U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(MARK ONE)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934

                    For the quarter ended September 30, 1997

[ ] TRANSITION  REPORT  UNDER SECTION 13 OR A5(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934  (no fee required)



                         Commission file number 0-23544

                                EROX CORPORATION
                  ---------------------------------------------
                 (Name of small business issuer in its charter)

                  California                                      94-3107202
---------------------------------------------                -------------------
(State or other jurisdiction of incorporation                 (I.R.S. employee
or organization)                                             Identification No.)


4034 Clipper Court, Fremont, California                             94538
---------------------------------------------                -------------------
(Address of principal executive offices)                          (Zip code)

                    Issuer's telephone number: (510) 226-6874

         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
[ ]

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. 10,289,488 shares of Common
Stock as of October 31, 1997.

                                                                Total Pages:  16

<PAGE>

<TABLE>
                                EROX CORPORATION
                                      INDEX
<CAPTION>
                                                                                                               Page
                                                                                                               ----
PART I
FINANCIAL INFORMATION

<S>               <C>                                                                                            <C>
         Item 1. Financial Statements

                  Condensed Balance Sheets (Unaudited)
                  as of September 30, 1997
                  and December 31, 1996...........................................................................2

                  Condensed Statements of Operations (Unaudited)
                  for the Three Months and Nine Months Ended
                  September 30, 1997 and 1996.....................................................................3

                  Statements of Cash Flows (Unaudited)
                  for the Nine Months
                  Ended September 30, 1997 and 1996...............................................................4

                  Notes to Condensed Financial Statements (Unaudited).............................................5

         Item 2. Management's Discussion and Analysis

                  Management's Discussion and Analysis of Financial Condition and Results of Operations...........6

PART II
OTHER INFORMATION

         Item 6. Exhibits and Reports on Form 8-K................................................................10

SIGNATURES.......................................................................................................11

</TABLE>

<PAGE>

                                     PART I
                              FINANCIAL INFORMATION


Item 1.  Financial Statements


<PAGE>

<TABLE>
                                                          EROX CORPORATION
                                                      Condensed Balance Sheets
                                                            (unaudited)


<CAPTION>
                                                                                                 September 30,         December 31,
                                                                                                    1997                   1996
                                                                                                 ------------          ------------
<S>                                                                                              <C>                   <C>         
Assets

Current assets:
  Cash and cash equivalents                                                                      $     11,857          $  2,059,084
  Accounts receivable, net of allowances of $553,853                                                3,249,142             2,813,135
   and $501,677 in 1997 and 1996, respectively
  Inventory                                                                                         4,187,583             2,906,517
  Other current assets                                                                                166,674                74,414
                                                                                                 ------------          ------------
Total current assets                                                                                7,615,256             7,853,150

Property and equipment, net                                                                           115,404                71,516
                                                                                                 ------------          ------------

                                                                                                 $  7,730,660          $  7,924,666
                                                                                                 ============          ============

Liabilities and Shareholders' equity

Current liabilities:
  Accounts payable                                                                               $    880,753          $  1,218,741
  Loan payable, bank                                                                                1,272,149               500,000
  Other accrued expenses                                                                            1,279,907               876,320
                                                                                                 ------------          ------------
Total current liabilities                                                                           3,432,809             2,595,061

Commitments
                                                                                                         --                    --

Shareholders' equity:
  Convertible  preferred  stock,  issuable  in series no par  value,                               
    shares  authorized, 1,433,333 and -0- shares  issued and  outstanding
    at September 30, 1997 and December 31, 1996, respectively
    at September 30, 1997 and December 31, 1996, respectively                                       2,150,000                  --
  Common stock, no par value, 40,000,000 shares authorized,
    10,289,488 and 10,156,905 shares issued and outstanding
    at September 30, 1997 and December 31, 1996, respectively                                      17,667,023            17,374,734
  Accumulated deficit                                                                             (15,519,172)          (12,045,129)
                                                                                                 ------------          ------------
Total shareholders' equity                                                                          4,297,851             5,329,605
                                                                                                 ------------          ------------

                                                                                                 $  7,730,660          $  7,924,666
                                                                                                 ============          ============
</TABLE>

<PAGE>

<TABLE>

                                                          EROX CORPORATION
                                                 Condensed Statements of Operations
                                                            (unaudited)

<CAPTION>

                                                                 Three months ended September 30,    Nine months ended September 30,
                                                                         1997           1996               1997             1996
                                                                   ------------     ------------       ------------     ------------
                                                                                                    
<S>                                                                <C>              <C>                <C>              <C>         
Net sales                                                          $  3,847,893     $  4,472,682       $ 12,761,724     $ 13,665,684
Cost of goods sold                                                    1,095,898        1,227,048          2,985,541        3,738,410
                                                                   ------------     ------------       ------------     ------------
                                                                                                    
Gross profit                                                          2,751,995        3,245,634          9,776,183        9,927,274
                                                                                                    
Expenses:                                                                                           
   Research and development                                              86,844          140,364            251,700          301,670
   Selling, general and administrative                                2,356,938        2,875,166         12,941,739        9,247,882
                                                                   ------------     ------------       ------------     ------------
                                                                                                    
Total expenses                                                        2,443,782        3,015,530         13,193,439        9,549,552
                                                                   ------------     ------------       ------------     ------------
                                                                                                    
Income (loss) from operations                                           308,213          230,104         (3,417,256)         377,722
                                                                                                    
Interest income                                                              15           11,266             12,486           24,094
Interest expense                                                         23,514              522             60,342            2,981
Other income (expense), net                                                 (34)          14,193              2,358           15,820
                                                                   ------------     ------------       ------------     ------------
                                                                                                    
Income (loss) before taxes                                              284,680          255,041         (3,462,754)         414,655
                                                                                                    
Income taxes                                                             10,489           20,733             11,289           20,733
                                                                   ------------     ------------       ------------     ------------
                                                                                                    
Net income (loss)                                                  $    274,191     $    234,308       $ (3,474,043)    $    393,922
                                                                   ============     ============       ============     ============
                                                                                                    
Net income (loss) per share                                        $       0.03     $       0.02       $      (0.34)    $       0.04
                                                                   ============     ============       ============     ============
                                                                                                    
Shares used in calculation of net income (loss) per share                                           
                                                                     10,304,125       10,624,096         10,265,274       10,459,904
                                                                   ============     ============       ============     ============
</TABLE>

<PAGE>

<TABLE>

                                EROX CORPORATION
                       Condensed Statements of Operations
                                   (unaudited)

<CAPTION>
                                                       Nine months ended September 30,
                                                             1997           1996
                                                         -----------    -----------


<S>                                                      <C>            <C>        
Cash Flows from Operating Activities
Net income (loss)                                        $(3,474,043)   $   393,922
Adjustments to reconcile net income (loss) to net cash
  used in operating activities:
  Depreciation and amortization                               48,040         82,296

  Changes in operating assets and liabilities:
    Accounts receivable                                     (436,007)      (782,717)
    Inventory                                             (1,281,066)    (1,604,590)
    Other current assets                                     (92,260)        40,189
    Accounts payable and accrued liabilities                  65,599        744,912
                                                         -----------    -----------
Net cash used in operating activities                     (5,169,737)    (1,125,988)

Cash Flows from Investing Activities
Purchase of property and equipment                           (91,928)       (79,220)
                                                         -----------    -----------
Net cash used in investing activities                        (91,928)       (79,220)

Cash Flows from Financing Activities
Proceeds from issuance of preferred stock                  2,150,000           --
Proceeds from issuance of common stock                       292,289        500,816
Proceeds from (payments on) bank borrowings                  772,149       (500,000)
                                                         -----------    -----------
Net cash provided by financing activities                  3,214,438            816

Net decrease in cash and cash equivalents                 (2,047,227)    (1,204,392)
Cash and cash equivalents at beginning of the period       2,059,084      2,186,828
                                                         -----------    -----------
Cash and cash equivalents at end of the period           $    11,857    $   982,436
                                                         ===========    ===========
</TABLE>


<PAGE>


                                EROX Corporation

                     Notes to Condensed Financial Statements
                                   (Unaudited)

                               September 30, 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying  unaudited condensed financial statements have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information  and  with  the  instructions  to Form  10-QSB  and  Rule  10-01  of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been  included.  Operating  results for the three  months and nine months  ended
September  30, 1997 are not  necessarily  indicative  of the results that may be
expected  for  the  calendar  year  ending   December  31,  1997.   For  further
information, refer to the financial statements and footnotes thereto included in
the Company's annual report on Form 10-KSB for the year ended December 31, 1996.

Inventory

Inventories  are  stated at the lower of cost  (first in - first out  method) or
market. The inventory at September 30, 1997 consists of finished goods inventory
valued  at  $1,840,296  work  in  process  of  $322,835  and  raw  materials  of
$2,024,452.  At December 31, 1996, these balances were $1,188,882,  $154,347 and
$1,563,288, respectively.

Line of Credit

         On July 1, 1997, the Company  renegotiated  its Business Loan Agreement
with Mid Peninsula Bank of Palo Alto,  California.  The Company may borrow up to
$3.0  million at an interest  rate equal to the bank's prime rate plus .75% with
borrowings  secured  primarily by the Company's trade receivables and inventory.
The agreement,  which expires on April 1, 1998, contains certain  debt-to-equity
and working capital covenants.

Convertible Preferred Stock

         On August 25, 1997, the Company obtained additional equity capital from
affiliates of a current  shareholder by issuing  1,433,333 shares of convertible
preferred stock. This investment  provided the Company with $2,150,000 in equity
capital that was used to reduce bank borrowings and finance accounts receivable.

Net Income (Loss) Per Share

Net income per share is computed using the weighted  average number of shares of
common stock outstanding and common  equivalent  shares from stock options.  The
latter are excluded from the  computation  of net loss per share as their effect
is antidilutive.

Accounting Pronouncements

         In February,  1997,  the Financial  Accounting  Standards  Board issued
Statement  No. 128,  Earnings Per Share,  which is required to be adopted by the
Company on December  31,  1997.  At that time,  the Company  will be required to
change the method  currently used to compute  earnings per share and restate all
prior periods.  Under the new requirements for calculating  primary earnings per
share, the dilutive effect of stock options will be excluded.  There is expected
to be no impact on primary or fully  diluted  earnings  per share for either the
three or nine month periods ended September 30, 1996 or September 30, 1997.

<PAGE>


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Subsequent Event

         On  October  8,  1997,  a  request  for  dismissal  of the Levy v. Erox
Corporation  packaging lawsuit was filed by the plaintiff in Contra Costa County
Superior Court. The dismissal was entered as requested, and the Company knows of
no other pending legal action.


<PAGE>


Item 2. Management's Discussion and Analysis

         This report contains  forward-looking  statements within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities  Exchange  Act  of  1934,  as  amended.  Except  for  the  historical
information contained in this discussion and analysis of financial condition and
results  of  operations,  the  matters  discussed  herein  are  forward  looking
statements.  These forward looking statements include but are not limited to the
Company's  plans for sales  growth and  expansion  into new  channels  of trade,
expectations  of gross  margin,  expenses,  new  product  introduction,  and the
Company's   liquidity  and  capital  needs.  These  matters  involve  risks  and
uncertainties  which  include  but  are not  limited  to the  acceptance  of new
products, the credit risk associated with consolidation in the retail trade, the
costs of components and advertising  associated with product retail roll-out and
new product  introductions,  supply  constraints or difficulties,  the impact of
competitive pricing or government regulation and the risk of diverted goods in a
slow retail  environment.  These and other  factors may cause actual  results to
differ materially from those anticipated in forward-looking statements.  Readers
are cautioned not to place undue reliance on these  forward-looking  statements,
which speak only as of the date hereof.


Risk Factors

         The  Company's  future  results  may be affected to a greater or lesser
degree by the following factors among others:

         Competition:  The prestige  fragrance  market is volatile and extremely
competitive.  Consumer preferences and demands can shift dramatically reflecting
changes in fashion and current fads. There are numerous fragrance products which
are better known than the products marketed by the Company.  There are also many
companies which have  substantially  greater  resources than EROX and which have
the ability to invest heavily in new product  development and introduction.  The
Company can expect that its competitors will attempt to compete with the Company
through the introduction of new products and promotion of existing products.

         In  addition,  the  product  life cycle of  fragrances  is  shortening.
Traditional  fragrance  companies now introduce a new fragrance every one to two
years  compared  to every four to five years as in the past.  This  increase  in
competing  fragrances  makes  it  difficult  for any one  fragrance  to hold the
consumer's  attention on a long-term  basis.  Although the Company  believes the
inclusion  of  human  pheromones  as  a  component  clearly  differentiates  its
products,  other fragrances are competing for space with the Company's  products
at both the store level and in print and media advertising.

         Marketing: The failure to establish and maintain the necessary sales or
distribution  channels  could have a material  adverse  effect on the  Company's
business.  Although the Company believes its marketing strategy is the most cost
effective  way  to  introduce  its  products,  there  can be no  assurance  that
broader-scale  retail launches will be successful.  The Company cannot guarantee
that retail outlets or catalogues  will continue to carry the EROX products.  If
the current strategy is unsuccessful,  marketing of the Company's products would
require a new  strategy and may require a  significantly  more  expensive  sales
effort for which the Company may not have sufficient funds.

         Retail environment: Continued consolidation in the retail trade has led
to the emergence of four major retail players who control the major share of the
market.  Federated  Department Stores, The May Company,  Dayton  Hudson/Marshall
Fields and Dillard  Department  Stores now comprise the majority of U.S.  better
priced department stores. This consolidation could lead to price and promotional
pressure and increased credit risk for the Company.

         The major U.S.  retailers  are also  moving  away from the  traditional
service  oriented  environment  toward one that is based on "value  pricing" and
self  service.  This change in emphasis  away from trained  sales  personnel and
retailer  support of  manufacturer's  products has created an  environment  that
values "newness" and price above quality and value. In light of these changes in
the retail  environment,  the Company may find it  necessary  to seek  alternate
channels of distribution to sell their products.

         Seasonality:  Sales in the fragrance  industry are generally  seasonal,
with generally  higher sales in the second half of the calendar year as a result
of increased demand for fragrance products in anticipation of and during

<PAGE>


the Christmas holiday season. The anticipated seasonality of the Company's sales
could cause a significant variation in its quarterly operating results.

         Patent protection:  There can be no assurance that any patent or patent
application  owned  or  controlled  by the  Company  will  continue  to  provide
commercially  significant  protection of the Company's technology or ensure that
the  Company  may not be  determined  to infringe  valid  patents of others.  No
assurance can be given that others will not independently  develop substantially
equivalent  proprietary  information  or otherwise  gain access to the Company's
trade  secrets or that the Company  can  meaningfully  protect  its  technology,
proprietary information or trade secrets.

         Attraction and retention of key employees: The success of the Company's
future operations  depends in large part on the Company's ability to recruit and
retain key employees and  consultants  with research,  product  development  and
marketing  experience,  as well as other  professionals  who are in considerable
demand.  There  can be no  assurance  that the  Company  will be  successful  in
retaining or recruiting such key personnel.

         Dependence  on third  parties for  manufacturing:  The Company does not
have  facilities to manufacture its products and relies on Pherin to manufacture
its  pheromones and third parties to supply  components  and to blend,  fill and
package its fragrance  products.  The Company  believes that such  manufacturing
services are the most  effective  method of  producing  its  products.  Contract
fillers are used by the majority of the fragrance industry,  and the Company has
no current  plans to set up its own  filling  facilities.  However,  as with any
business that is not vertically  integrated,  if the Company is unable to obtain
or  retain  fragrance   suppliers,   component   manufacturers  or  third  party
manufacturing  on  acceptable  terms,  it may not be able to  obtain  commercial
quantities of its products, which would adversely affect results.


Results of Operations

Three  Months  ended  September  30, 1997 as compared to the Three  Months ended
September 30, 1996

         Net sales for the third  quarter of 1997 were  $3,847,893  compared  to
$4,472,682  for the third quarter of 1996.  This decrease was due to the overall
softening  of  the  US  Department  Store  fragrance  market  in  general.  Also
contributing  to this  decrease in net sales was the high  percentage  of return
authorizations the Company issued to Department Store customers in line with the
Company's policy to rationalize  inventories prior to the holiday season.  These
return  authorizations  are a means of removing  certain  slow moving  ancillary
items  from the  Department  Store  shelves  in  exchange  for new orders of the
Company's  better  selling  fragrance  items.  The Company saw  expansion in the
Perfumeries  and  Distributor  class of trade as shipments were made to open new
retail outlets.  The Company opened one new department store chain,  Herbergers,
in the third quarter of 1997.  compared to four chains,:  Castner Knott,  Carson
Pirie Scott, T. Eaton Company,  and Kaufmann's during the third quarter of 1996.
These openings boosted sales by the initial sell-in orders required to stock the
store's  shelves for the launch of Realm Men(R) and Realm  Women(R).  During the
third quarter of 1997, the Company did not open any new distributors or new duty
free markets. This compares to the third quarter of 1996 when the Company opened
Middle  Eastern and North  American Duty Free  distribution.  The  comparison of
sales for these periods is as follows:

--------------------------------------------------------------------------------
Class of Trade                                                1997          1996
--------------------------------------------------------------------------------

North American Department Store                         $2,935,151    $3,811,993
Perfumeries/Distributors                                   626,045             0
Duty Free and International                                281,021       643,917
Direct Marketing                                             5,676        16,772
                                                        ----------    ----------

Net Sales                                               $3,847,893    $4,472,682


         Gross  margin  showed a slight  decrease to 71.5% in the quarter  ended
September  30 1997  from  72.6% in the same  quarter  in the  prior  year.  This
decrease is attributable to increased sales to  non-department  store classes of
trade  and  to  the  high  percentage  of  return  authorizations  recorded  for
department stores in the third quarter of

<PAGE>

1997.  Future quarters may have a different gross margin depending on the demand
for promotional  products and the percentage of higher margin  department  store
sales in comparison to sales through third party distributors.

         Research and  Development  expenses for the third  quarters of 1997 and
1996 were $86,844 and  $140,364,  respectively.  During  1997,  these costs were
principally  payments  and  costs  under  the  Company's  contract  with  Pherin
Corporation  compared to 1996 when the Company was  incurring  costs  associated
with the development of its second women's fragrance: inner REALM(TM).

         Selling and marketing  expenses  decreased to $1,834,346 (48% of sales)
in the three months ended  September 30, 1997 from  $2,461,254 (55% of sales) in
the period ended  September 30, 1996.  This decrease was the result of stringent
spending controls  instituted at the end of the second quarter.  The Company has
been reassessing  advertising and promotional  activities  undertaken to support
sales  in  retail  department  store  chains  with the  goal of  reducing  these
expenditures  as a  percentage  of  net  department  store  sales.  Sales  force
headcount was reduced in the third  quarter as  territories  were  realigned and
selling  responsibilities  restructured.  The Company instituted stricter,  more
comprehensive controls on cooperative advertising spending and fragrance selling
specialist  expenses.  These  controls  enabled the Company to hold  spending to
budgeted  levels in the third quarter of 1997. In the third quarter of 1996, the
Company  increased  headcount and  advertising  spending to serve new department
store retail customers. Distribution and general and administrative expenses for
the period  increased to $522,592 in 1997 from  $413,912 in 1996, as a result of
operational  expenses being  reclassified as period expenses and not capitalized
into inventory and additional  warehousing  charges from fillers and fulfillment
providers.

         Net interest  income/(expense)  was  $(23,499) in the third  quarter of
1997 compared to $10,744 for the same period in 1996.

         The  Company's  tax expense for the third  quarter of 1997 was $10,489.
This is the result of minimum  income  taxes for the States in which the Company
has a tax  presence.  Tax  expense of  $20,733 in the third  quarter of 1996 was
based  upon  projected  profits  for the year 1996  after  taking  into  account
utilization of net operating loss carry forwards.

Nine Months  ended  September  30,  1997 as  compared  to the Nine Months  ended
September 30, 1996

         Net sales for the nine months ended September 30, 1997 were $12,761,724
compared to $13,665,684  for the same period in 1996.  This was due to decreases
in US Department  Store and  International  sales  partially  offset by sales to
Perfumeries and Distributors.  In 1996, the Company launched its products in the
California  market with the opening of 91 doors of Macy's West.  Additionally in
1996,  the Company  entered into  distribution  agreements  for the Middle East,
Latin  American and  Caribbean  duty free markets.  The following  table shows a
comparison of the nine month's net sales by class of trade:


--------------------------------------------------------------------------------
Class of Trade                                                1997          1996
--------------------------------------------------------------------------------

North American Department Store/Retail                 $10,574,651   $12,431,974
Perfumeries/Distributors                                 1,229,063             0
Duty Free                                                  646,110       493,871
International                                              297,382       673,169
Direct Marketing                                            14,518        66,670
                                                       -----------   -----------

Net Sales                                              $12,761,724   $13,665,684


         Gross  margin  increased  to 77% from 73% for the first nine  months of
1997  compared  to the same  period in 1996.  This  increase  was the  result of
reductions in the Company's cost of goods structure and the  reclassification of
certain operational costs as general and administrative,  period expenses.  Also
in 1997, the Company  introduced its second fragrance  offering for women: inner
REALM(TM).  This  line of  products  carries  a  higher  gross  margin  than the
Company's first fragrances.  In 1996, the Company was still working through high
cost  inventories  that had been  purchased  from higher cost  suppliers or were
manufactured using less efficient or higher cost methods.

<PAGE>

         Research and development expenses decreased 17% to $251,700 in the nine
months ended  September  30,  1997.  These costs were  principally  comprised of
payments under the Company's contract with Pherin Corporation. In the prior year
period,  the Company  began  development  of a new line of women's  products for
launch in 1997 and incurred costs of $301,670.

         Selling and marketing expenses for the nine months ending September 30,
1997 were  $11,124,927  compared to $8,119,743  for the same period in 1996. The
expense  restatement  of $984,279 for the second  quarter of 1997 is included in
these numbers.  These expenses were the result of  unanticipated  second quarter
co-op advertising charges that were charged back to the Company during the third
quarter.  Advertising  expenses for the  Department  Store class of trade remain
high,  and the Company has begun to sell its products to  distributors  and into
Duty Free markets. These sales channels, while resulting in lower gross margins,
provide  more profit  potential  as the  advertising  and  promotional  expenses
necessary  for  retail  sell  through  are  borne by the  distributor.  On going
expenses in the sales and  marketing  area are employee  staffing,  commissions,
radio  advertising and fragrance  modeling to support local in-store  promotions
and  to  support  the  REALM  brand  in  general.   The  Company's  general  and
administrative expenses increased to $1,816,812 in 1997 from $1,128,139 in 1996.
This  increase is  attributable  to the  reclassification  of overhead  expenses
necessary to support the sales of products to general and administrative  period
expenses.  These expenses had been capitalized into inventory in the prior year.
The Company also incurred  additional legal expenses related to the registration
of its products and trademarks in foreign  countries and to its defense  against
the now dismissed lawsuit brought against the Company in 1996.

         Interest income was $12,486 and $24,094 for the first three quarters of
1997 and 1996,  respectively.  The decrease in interest  income was due to lower
cash balances.  In 1997, the Company paid $60,342 in interest expense related to
advances  under its bank line of credit.  During 1996,  the  Company's  interest
expense was $2,981.

         The  Company's  tax  expense in 1997  relates to minimum  income  taxes
payable  to  States in which  the  Company  has a tax  presence.  The  Company's
effective tax rate for the first nine months of 1996 was 5% based upon projected
profits for the entire year and after  taking into  account  utilization  of net
operating loss carry forwards.

LIQUIDITY

         At September 30, 1997,  the Company had working  capital of $4,182,447.
Net cash used in operating  activities  was $5,169,737 for the nine months ended
September 30, 1997.  During 1997, the Company received $292,289 in cash from the
exercise of stock options issued under the Company's Employee Stock Option Plan.
Also in 1997, the Company obtained $2,150,000 in additional working capital from
affiliates of a current  shareholder by issuing  1,433,333 shares of convertible
preferred  stock.  The money  was used to reduce  bank  borrowings  and  finance
accounts receivable.

         On July 1, 1997, the Company  renegotiated  its Business Loan Agreement
with Mid-Peninsula Bank of Palo Alto,  California.  The Company may borrow up to
$3,000,000  at an  interest  rate equal to the bank's  prime rate plus .75% with
borrowings  primarily  secured by the Company's trade receivables and inventory.
The agreement,  which has a one year term,  contains  certain debt to equity and
working capital  covenants.  Under the terms of the renegotiated  bank line, the
Company may borrow  against  both  eligible  accounts  receivable  and  eligible
inventory.  There were  borrowings  totaling  $1,272,149  at September 30, 1997.
Assuming the Company's activities proceed  substantially as planned and if there
are no new brand  introductions,  the Company's current cash, line of credit and
anticipated  revenues  from product sales should be adequate to meet its working
capital needs over the next twelve months.  Working  capital  requirements  will
primarily  be for the  supply of  inventory,  staffing,  product  promotion  and
training and accounts receivable financing.

         If the  Company  fails to achieve  significant  revenues  from its 1997
marketing  efforts or if ongoing  business  proves to be more capital  intensive
than  planned  or if the  Company  elects to  develop  and  launch a new  brand,
additional funding may be required.  There can be no assurance that such funding
will be available.

<PAGE>

<TABLE>
                                     PART II
                                OTHER INFORMATION

<CAPTION>
Item 6.  Exhibits and Reports on Form 8-K
<S>      <C>                                                                                      <C>

         (a) Exhibit 11-Statement re: Computation of Per Share Earnings                           E- 12
             Exhibit 27.01-Financial Data Schedule                                                E- 13

         (b) The  Company  did not file any reports on Form 8-K during the three
             months ended September 30, 1997.

</TABLE>


<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  had duly  caused  this  Report  to be  signed  on behalf by the
undersigned thereunto duly authorized.


                               EROX CORPORATION
                               Registrant




Date:  November 10, 1997       /s/ William P. Horgan
                               ---------------------
                                  William P. Horgan
                               Chairman of the Board and Chief Executive Officer




Date:  November 10, 1997          /s/ Maxine C. Harmatta
                                  ----------------------
                                    Maxine C. Harmatta
                                  CFO, Vice President Finance and Administration