 5
of Form 8-K. The first report, dated November 25, 1996, included
information on the testing discrepancies discussed in Note 6
of Notes to the Consolidated Financial Statements. The
second report, dated January 23, 1997, included information on the
pending stock sale to Brockson Technologies Group LLC
discussed in Note 7 of Notes to the Consolidated Financial
Statements.
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: March 11, 1997 /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 JANUARY 31,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JAN-31-1997
<CASH> 214,000
<SECURITIES> 0
<RECEIVABLES> 2,060,000
<ALLOWANCES> 92,000
<INVENTORY> 2,937,000
<CURRENT-ASSETS> 5,205,000
<PP&E> 4,495,000
<DEPRECIATION> 2,650,000
<TOTAL-ASSETS> 7,406,000
<CURRENT-LIABILITIES> 2,827,000
<BONDS> 0
<COMMON> 1,439,000
0
0
<OTHER-SE> 1,409,000
<TOTAL-LIABILITY-AND-EQUITY> 7,406,000
<SALES> 11,341,000
<TOTAL-REVENUES> 11,341,000
<CGS> 8,296,000
<TOTAL-COSTS> 11,179,000
<OTHER-EXPENSES> 14,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 191,000
<INCOME-PRETAX> (43,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (43,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (506,000)
<NET-INCOME> (549,000)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
