<PAGE>   1

                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549

                                      FORM 10-QSB

                Quarterly report under Section 13 or 15(d) of the
                        Securities Exchange Act of 1934

                For the quarterly period ended December 31, 1997

                         Commission file number 0-15148

                                   ---------

                          SCIENTIFIC NRG, INCORPORATED
             (Exact name of registrant as specified in its charter)

                                    Minnesota
         (State or Other Jurisdiction of Incorporation or Organization)

                                2246 Lindsay Way
                           Glendora, California 91740
                    (Address of Principal Executive Offices)

                                   41-1457271
                      (I.R.S. Employer Identification No.)

       Registrant's telephone number, including area code: (909) 305-0322

                                  ------------

        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. At January 31, 1998 the
registrant had 4,203,423 shares of common stock, no par value, issued and
outstanding.



<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
<S>                                                                         <C> 
                                        PART I

ITEM 1.  FINANCIAL STATEMENTS.                                                3

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.           3

                                        PART II

ITEM 1.  LEGAL PROCEEDINGS.                                                   5

ITEM 2.  CHANGES IN SECURITIES.                                               5

ITEM 3.  DEFAULT UPON SENIOR SECURITIES.                                      5

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.                 5

ITEM 5.  OTHER INFORMATION.                                                   5

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.                                    5
</TABLE>



<PAGE>   3

                                     PART I

ITEM 1. FINANCIAL STATEMENTS.

        The Company's unaudited condensed balance sheet as of the end of the
Company's most recent quarter, December 31, 1997 and unaudited condensed
statements of operations for the three and six month period and statements of
cash flow for the six month period up to the date of the balance sheet and the
comparable period of the preceding fiscal year are attached hereto as pages F-1
through F-6 and are incorporated herein by this reference.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
        OF OPERATIONS.

        The following discussion and analysis should be read in conjunction with
the Company's audited financial statements and management's Discussion and
Analysis of Financial Condition and results of Operations included in the
Company's Annual Report on Form 10-KSB, filed with the Securities and Exchange
Commission on October 15, 1997.

        The following discussion includes "forward looking statements" ( "FLS" )
that represent management's assessment of future performance and its goals.
There are no assurances that the forward looking statements will be achieved.


RESULTS OF OPERATIONS

        The three and six month period ended December 31, 1997 compared to the
three and six month period ended December 31, 1996.

        The Company realized a net loss of $8,801, or $.01 per share for the
three month period ended December 31, 1997, compared to a net loss of $21,206,
or $.01 per share for the corresponding period of the prior fiscal year. The
Company realized a net loss of $50,006, or $.01 per share for the six month
period ended December 31, 1997, compared to a net loss of $111,974, or $.04 per
share for the corresponding period of the prior fiscal year. Management
attributes these decreased losses to the Company's reduced overhead and reduced
interest expense.

        Net sales of the Company during the three months ended December 31, 1997
increased $14,041 or 9.5% from the corresponding period of the prior fiscal
year. Net sales of the Company during the six months ended December 31, 1997
increased $20,521 or 8.7% from the corresponding period of the prior fiscal
year. Management believes it has made substantial progress with relationships
with sales reps. Management plans for continued sales increases from reps and
the affiliated company Parke Industries (FLS), ( See " Other Information" ).

        Gross profit from operations during the three months ended December 31,
1997 increased $39,958 or 152.3% from the gross profit from the corresponding
period of the prior fiscal year. Gross profit from operations during the six
months ended December 31, 1997 increased $27,958 or 42.3% from the gross profit
from the corresponding period of the prior fiscal year. Management attributes
this increase to the Company's improvement of inventory management.


<PAGE>   4

        General, administrative and selling costs for the three months ended
December 31, 1997 decreased by $10,553, and decreased as a percentage of sales
from 57.0% of sales to 45.6% of sales in comparison to the corresponding period
of the prior fiscal year. General, administrative and selling costs for the six
months ended December 31, 1997 decreased by $55,864, and decreased as a
percentage of sales from 84.4% of sales to 55.8% of sales in comparison to the
corresponding period of the prior fiscal year. The reduction in overhead for the
three and six months ended December 31, 1997 indicates management's continuing
efforts to reduce overhead. However, management is contemplating plans that
would significantly increase sales (see "Other Information). This would also
create a need to substantially increase the expenditures for administrative
costs. Although management believes this is the appropriate course of action,
such plans most likely will increase the percentage of administration costs to
sales in the short term, until sales volume actually increases under the plan.
Management plans to budget for a six month lag time from the events of hiring
additional administration to the realization of a significant improvement in
sales volume (FLS).

        Other income for the three and six months ended December 31, 1996
related to the increase of prior year discounts negotiated with vendors, less a
loss from the disposal of the Company's outdated computer equipment. No such
items were reportable for the three and six months ended December 31, 1997.


LIQUIDITY AND CAPITAL RESOURCES

        The six month period ended December 31, 1997 compared to the six month
period ended December 31, 1996.

        The Company had a negative cash flow from operating activities for the
six month period ended December 31, 1997 of $705 compared to a negative cash
flow of $92,953 for the six month period ended December 31, 1996. The 1997
improvement of cash flow from operating activities compared to the previous
period can be attributed to a reduction in overhead and the payments to vendors
on past due accounts during the three months ended December 31, 1996.

        At December 31, 1997, the Company had net working capital of $ 78,341,
compared to net working capital of $96,934 at June 30, 1997, a decrease of
$18,593, which is the result of the net loss of $50,066 and partially offset by
the non-cash compensation expense which was prepaid at June 30, 1997 via the
issuance of common stock.

        Management believes its plans will be sufficient to support operations
during the year ending June 30, 1998 (FLS). Part of management's operational
strategy include plans to secure additional equity to support anticipated
operations. However, there are no assurances that such efforts to improve
operating results and secure financing will be successful. The Company may be
unable to continue operations and there can be no assurances regarding the
recoverability of assets or their values upon liquidation.


<PAGE>   5

                                     PART II

ITEM 1. LEGAL PROCEEDINGS.

        None.

ITEM 2. CHANGES IN SECURITIES.

        None.

ITEM 3. DEFAULT UPON SENIOR SECURITIES.

        None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.

        None. However, the next annual Meeting of Shareholders of the Company
will be held on February 21, 1997. The only scheduled vote will be to elect the
Directors of the Company.

ITEM 5. OTHER INFORMATION.

        Since becoming an affiliate in 1996, Parke Industries, Inc. ("Parke")
has accounted for approximately one-third of the Company's revenue. At December
31, 1997, Parke owned eleven percent of the outstanding common stock of the
Company and held an option to acquire an additional five percent.

        Subsequently, on January 31, 1998, Parke was acquired by SRS, a wholly
owned subsidiary of Carolina Power and Light. Under the purchase agreement, SRS
hired the Parke management team and bought Parke's stock in the Company and the
related stock option. Accordingly, as of January 31,1998, SRS became an
affiliate of the Company. SRS and Parke announced a strategic plan to
significantly expand SRS's presence in the energy efficient retrofit market.
Management of the Company believes that its strong ties with Parke and the plans
of its new affiliate, SRS, may lead to a substantial increase in demand for the
Company's products in the future (FLS).

        In addition, the Company has been approached by persons who have
expressed a desire to see the Company play a role in the consolidation of the
energy efficient lighting products industry, particularly compact flourescent
lighting products and other products used by ESCOs on large retrofit projects.
Management of the Company plans to pursue opportunities that will enhance
shareholder value and allow the Company to compete in selected areas of the
energy efficient lighting market.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

        Exhibit 27 - Financial Data Schedule

        The following exhibits are incorporated herein by reference from the
Company's initial Form 10 filing on or about November 12, 1986 or in other
reports filed pursuant to the Securities Exchange Act of 1934, as amended.

         3.1    Articles of Incorporation as in effect on the date hereof
                (including Amendment thereto effective December 28, 1988).


<PAGE>   6

         3.2    Articles of Incorporation as in effect on the date hereof
                (including Amendment thereto effective November 20, 1996).

         3.3    Bylaws.

         4.1    Specimen of Issued and Outstanding Restricted Share Certificate
                and reverse side thereof (see also Exhibits 3.1 and 3.3).

         4.6    Incentive Stock Option Plan.

        10.7    Agreement (assigning patent rights).

        10.8    Agreement Between Scientific Component Systems, Inc. and NRG,
                Inc., June 29, 1983.

        10.9    Agreement, July, 1983 (assigning patent rights, with Exhibit
                10.7 as exhibit).

        10.10   Assignment of Patent Rights from Scientific Component Systems,
                Inc. to NRG, Inc., April 20, 1984.

        10.11   Assignment of Patent Rights from Rhett McNair and James Helling
                to NRG, Inc., April 20, 1984.

        10.12   Assignment of Patent Rights from Rhett McNair, James Helling,
                William R. Ingles and Gerald L. Fullerton to NRG, Inc., April
                20, 1984.

        10.13   Agreement Assigning Patent Rights from Scientific Component
                Systems, Inc., to NRG, Inc., April 20, 1984.

        10.14   Assignment with Possibility of Reverter of Patent Rights from
                Rhett McNair to NRG, Inc., January 21, 1986.

        10.20   Form of Warrant Certificate.

        10.27   New Lease for Company Headquarters in Tustin, California.

        10.28   Royalty Agreement with Rhett McNair.

        10.29   Consulting Agreement with MLF & Associates, Inc., April 1, 1990.

        10.30   Promissory Note Payable to Oliver Washburn and Extension
                Thereto.

        10.31   Promissory Note Payable to Malcolm Fickel and Extension Thereto.

        10.32   Promissory Note Payable to Malcolm Fickel and Extension Thereto.

        10.33   Promissory Note Payable to Malcolm Fickel and Extension Thereto.

        10.34   Promissory Note Payable to Malcolm Fickel and Extension Thereto.

        10.35   Deferred Compensation Agreement Between the Company and Malcolm
                Fickel.

        10.36   Line of Credit Agreement with Bank.

<PAGE>   7

        10.37   Promissory Note Payable to Peter C. Kreft.

        10.38   Stock Purchase Agreement Between the Company and MLF &
                Associates, Inc. Retirement Trust, April 30, 1993.

        10.39   Stock Purchase Agreement Between the Company and Malcolm L.
                Fickel, April 30, 1993.

        10.40   Stock Purchase Agreement Between the Company and Oliver K.
                Washburn, April 30, 1993.

        10.41   Stock Purchase Agreement Between the Company and Peter C. Kreft,
                April 30, 1993.

        10.42   Stock Purchase Agreement Between the Company and Thomas C.
                Moceri, April 30, 1993.

        10.43   Financing Agreement Between the Company and Pre-Banc Business
                Credit, Inc., May 21, 1993.

        10.44   Addendum to Consulting Agreement between the Company and Malcolm
                L. Fickel, June 30, 1993.

        10.45   Leasing Agreement Between the Company and Auto Car Leasing
                Company, September 9, 1993.

        10.46   Stock Warrant Agreement Between the Company and Eddie R.
                Fischer, September 9, 1993.

        10.47   Note and Revolving Loan Agreement Between the Company and
                William T. Moceri, IRA, November 15, 1994.

        10.48   Promissory Note Payable to Thomas C. Moceri, Trustee, Thomas C.
                Moceri Profit Sharing Plan, September 28, 1994.

        10.49   Promissory Note Payable to Oliver Washburn, March 7, 1995.

        10.50   Promissory Note Payable to Oliver Washburn, March 7, 1995.

        10.51   General Release Agreement Between the Company and Peter Kreft,
                June 9, 1995.

        10.52   Promissory Note Payable to Oliver Washburn, September 14, 1995.

        10.53   Promissory Note Payable to Oliver Washburn, November 13, 1995.

        10.54   Promissory Note Payable to Oliver Washburn, April 26, 1996.

        10.55   Promissory Note Payable to Oliver Washburn, July 18, 1996.

        10.56   Workout Agreement dated August 30, 1996.

        10.57   Secured Promissory Note to Malcolm L. Fickel, September 11,
                1996.

        10.58   Secured Promissory Note to Oliver K. Washburn, September 11,
                1996.


<PAGE>   8

        10.59   Subordinated Cash Flow Promissory Note to Oliver K. Washburn,
                September 30, 1996.

        28.2    Patent No. 4,520,436 (X-18 Series Downlight).

        28.4    Patent No. 4,595,969 (Lamp Mounting Apparatus and Method).

        28.5    Patent No. 4,641,228 (Lamp Mounting Apparatus and Method).

        28.6    Patent No. 4,700,110 (Lamp Switching).

        28.7    Patent No. 4,704,664 (Lamp Apparatus).

        28.8    Trademarks Registered (Lightning Bolt Logo, Scientific NRG
                Component Systems, SCS, X-18) and Notice of Publication of
                Trademark, "Switchit".

        28.9    Patent No. 4,922,393 (Lamp Apparatus).

(b)     Reports on Form 8-K

        No reports were filed during the quarter ended December 31, 1997 on Form
8-K.


<PAGE>   9

                                   SIGNATURES

        In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Date: February 16, 1998
                                   SCIENTIFIC NRG, INCORPORATED,
                                   a Minnesota Corporation


                                   By: /s/ Daniel W. Parke
                                       -----------------------------------------
                                   Name: Daniel W. Parke
                                   Title: Chairman and CEO


        Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                  Signatures                      Date
                  ----------                      ----

<S>                                               <C>              
                  By: /s/ Daniel W. Parke         February 16, 1998
                      --------------------------
                  Name: Daniel W. Parke
                  Title: Chairman and CEO

                  By: /s/ Oliver K. Washburn      February 16, 1998
                      --------------------------
                  Name: Oliver K. Washburn
                  Title: Treasurer and Principal
                  Financial Officer
</TABLE>

<PAGE>   10

                          SCIENTIFIC NRG, INCORPORATED

                         PART I. FINANCIAL INFORMATION
               Item 1. Condensed Financial Statements (Unaudited)

                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                   December 31,      June 30,
                                                       1997            1997
                                                    -----------     -----------
                                                    (unaudited)
<S>                                                 <C>             <C>        
                    ASSETS

CURRENT ASSETS
  Cash                                              $    34,595     $    35,300
  Trade receivables, less allowance for
   doubtful accounts at December 31, 1997
   and June 30, 1997 of $9,658                          101,708          68,323
  Inventories                                            87,344          96,720
  Prepaid expenses                                          700              --
                                                    -----------     -----------
     Total current assets                               224,347         200,343

EQUIPMENT AND LEASEHOLD IMPROVEMENTS,
 net of accumulated depreciation of $14,771
 at December 31, 1997 and $13,397 at
 June 30, 1997                                            3,503           4,877
                                                    -----------     -----------
                                                    $   227,850     $   205,220
                                                    ===========     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Current obligations under capital leases          $    14,978     $    14,978
  Accounts payable                                       42,779          27,018
  Accrued compensation                                   42,067          21,700
  Other accrued expenses                                 46,182          39,713
                                                    -----------     -----------
     Total current liabilities                          146,006         103,409

STOCKHOLDERS' EQUITY
  Common stock, no par value; authorized
  40,000,000 shares; issued and outstanding;
     December 31, 1997 4,203,423 shares;
     June 30, 1997 4,203,423 shares                   3,546,707       3,516,607
  Additional paid-in capital                             11,970          11,970
  Accumulated deficit                                (3,476,833)     (3,426,766)
                                                    -----------     -----------
     Total stockholders' equity                          81,844         101,811
                                                    -----------     -----------
                                                    $   227,850     $   205,220
                                                    ===========     ===========
</TABLE>

                      See accompanying notes to unaudited
                         condensed financial statements


                                      F-1

<PAGE>   11

                          SCIENTIFIC NRG, INCORPORATED

                       CONDENSED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                Three Months Ended              Six Months Ended
                                    December 31,                  December 31,
                             --------------------------    --------------------------
                                1997           1996           1997           1996
                             -----------    -----------    -----------    -----------
<S>                          <C>            <C>            <C>            <C>        
Net sales                    $   162,635    $   148,594    $   255,783    $   235,262

Cost of sales                     96,442        122,359        161,757        169,194
                             -----------    -----------    -----------    -----------
Gross profit                      66,193         26,235         94,026         66,068

Operating expenses:
  Selling, general and
   administrative expenses        74,189         84,742        142,640        198,504
  Research and development           605          1,427          1,052          2,833
                             -----------    -----------    -----------    -----------

Operating loss                    (8,601)       (59,934)       (49,666)      (135,269)

Other income                          --         41,390             --         41,390
Interest expense                      --         (2,462)            --        (17,695)
                             -----------    -----------    -----------    -----------
Loss before income taxes          (8,601)       (21,006)       (49,666)      (111,574)

Income tax provision                (200)          (200)          (400)          (400)
                             -----------    -----------    -----------    -----------
Net loss                     $    (8,801)   $   (21,206)   $   (50,066)   $  (111,974)
                             ===========    ===========    ===========    ===========
Weighted average number
 of shares outstanding         4,203,423      2,995,224      4,203,423      2,659,115
                             ===========    ===========    ===========    ===========
Net loss per common share    $     (0.01)   $     (0.01)   $     (0.01)   $     (0.04)
                             ===========    ===========    ===========    ===========
</TABLE>

                      See accompanying notes to unaudited
                         condensed financial statements


                                      F-2

<PAGE>   12

                          SCIENTIFIC NRG, INCORPORATED

                  CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
                       Six Months Ended December 31, 1997
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                            Common Stock          Additional
                                      -------------------------     Paid-In     Accumulated   Stockholders'
                                        Shares        Amount        Capital       Deficit         Equity
                                      -----------   -----------   -----------   -----------    -----------
<S>                                     <C>         <C>           <C>           <C>            <C>        
Balance, June 30, 1997                  4,203,423   $ 3,516,607   $    11,970   $(3,426,766)   $   101,811
Common stock earned in connection
 with legal services rendered                  --         3,738            --            --          3,738
Common stock earned by Parke
 Industries, an affiliated company,
 for services rendered under the
 administrative services agreement             --        15,000            --            --         15,000
Net loss                                       --            --            --       (41,265)       (41,265)
                                      -----------   -----------   -----------   -----------    -----------
Balance, September 30, 1997             4,203,423     3,535,345        11,970    (3,468,031)        79,284

Common stock earned in connection
 with legal services rendered                  --         1,362            --            --          1,362
Common stock earned by Parke
 Industries, an affiliated company,
 for services rendered under the
 administrative services
 agreement                                     --        10,000            --            --         10,000
Net loss                                       --            --            --        (8,802)        (8,802)
                                      -----------   -----------   -----------   -----------    -----------
Balance, December 31, 1997              4,203,423   $ 3,546,707   $    11,970   $(3,476,833)   $    81,844
                                      ===========   ===========   ===========   ===========    ===========
</TABLE>

                      See accompanying notes to unaudited
                         condensed financial statements


                                      F-3

<PAGE>   13

                          SCIENTIFIC NRG, INCORPORATED

                       CONDENSED STATEMENTS OF CASH FLOW
                  Six Months Ended December 31, 1997 and 1996
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                           December 31,    December 31,
                                               1997            1996
                                            ---------       ---------
<S>                                         <C>             <C>      
CASH FLOW FROM OPERATING ACTIVITIES
  Cash received from customers              $ 216,941       $ 257,456
  Cash paid to suppliers and employees       (216,046)       (347,663)
  Interest paid                                    --          (2,746)
  Income taxes paid                            (1,600)             --
                                            ---------       ---------
     Net cash used in operating
      activities                                 (705)        (92,953)
                                            ---------       ---------

CASH FLOW USED IN INVESTING ACTIVITIES
  Purchase of equipment and
   leasehold improvements                          --          (5,000)
                                            ---------       ---------

CASH FLOW FROM FINANCING ACTIVITIES
  Net decrease in line of credit                   --         (44,220)
  Proceeds from advances and notes
   from Company's officer and/or
   director                                        --          70,000
  Principal payments under capital
   lease obligations                               --          (3,226)
  Proceeds from issuance of common
   stock                                           --          83,000
                                            ---------       ---------
     Net cash provided by (used in)
      financing activities                         --         105,554
                                            ---------       ---------
     Net increase (decrease) in cash             (705)          7,601

CASH
  Beginning of period                          35,300              --
                                            ---------       ---------
  Ending of period                          $  34,595       $   7,601
                                            =========       =========
</TABLE>

                      See accompanying notes to unaudited
                         condensed financial statements


                                      F-4

<PAGE>   14

                          SCIENTIFIC NRG, INCORPORATED

                  CONDENSED STATEMENTS OF CASH FLOW (Continued)
                  Six Months Ended December 31, 1997 and 1996
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                           December 31,    December 31,
                                               1997            1996
                                            ---------       ---------
<S>                                         <C>             <C>      
RECONCILIATION OF NET LOSS TO NET CASH
 USED IN OPERATING ACTIVITIES
  Net loss                                  $ (50,066)      $(111,974)
  Adjustments to reconcile net loss to
   net cash used in operating activities:
     Depreciation and amortization              1,374           2,938
     Provision for doubtful accounts               --          (4,110)
     Loss on disposal of fixed assets              --          22,252
     Compensation for services rendered,
      previously prepaid with issuance of
      common stock                             30,100          20,000

     Change in assets and liabilities:
       Trade receivables                      (33,385)        (20,146)
       Inventories                              9,376          37,438
       Prepaid expenses and deposits             (700)          7,173
       Accounts payable, accrued
        compensation and other accrued
        expenses                               42,596         (49,149)
       Accrued interest payable                    --           2,625
                                            ---------       ---------
  Net cash used in operating activities     $    (705)      $ (92,953)
                                            =========       ========= 
</TABLE>

                      See accompanying notes to unaudited
                         condensed financial statements


                                      F-5

<PAGE>   15

                          SCIENTIFIC NRG, INCORPORATED

                NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)

              FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 1997



NOTE 1.  BASIS OF PRESENTATION

In the opinion of the Company's management, the accompanying unaudited condensed
financial statements include all adjustments (consisting of normal accruals)
necessary for the fair presentation of its financial position at December 31,
1997, results of operations for the three and six months ended December 31, 1997
and 1996 and cashflows for the six months ended December 31, 1997 and 1996.
Although the Company believes that the disclosures in these financial statements
are adequate to make the information presented not misleading, certain
information and disclosures normally included in the financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. These financial statements should be read in conjunction
with the Company's audited financial statements included in the Company's Annual
Report on Form10-KSB filed with the Securities and Exchange Commission on
October 15, 1997. Operating results for the three and six month periods ended
December 31, 1997 are not necessarily indicative of the results that may be
expected for the Company's entire year ending June 30, 1998. The Financial
Accounting Standards Board has issued Statement of Financial Accounting
Standards 128, "Earnings per Share" (SFAS 128), which is effective for financial
statements issued for periods ending after December 15, 1997. The effect of
adopting SFAS 128 has not yet been determined.

NOTE 2.  INVENTORIES

Inventories are stated at the lower of cost or net realizable value. Cost is
determined under the standard cost method. Costs include materials, direct
labor, and an allocable portion of manufacturing overhead. The Company operates
in an industry in which its products are subject to design changes and are
manufactured based upon customer specifications. Accordingly, should design
requirements change significantly or customer orders be canceled, the ultimate
net realizable value of such products could be less than the carrying value of
such amounts. At December 31, 1997, management believes that inventories are
carried at their net realizable value.



                                       F-6

<PAGE>   16

                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
Exhibit             Description
-------             -----------
<C>                 <S>                                                         
   27               Financial Data Schedule
</TABLE>