TCR_Public/980504.MBX T R O U B L E D   C O M P A N Y   R E P O R T E R
     
     Monday, May 4, 1998, Vol. 2, No. 88                  

                  Headlines

ALLIANCE ENTERTAINMENT: Close to Reorganization Plan
AR ACCESSORIES GROUP: Panel Seeks Approval of Settlement
2CONNECT EXPRESS: No Authority to Pay for Audit
CREDIT LYONNAIS: Trade Unions Call for National Protest
GRAND UNION: Group Tied To GE, Disney To Fight Plan

FIRSTPLUS FINANCIAL: Announces Net Interest Margin Deal
HALLA ENGINEERING: MHI Agrees to Major Deal with Halla
HOME HOLDINGS: Seeks Approval for Second Amended Plan
JAYHAWK ACCEPTANCE: Reports First Quarter Results          
LOT$OFF Corporation: Year End and Fourth Quarter Results

MICROLYTICS: Plan Approved by Shareholders and Creditors
MONTGOMERY WARD: Exclusivity Extended To September 15
PAN AM: Proposes Plan with Guilford Transportation
PARAGON TRADE: Announces Increased First Quarter Earnings
PINNACLE MICRO: Poor Results May Force Bankruptcy

SA TELECOMMUNICATIONS: Bar Date Fixed
TOWN & COUNTRY: Order Approves Disclosure Statement
UNITED ACQUISITION: Chapter 11 Petition Dismissed
VOICE POWERED TECHNOLOGY: Limited Business Activities

                  *********

ALLIANCE ENTERTAINMENT: Close to Reorganization Plan
----------------------------------------------------
Alliance Entertainment Corp. has filed its monthly
operating report, and announced that the Company continues
to see significant progress in meeting its performance
goals and reducing expenses.  In its report filed with the
Office of the United States Trustee, the Company reported a
consolidated net loss of $3.2 million on net sales of $25.8
million.  The loss includes $2.5 million in interest and
reorganization expenses.  This compares with a consolidated
net loss of $4.5 million on net sales of $22.8 million, and
$2.2 million in interest and  reorganization expenses for
the February reporting period.  

At the same time, the Company said that it has asked for a
two-week extension to approximately  May 15, 1998, of its
exclusive right to file a plan of reorganization with the  
Court.  The Company said it had presented a proposed draft
plan to its major  creditor constituencies in early April,
and that "active" negotiations relative  to the final plan
are continuing.

"I am very pleased with the results for March," said Eric
Weisman, Alliance's president and chief executive officer.  
"We are extremely confident that negotiations among the
various creditor groups and the Company are at a stage
where they will shortly lead to a successful reorganization
of this complex case," Mr. Weisman said.  

Under the plan of reorganization, current stock in the
Company will be canceled.  The Company said that it has
made progress in the sale of its Castle Communications
subsidiary, and that the Court recently approved certain
bidding  procedures and a model purchase agreement for the
sale of Alliances, U.K. subsidiary.  The filing of
Alliance's plan of reorganization is not contingent on the
Castle sale.  However, Mr. Weisman said, the procedures
approved by the Court "are calculated to protect the
interests of all creditors while  permitting the Company
the necessary leeway to maximize recoveries to the  
estate."


AR ACCESSORIES GROUP: Panel Seeks Approval of Settlement
--------------------------------------------------------
The AR Accessories Group Inc. creditors' committee is
seeking approval of a settlement with the company's bank
group that will entitle AR to cash and other rights in
exchange for a release of claims against the lenders and
the committee's withdrawal of its objection to AR's request
for postpetition financing from the bank group.  The
proposed settlement "efficiently resolves numerous issues
which will result in a significantly higher distribution to
unsecured creditors without the need for continued and
costly litigation," the panel asserted. (Federal Filings
Inc. 01-May-98)


2CONNECT EXPRESS: No Authority to Pay for Audit
-----------------------------------------------
In a Form 8-K filed with the SEC on April 28, 1998,
2Connect Express Inc. stated that the Company's Form 10-K
for the fiscal year ended January 31, 1998 is required
to be filed by May 1, 1998. The Company, however, due to
the Chapter 11 proceedings, does not have authorization to
use available funds to pay the cost of an audit of its
financial statements as required by Form 10-K. Accordingly,
the Company will be unable to file its Form 10-K for the
fiscal year ended January 31, 1998, in a timely manner. If
the Company is able to obtain authorization to use
available funds to pay for such audit, it intends to have
such audit undertaken and to file its Form 10-K as soon
thereafter as practicable. In any event, the Company
intends to continue to file on Form 8-K the Debtor's
Monthly Reports after each filing with the Bankruptcy
Court.


CREDIT LYONNAIS: Trade Unions Call for National Protest
-------------------------------------------------------
Trade unions at troubled state-owned Credit Lyonnais bank
called Thursday for a national protest May 19 against EU  
conditions for a new rescue package.  The call issued by
five trade unions follows a demonstration by 3,000 Credit
Lyonnais staff in Brussels this week outside the offices of
the European Commission to voice fears of imminent job cuts
at the bank.  The Commission has given France an ultimatum
ending this weekend to agree to its conditions for a new
aid package.

These include massive restructuring to shed some 600
billion francs (100 billion dollars) worth of assets
worldwide, reducing its French activities by 22.5 percent,
and privatisation of the bank, something the previous
rightwing government had agreed to do by 1998 in exchange
for a 45 billion franc aid package in 1993. The new package
will amount to around 90 billion francs according to the  
French government, although the Commission puts the bill at
between 130 and 150 billion.

Trade unions said in a statement Thursday that a meeting
with European Competition Commissioner Karel van Miert in
Brussels had "increased concern about the possiility of a
compromise" between the Commission and Paris. A Commission
spokesman who met union representatives told them that a
final decision would be announced "in the next fortnight,"
suggesting that the original May 6 date for a decision may
be postponed slightly.

If France does not agree, the European Commission has said
it will refuse to  allow the French government to inject
any more state funds into the bank, something one
Commission official said would leave Credit Lyonnais
bankrupt.  The French government has said allowing the bank
to go to the wall is "out of the question" and that
depositors have nothing to fear.

But the threat from Brussels last week was enough to lead
French account holders to withdraw 600 million francs (100
million dollars), according to Lyonnais officials.
The bank played down the withdrawals, saying they
represented only a thousandth of total deposits, but
nonetheless issued an open letter to account holders
Wednesday seeking to reassure them that the government
would not allow the bank to collapse despite threats from
Brussels.  (Agence France Presse - 04/30/98)

GRAND UNION: Group Tied To GE, Disney To Fight Plan
----------------------------------------------------
Even as it has secured $300 million in new financing, Grand  
Union Co. faces opposition to its reorganization plan from
an investment group with ties to General Electric Co. and
Roy Disney.  The supermarket chain announced on March 30
that it had agreed to give bondholders almost all of the
company's common stock through a proposed reorganization.
Current shareholders would get warrants to buy about 2
percent  of the company's new common stock at $19.82 a
share.

However, the investment group, which holds a 77.6 percent
stake in Grand Union, claims that the company is required
to get its approval for any reorganization or
recapitalization. The investors suggested in an April 23  
letter to Grand Union that they would fight the proposal.

"We have repeatedly advised you that we do not consent to
the company's proposed recapitalization," the group said in
a copy of the letter filed with the Securities and Exchange
Commission. "We intend to take any and all actions that may
prove to be necessary to enforce our rights," it said.

Meanwhile, five of Grand Union's 11 directors resigned. No
successors were named.  The group asserted in the letter
that the terms of the preferred stock give them the right
to vote separately on any reorganization. Investors holding
a  majority of the preferred shares must approve the
transaction for it to proceed, the SEC filing said.

Grand Union said in a news release issued last week that
the position taken by the  shareholders is "without merit."
As a result, the company said it would reorganize as
planned.  Grand Union has received a commitment letter for
a $300 million line of credit from investment banks SBC
Warburg Dillon Read and Lehman Bros.  The credit line is
part of the capital-restructuring plan that was negotiated
with noteholders holding more than $275 million of the
company's nearly $600 million in notes.

In February, Grand Union disclosed it would not pay about
$36 million in interest due March 2 on its 12 percent
senior notes due in 2004, putting it in default.
The investment group holds its stock in Grand Union through
an investment partnership called Trefoil Capital Investors
II LP. Its general partners are controlled by GE pension
funds and Shamrock Holdings Inc., an investment vehicle
for Roy Disney, vice chairman of Walt Disney Co. and nephew
of the company's founder.

GE and Disney agreed to invest $100 million in Grand Union
convertible preferred stock in July 1996. Grand Union
earmarked the money for refurbishment  of its aging stores.


FIRSTPLUS FINANCIAL: Announces Net Interest Margin Deal
-------------------------------------------------------
Dallas-FirstPlus Financial Group Inc. announced the pricing
of its first net interest margin transaction.  FirstPlus
secured $150 million of bonds with interest-only strips and
a limited portion of servicing fees to be earned from its
1996-4, 1997-1, 1997-2, 1997-3, and 1997-4 high-loan-to-
value loan securitizations, the company said.

The bonds have 8.5% coupons, an expected average life of
2.5 years, and were sold at 99.55 to yield approximately
8.87% on a bond-equivalent basis.   The pricing reflected a
spread of about 3.35% over comparable U.S. Treasuries,
FirstPlus said.  Portions of the IO strips will be assigned
to a bankruptcy-remote entity.  FirstPlus said it would
report no gain from the transaction, which will be
accounted for as a financing. The bonds were placed with
investors by an underwriting consortium led byMerrill Lynch
and co-managed by Bear Stearns, Deutsche Morgan Grenfell,
J.P. Morgan, and PaineWebber.


HALLA ENGINEERING: MHI Agrees to Major Deal with Halla
------------------------------------------------------
Massachusetts Heavy Industries (MHI), the company
established to run the former Fore River Shipyard in
Quincy, has agreed a major deal with the bankrupt South
Korean shipbuilder Halla Engineering and Heavy Industries
for the transfer of shipbuilding technology.  Halla will
supply not only basic ship designs and production know-
how, but also overall technical support in connection with
the construction of a vessel and the engineering
technology, from basic designing to the application of CAD
and automation equipment.

The agreement is believed to be one of the most
comprehensive transfers of technology in the history of
commercial US shipbuilding. At the end of last year, the
company, headed by a former chairman of the Association of
European Shipbuilders, Sotirios Emmanouil, succeeded in
receiving approval for a $55m Title XI loan guarantee for
the $62.85m modernisation of the Massachusetts-based
facility from the US Maritime Administration.

The former General Dynamics' owned yard will initially be  
targeting the products tanker market. MHI claims that it
already has contracts worth $287.32m to build six 47,000
dwt products tankers for London-based Greeks Intermare
Navigation.  Halla has delivered a total 40 double-hull
products tankers, and until its bankruptcy was one of the
industry's leading lights in the field of handysize tanker
construction.  (LLoyds List International - 04/30/98)


HOME HOLDINGS: Seeks Approval for Second Amended Plan
-----------------------------------------------------
Home Holdings Inc. is seeking approval for a second amended
reorganization plan that, among other things, creates a
separate class for creditor AmBase Corp. and, through an
agreement with parent Zurich Insurance Co., renders the
class unimpaired.  The company said parties in interest who
voted for the previous plan should be deemed to have
accepted the modified plan because it does not adversely
change claim treatment for creditors who previously voted.  
(Federal Filings Inc. 01-May-98)


JAYHAWK ACCEPTANCE: Reports First Quarter Results          
-------------------------------------------------
Jayhawk Acceptance Corporation reported net income of
$316,000, or $0.01 per share, for the three months ended
March 31, 1998, compared to a net loss of $5,819,000 or
$0.24 per share for the same quarter in 1997.  Revenues for
the first quarter of 1998 were $5,294,000, versus
$14,051,000 for the same period in 1997. Operating expenses  
decreased from $18,870,000 during the first quarter of 1997
to $4,978,000 for  the same period in 1998.  

The Company's Plan of Reorganization was confirmed by  the
Bankruptcy Court effective October 21, 1997, and since that
date the  Company has operated in accordance with the Plan.

Results of operations for the first quarter of 1998 include
$1,580,000 ($1,437,000 in the first quarter of 1997) of
revenue and $1,837,000 ($3,608,000  in the first quarter of
1997) of expenses related to the elective healthcare  
financing program offered by the Company's subsidiary,
Jayhawk Medical Acceptance Corporation.


LOT$OFF Corporation: Year End and Fourth Quarter Results
--------------------------------------------------------
San Antonio based LOT$OFF Corporation announced today that
preliminary results for its fiscal year ended January 30,
1998 were net sales of $485 million and a net loss
(including non-recurring items) of $6.9 million as compared
to net sales of $106.2 million and a net loss of $43.6
million for its fiscal year ended January 31, 1997.

During fiscal 1998, the Company operated a weighted average  
42.1 stores as compared to 82.8 such stores in fiscal 1997.  
Preliminary results for the thirteen weeks ended January
30, 1998 were net sales of $16.8 million and net income
(including non-recurring items) of approximately  
$1,037,000 as compared to net sales of $15.0 million and a
net loss of $6.6 million for the thirteen weeks ended
January 31, 1997. During such fiscal 1998 period, the
Company operated a weighted average 44.0 stores as compared
to 49.2 such stores in the comparable fiscal 1997 period.

LOT$OFF is the successor to 50-OFF Stores Inc.  The
Company's plan of reorganization, as amended and modified,
became effective June 16, 1997 (in fiscal 1998).  Results  
for both fiscal years were substantially affected
by the Company's approximately eight month status as a
debtor in possession and reorganization.   In addition,
during the thirteen weeks ended January 30, 1998, the
Company received net lawsuit proceeds of approximately $4.0
million from two settlements related to important
litigation brought by the Company.

CEO Charles "Hop" Fuhrmann said that comparable store  
merchandise sales figures were up 6.5% (to $2,334,752 from
$2,192,785) for the fifteen days ended April 12, 1998 as
compared to the fifteen days ended March  
29, 1997, while total merchandise sales were up 9.0% to
$2,489,514 as compared to $2,283,291 for the prior year
period.


MICROLYTICS: Plan Approved by Shareholders and Creditors
--------------------------------------------------------
Microlytics Inc. announced that a Plan of Reorganization
has  been approved by its shareholders and creditors and
that the Bankruptcy Court for the Western District of New
York has issued an Order Confirming the Plan.  The Company
and SanTi Group,Inc. of Atlanta, Georgia announced  
today that they have entered into a definitive Merger
Agreement.

Pursuant to its Reorganization Plan, the Company (i) will
effect a 1 for 400 reverse split and begin trading under
the symbol SNTI subject to symbol availability and Nasdaq
approval, (ii) will distribute the net proceeds from asset
liquidations to its creditors, (iii) will merge with SanTi,
and (iv) will distribute shares and/or warrants to its
creditors and shareholders.

Pursuant to the Merger Agreement, the Company will issue to
the owners of SanTi 7,295,879 shares of the Company's
common stock.  After the issuance of shares pursuant to the
Plan of Reorganization and the Merger Agreement and the
effect of the reverse split, the Company will have
8,264,569 primary shares outstanding.  It is anticipated
that the Merger shall be consummated on May 10, 1998 and is
subject only to a ten day waiting period and the filing of
various closing documents with the Delaware Secretary of
State.  The Company will change its name to SanTi Group,
Inc.


MONTGOMERY WARD: Exclusivity Extended To September 15
-----------------------------------------------------
At a hearing Wednesday, the court extended Montgomery
Ward's exclusive period to file a reorganization plan to
Sept. 15.  The retailer expects to request another
extension from the U.S. Bankruptcy Court in Wilmington,
Del., when the current extension expires. (Federal Filings
Inc. 01-May-98)
  

PAN AM: Proposes Plan with Guilford Transportation
--------------------------------------------------
Pan American World Airways today announced that it has
executed a letter of agreement with Guilford  
Transportation Industries which, if approved by the U.S.
court  would form the foundation for the carrier's
reorganization plan which will be  filed by May 20 and set
for confirmation hearing in the summer.

Under terms of the transaction, Guilford will acquire
certain of Pan Am's airline related assets. These include
two Boeings 727's-200 aircraft, one Boeing 737-200
aircraft, spare parts, maintenance and operating manuals
and grounds support equipment.  In addition, Guilford will
acquire all of Pan Am's route authorities and rights, Pan
Am's 30 percent interest in the Pan Am Air Bridge, its US  
regulatory certificates and all trade marks, logos and
intellectual property relating to the Pan Am name. Pan Am
will receive in excess of $23.5 million in cash for these
assets, a portion of which will be paid to NationsBank, the  
largest secured creditor.  Guilford Transportation would
put up more than $9 million for unsecured loans and $5
million in operating capital.

The agreement is subject to approval by the Bankruptcy
Court and a completion of due diligence by Guilford.  A
hearing is scheduled for May 6, 1998. Pan Am Corporation's
existing equity will not be represented in the proposed
plan of reorganization.


PARAGON TRADE: Announces Increased First Quarter Earnings
---------------------------------------------------------         
Paragon Trade Brands, Inc. reported net earnings of $6.0
million, or $.50 per share, for the quarter ended March 27,
1998 compared to net earnings of $3.8 million, or $.32 per
share for the first quarter of 1997.  Net sales for the
quarter were $138.3 million, compared to $135.7 million for
the first quarter of 1997. Earnings before interest, taxes,
depreciation and amortization and bankruptcy costs,  
EBITDA, for the first quarter totaled $15.5 million.

Savings from improved manufacturing efficiencies  
realized during the quarter largely offset the impact of
approximately $2.3 million in charges associated with a
royalty payable to P&G.  The royalty is payable under a
Conversion Agreement which allows the Company to continue
to manufacture the diaper product currently the subject of
a patent dispute with P&G while the Company completes its
conversion to a new product design.

Income from the Company's foreign joint ventures grew
significantly during the quarter from  operations in
Tijuana, Mexico and Argentina and is reflected in Other
Income.   Earnings from Paragon's investment in Grupo P.I.
Mabe S.A. de C.V. are not reflected in the Company's
financial statements.  The Company's profitability also
benefited from the recognition of tax benefits previously
reserved.

Commenting on the Chapter 11 filing and the status of the
Company, Chief Executive Officer, Bobby Abraham, said
we have more than $35 million in cash on hand and
have made no borrowings under our $75 million credit
facility with The Chase Manhattan Bank.


PINNACLE MICRO: Poor Results May Force Bankruptcy
-------------------------------------------------
Pinnacle Micro, Inc. today announced its complete results
for the fourth quarter and year-ended December 27, 1997.
Net sales for the fourth quarter ended December
27, 1997 were $2,434,000, compared to $3,307,000 in the
third quarter of 1997 and $15,895,000 in the  fourth
quarter of 1996.  Net loss for the fourth quarter 1997 was
$6,465,000, or $.45 per share as compared to a net loss of
$14,710,000 or $1.02 per share in the third quarter of 1997
and $3,912,000 or $.42 per share in the fourth  quarter of
1996.  Included in the fourth quarter 1997 results were
non- recurring expenses of $1,157,000 for accrual of
additional severance obligations related to the Company's
workforce reductions and settlement costs  related to a
shareholder lawsuit.

Net sales for fiscal 1997 were $31,124,000, compared
to $59,921,000 in  fiscal 1996.  Net loss for fiscal 1997
was $30,229,000, or $2.32 per share, as compared to a net
loss of $ 20,833,000,or $2.52 per share in 1996. Included  
in the fiscal 1997 results were non-recurring expenses of
$2,087,000 related to severance obligations, settlement
costs of a shareholder lawsuit, relocation of the Company's
operations from Colorado Springs to Irvine, Calif. and
subsequently to a smaller location in Irvine, as well as
the closure of the Company's European operations.

Although the Company reduced its losses  from the third
quarter to the fourth quarter, the Company continues to
incur significant losses and quarterly sales remain
significantly below historical  levels and those levels
required for profitability.   The Company's liquidity  
position continues to be severely constrained.  The
Company is presently looking for sources of financing;
there can be, however, no assurance that  sources of
financing will be located.

As a result of the Company's difficulty in paying  
its trade debt on a timely basis the Company sought the
cooperation of its creditors in 1997 in a restructuring of
its trade debt. The Company continues to be in default
under the Company's agreement with its secured lender. At
present time the Company has borrowed in excess of its
available credit.  In the event the Company is unable to
obtain additional extensions of the existing moratorium or
the committee and/or unsecured creditors reject the
Company's proposed plan, the Company may be unable to
continue to operate as a going concern and may be required
to file for bankruptcy protection.

Similarly, in the event the Company is declared in default
under the secured line of credit by the lender and demand
for payment is made, the Company would be unable to make
such payment and would likely be required to seek
protection under the Federal bankruptcy laws.


SA TELECOMMUNICATIONS: Bar Date Fixed
-------------------------------------
In the case of SA Telecommunications, Inc. and its
affiliated companies as debtors, the court entered an order
fixing June 1, 1998 as the deadline for filing proofs of
claim against SA Telecommunications, Inc. and certain of
its subsidiaries.


TOWN & COUNTRY: Order Approves Disclosure Statement
---------------------------------------------------
A copy of the order approving the Disclosure Statement and
scheduling a Plan confirmation hearing in the case of Town
& Country Corporation, was published in The Wall Street
Journal on Friday May 1, 1998.

The hearing on confirmation of the Amended Plan will take
place on May 26, 1998.  May 18, 1998 is fixed as the
deadline for filing objections to confirmation of the
Amended Plan.  May 18, 1998 shall constitute the
"Distribution Record Date."


UNITED ACQUISITION: Chapter 11 Petition Dismissed
-------------------------------------------------
United Acquisition II Corp. announced that on April 16,  
1998, the company's voluntary petition for reorganization
under the provisions of Chapter 11 of the United States
Bankruptcy Code in the Southern District of New York was
dismissed.

The company also announced that it had entered into an
agreement to acquire 100% of the issued and outstanding
shares of capital stock of U.S. Mobile Services Inc., a
company engaged in the telecommunications industry, in
exchange for shares of the company's common stock and that
the company declared a one for 25 reverse split of its  
outstanding common stock. The Reverse Split will be  
effective on May 1, 1998.  After giving effect to the
Reverse Split and the issuance of additional shares, the
company will have 9,094,860 post Reverse Split shares of
common stock issued and outstanding as well as warrants to  
purchase an additional 1,202,500 post Reverse Split common
shares.  The company will also change its name to U.S.
Mobile Services Inc. and its symbol to USMS.


VOICE POWERED TECHNOLOGY: Limited Business Activities
-----------------------------------------------------
Voice Powered Technology International, Inc. stated in its
most recent annual report, Form 10-KSB, filed with the SEC
that in the course of its bankruptcy proceedings, the
Company in conjunction with Franklin, filed a combined
Amended Disclosure Statement and Plan of Reorganization
with the Bankruptcy Court. The Disclosure Statement aspect
of this Plan has been approved as to form by the Bankruptcy
Court, and submitted to all interested parties for
approval.

Under the terms of the Plan, Franklin will provide the
Company with a $350,000 loan. In addition, the Plan
provides for the conversion of the Company's outstanding
500,000 shares of preferred stock into 2,000,000 shares of
the Company's common stock. The Plan also provides for
Franklin to convert its $1,708,750 pre-petition secured
loan to the Company into an eighty percent (80%) interest
in the equity of the Company, after conversion of the
preferred stock, through the issuance by the Company of
additional shares of the Company's common stock.

On March 16, 1998, the Company filed a motion with the
Bankruptcy Court for confirmation of the Plan and a hearing
to grant such motion is scheduled for April 23, 1998. Until
final confirmation by the Bankruptcy Court, no assurance
can be given that the Plan will be completed and
implemented.

Success of the Company after confirmation of the Plan, if
confirmed, is dependent, among other things, on reaching a
satisfactory level of profitability and generating
sufficient cash flow resources to meet ongoing
obligations. No assurance can be given that Franklin will
continue to participate in the Plan. Should Franklin cease
its participation, the Company may be forced to liquidate.

Pursuant to the terms of its Post Petition Financing, the
Company was provided a revolving line of credit based upon
a borrowing base equal to seventy-five percent (75%) of the
Company's eligible accounts receivable plus fifty percent
(50%) of the Company's eligible outstanding customer
purchase orders, up to a maximum loan amount of
$400,000.

At present, the Company is engaged in only limited business
activities consisting of sales of IQ-VOICE Organizer
products to smaller retailers and wholesale accounts, to
international distributors, and through various direct
marketing programs. As a result of this contraction in the
Company's business activities, the Company has terminated
the employment of a number of its employees, inclusive of
the Company's Vice President of Sales and Marketing and
Vice President of Engineering and Development. In addition,
in May 1997, prior to commencement of the Bankruptcy
Proceedings, the Company's president/CEO resigned, and such
duties were assumed by the Company's vice president/CFO
thereby further reducing the Company's ongoing costs for
executive management personnel.

Management of the Company is presently focused on the
successful completion of a pending licensing agreement for
the Company's Technology, the development of targeted
direct marketing channels for its current products, as
well as maintaining and servicing its remaining customer
base in order to sustain operations through completion and
confirmation of the Plan. Until such time, the Company has
suspended development of new products and major expansion
of sales activities into new markets. It should also be
noted, however, that upon confirmation of the Plan, the
Company will become an 80% controlled subsidiary of
Franklin, and therefore subject to Franklin's direction
regarding future business activities.

                  *********

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