<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 26, 1998
___ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission file number 0-21074
SUPERCONDUCTOR TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 77-0158076
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
</TABLE>
460 WARD DRIVE, SUITE F
SANTA BARBARA, CALIFORNIA 93111-2310
(Address of principal executive offices & zip code)
(805) 683-7646
(Registrant's telephone number including area code)
-------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
--- ---
As of November 6, 1998 there were 7,716,081 shares of the Registrant's Common
Stock outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUPERCONDUCTOR TECHNOLOGIES INC.
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT. 26, 1998 SEPT. 27, 1997 SEPT. 26, 1998 SEPT. 27, 1997
------------------- ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Net revenues:
Government contract revenues $1,502,000 $1,886,000 $5,178,000 $6,331,000
Commercial product revenues 563,000 85,000 1,031,000 112,000
Sublicense royalties 0 38,000 0 38,000
------------------- ------------------ ------------------ -----------------
Total net revenues 2,065,000 2,009,000 6,209,000 6,481,000
------------------- ------------------ ------------------ -----------------
Costs and expenses:
Cost of commercial revenues 1,747,000 0 4,266,000 0
Contract research and development 1,175,000 1,479,000 3,575,000 4,453,000
Other research and development 244,000 512,000 892,000 1,289,000
Selling, general and
administrative 1,395,000 1,093,000 4,035,000 2,900,000
------------------- ------------------ ------------------ -----------------
Total costs and expenses 4,561,000 3,084,000 12,768,000 8,642,000
------------------- ------------------ ------------------ -----------------
Loss from operations (2,496,000) (1,075,000) (6,559,000) (2,161,000)
Interest (expense) income, net (5,000) 64,000 39,000 189,000
------------------- ------------------ ------------------ -----------------
Net loss ($2,501,000) ($1,011,000) ($6,520,000) ($1,972,000)
=================== ================== ================== =================
Basic and diluted loss per share ($0.34) ($0.13) ($0.87) ($0.26)
Weighted average number of
shares outstanding 7,730,668 7,717,356 7,723,340 7,696,955
========== ========== ========= =========
</TABLE>
(See accompanying notes)
2
<PAGE> 3
SUPERCONDUCTOR TECHNOLOGIES INC.
(A Development Stage Enterprise)
BALANCE SHEET
<TABLE>
<CAPTION>
(Unaudited)
ASSETS SEPTEMBER 26, DECEMBER 31,
1998 1997
------------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,963,000 $ 1,438,000
Short-term investments 0 2,099,000
Accounts receivable 1,340,000 1,048,000
Inventory 1,778,000 677,000
Prepaid expenses and other current assets 181,000 146,000
-------------- -----------------
Total current assets 7,262,000 5,408,000
Property and equipment, net of accumulated depreciation
of $6,864,000 and $6,534,000, respectively 4,647,000 2,456,000
Patents and licenses, net of accumulated amortization
of $1,228,000 and $1,057,000, respectively 2,062,000 2,152,000
Other assets 125,000 71,000
-------------- -----------------
Total assets $ 14,096,000 $ 10,087,000
============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,188,000 $ 1,407,000
Accrued compensation 592,000 437,000
Current portion of long-term debt 162,000 64,000
-------------- -----------------
Total current liabilities 2,942,000 1,908,000
Long-term debt 649,000 13,000
-------------- -----------------
Total liabilities 3,591,000 1,921,000
-------------- -----------------
Redeemable Preferred Shares, $.001 par value, 2,000,000 shares authorized,
Series A 645,833 shares issued and outstanding,
Series A-1 125,000 shares issued and outstanding, Series B
500,000 shares issued and outstanding 9,003,000 0
-------------- -----------------
Commitments and contingencies
Stockholders' equity:
Common Stock, $.001 par value, 30,000,000 shares authorized,
7,715,081 and 7,699,581 shares issued and outstanding 8,000 8,000
Capital in excess of par value 35,067,000 35,211,000
Deficit accumulated during development stage (33,573,000) (27,053,000)
-------------- -----------------
Total stockholders' equity 1,502,000 8,166,000
-------------- -----------------
Total liabilities and stockholders' equity $ 14,096,000 $ 10,087,000
============== =================
</TABLE>
(See accompanying notes)
3
<PAGE> 4
SUPERCONDUCTOR TECHNOLOGIES INC.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Unaudited)
<TABLE>
<CAPTION>
SEPT. 26, SEPT. 27,
1998 1997
--------------------- --------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($6,520,000) ($1,972,000)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization 763,000 730,000
Changes in assets and liabilities:
Accounts receivable (292,000) 160,000
Inventory (1,101,000) (128,000)
Prepaid expenses and other current assets (35,000) (4,000)
Patents and licenses (81,000) (137,000)
Other assets (54,000) 144,000
Accounts payable and accrued expenses 936,000 90,000
Billings in excess of cost and earnings on uncompleted contracts 0 (266,000)
--------------------- --------------------
Net cash used in operating activities (6,384,000) (1,383,000)
--------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in short-term investments 2,099,000 2,278,000
Purchases of property and equipment (2,783,000) (806,000)
--------------------- --------------------
Net cash (used in) provided by investing activities (684,000) 1,472,000
--------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 776,000 0
Principal payments on long-term obligations (41,000) (321,000)
Proceeds from sale of preferred and common stock, net 8,858,000 417,000
--------------------- --------------------
Net cash provided by financing activities 9,593,000 96,000
--------------------- --------------------
Net increase in cash and cash equivalents 2,525,000 185,000
Cash and cash equivalents at beginning of period 1,438,000 2,599,000
--------------------- --------------------
Cash and cash equivalents at end of period $3,963,000 $2,784,000
===================== ====================
</TABLE>
(See accompanying notes)
4
<PAGE> 5
SUPERCONDUCTOR TECHNOLOGIES INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
A. GENERAL
The unaudited financial information furnished herein has been prepared in
accordance with generally accepted accounting principles and reflects all
adjustments, consisting only of normal recurring adjustments, which in the
opinion of management, are necessary to fairly state the Company's financial
position, the results of its operations and its cash flows for the periods
presented. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and the
accompanying notes. Actual results could differ from those estimates and such
differences may be material to the financial statements. This quarterly report
on Form 10-Q should be read in conjunction with the Company's Form 10-K for the
year ended December 31, 1997. The results of operations for the three months and
nine months ended September 26, 1998 are not necessarily indicative of results
for the entire fiscal year ending December 31, 1998.
The Company reports on a 13-week quarter period ending on the Saturday nearest
the calendar quarter end. The Company's fiscal year-end is December 31.
B. INVENTORIES
Inventories are stated at the lower of cost (first-in, first out) or market and
consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 26, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
Raw Materials $ 326,000 $ 336,000
Work-in-Progress 1,012,000 302,000
Finished Goods 440,000 39,000
---------- ----------
Total Inventory $1,778,000 $ 677,000
========== ==========
</TABLE>
C. PER SHARE INFORMATION
Basic net loss per share is computed by dividing net loss available to common
stockholders by the weighted average number of common shares outstanding in each
year. Net loss available to common stockholders is computed by deducting
dividends accumulated on cumulative preferred stock and accretion of redemption
value on redeemable preferred shares for the period. Preferred dividends
accumulated for the three and nine-month periods ended September 26, 1998 were
$100,000 and $173,000, respectively. Diluted net loss per share is computed by
dividing loss available to common stockholders plus income associated with
dilutive securities by the weighted average number of common shares outstanding
plus any potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock in each year.
Potential Common Stock issuable upon exercise of options and warrants to
purchase shares of the Company's Common Stock (and conversion of the outstanding
Preferred Stock to Common Stock) is not included as the result would have been
antidilutive considering the Company's reported net loss from operations for all
periods presented.
D. PRIVATE PLACEMENT OF REDEEMABLE PREFERRED SHARES
The Company completed a private placement of Series A and Series A-1 6%
Cumulative Convertible Preferred Stock, with three different closing dates, to
certain investors over the first nine months of 1998. Each Preferred Share is
convertible into two shares of Common Stock. The Preferred Shares carry a
cumulative dividend of 6% per annum and also have voting rights and liquidation
preferences. The Preferred Shares are not redeemable by the Company prior to
March 26, 2001. Thereafter, the Company may redeem the Preferred Shares at 110%
of the liquidation preference plus accrued dividends. Subsequent to March 26,
2005, until fully redeemed, the holders of the Preferred Shares have the option
to cause the Company to redeem the Preferred Shares at their liquidation
preference plus accrued dividends. On March 26, 1998, the Company raised
approximately $3,000,000 from the sale of 500,000 Series A Preferred Shares at
$6.00 per share, and issued warrants to purchase up to 100,000 shares of Common
Stock at an exercise price of $4.00 per share. On August 11, 1998, the Company
raised approximately $1,000,000 from the sale of 125,000 Series A-1 Preferred
Shares at $8.00 per share with warrants to purchase up to 66,667 shares of
Common Stock at an exercise price of $4.00 per share. On September 3, the
Company raised approximately $875,000 from the sale of 145,833 Series A
Preferred Shares at $6.00 per share with no warrants.
5
<PAGE> 6
On September 2, 1998, the Company completed a private placement of 500,000
shares of Series B 7% Cumulative Convertible Preferred Stock to certain
investors at $8.00 per share. The proceeds of the offering, net of offering
expenses, totaled approximately $4 million. The Series B Preferred Shares are
not redeemable prior to September 2, 2001. Thereafter, the Company may redeem
the Series B Preferred Shares at 110% of the liquidation preference plus accrued
dividends. Subsequent to September 2, 2005, until fully redeemed, the holders of
the Series B Preferred Shares have the option to cause the Company to redeem
those Preferred Shares at their liquidation preference plus accrued dividends.
The Company also issued warrants to purchase up to 120,000 shares of Common
Stock at $5.70 per share. Pursuant to the purchase agreement, the Company has an
obligation to grant additional warrants under certain conditions.
Accretion of the redemption value of all series of Preferred Shares was not
material to the period ended September 26, 1998.
E. CAPITAL LEASE FINANCING
The Company received $1 million in capital lease financing commitment under
which $650,000 was drawn in the third quarter of 1998. The lease financing
carries an implicit interest rate of approximately 14.8% for 60 months.
F. NEWLY ISSUED FINANCIAL REPORTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 becomes effective for the Company
in 2000. The adoption of SFAS 133 is not expected to have a material effect on
the Company's financial statement disclosures.
G. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND NON-CASH ACTIVITIES
At September 26, 1998, accrued dividends on redeemable preferred shares were
$173,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements are in "Results of
Operations for the three-month and nine-month periods ended September 26, 1998
and September 27, 1997" and "Liquidity and Capital Resources". These statements
represent the Company's expectations or beliefs concerning future events and
include statements, among others, regarding commercial revenues and the
Company's financial resources. Actual results could differ materially from those
projected in the forward-looking statements as a result of the risk factors set
forth herein. Investors are strongly encouraged to review the section entitled
"Factors Affecting Future Business Operations" for a discussion of factors that
could affect future performance.
RESULTS OF OPERATIONS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER
26, 1998 AND SEPTEMBER 27, 1997
Total net revenues increased by $56,000, or 3%, from $2,009,000 in the third
quarter of 1997 to $2,065,000 in the third quarter of 1998. This increase is due
to the increase in commercial revenues offset by the decrease in government
contract revenues and sublicense royalties. Net revenues decreased by $272,000,
or 4%, from $6,481,000 in the first nine months of 1997 to $6,209,000 in the
first nine months of 1998. This change is due to the decrease in government
contract revenues and sublicense royalties offset by an increase in commercial
revenues.
Government contract revenues decreased by $384,000, or 20%, from $1,886,000 in
the third quarter of 1997 to $1,502,000 in the third quarter of 1998. Government
contract revenues decreased by $1,153,000, or 18%, from $6,331,000 in the first
nine months of 1997 to $5,178,000 in the first nine months of 1998. These
decreases are attributable to the completion of certain government programs and
the transition period associated with entering into new government contracts.
Commercial product revenues increased $478,000 from $85,000 in the third quarter
of 1997 to $563,000 in the third quarter of 1998. Commercial product revenues
increased $919,000 from $112,000 in the first nine months of 1997 to $1,031,000
in the first nine months of 1998. These increases are due to increased sales of
the SuperFilter(R) product, resulting from the Company's success in marketing
and manufacturing its flagship product.
Sublicense royalties were $38,000 in the three-month and nine-month periods
ended September 27, 1997. There were no sublicense royalties in the three-month
and nine-month periods ended September 26, 1998 as the Company did not offer any
new sublicense agreements on its patents during this time period.
As the Company continues to focus on its commercial products, commercial product
revenues are expected to increase as a percentage of revenues over the next
several quarters; however, there can be no assurance that such commercial
revenues will increase. Furthermore, as the Company attempts to achieve
commercialization of products, it could encounter seasonality, manufacturing
delays or other currently unforeseen factors causing additional variability in
its results.
6
<PAGE> 7
The cost of commercial revenues was $1,747,000 for the third quarter of 1998 and
$4,266,000 in the first nine months of 1998. This represents an increase over
1997 in cost of commercial revenues and related start-up costs to support the
increase in commercial sales and manufacturing capacity.
Contract research and development expenses decreased by $304,000, or 21%, from
$1,479,000 in the third quarter of 1997 to $1,175,000 in the third quarter of
1998. Contract research and development expenses decreased by $878,000, or 20%,
from $4,453,000 in the first nine months of 1997 to $3,575,000 in the first nine
months of 1998. These decreases are attributable to the decreases in contract
revenues, which are directly related to contract research and development
expenses.
Other research and development expenses decreased by $268,000, or 52%, from
$512,000 in the third quarter of 1997 to $244,000 in the third quarter of 1998.
Other research and development expenses decreased by $397,000, or 31%, from
$1,289,000 in the first nine months of 1997 to $892,000 in the first nine months
of 1998. These decreases are due to the Company's continued focus on commercial
production and ramp-up of manufacturing capacity.
Selling, general and administrative expenses increased by $302,000, or 28%, from
$1,093,000 in the third quarter of 1997 to $1,395,000 in the third quarter of
1998. Selling, general and administrative expenses increased by $1,135,000, or
39%, from $2,900,000 in the first nine months of 1997 to $4,035,000 in the first
nine months of 1998. These increases are due to increased labor-related expenses
attributable to the expansion of the Company's sales force, as well as increased
efforts in the Company's marketing program.
Interest income decreased by $62,000, or 89%, from $70,000 in the third quarter
of 1997 to $8,000 in the third quarter of 1998. Interest income decreased by
$157,000, or 73%, from $216,000 in the first nine months of 1997 to $59,000 in
the first nine months of 1998. The decreases in interest income are primarily
due to the reduction in interest-earning investment balances to fund and expand
operations.
Interest expense increased by $7,000, or 117%, from $6,000 in the third quarter
of 1997 to $13,000 in the third quarter of 1998 as the Company entered into an
equipment financing agreement in the third quarter of 1998 (see Note E).
Interest expense decreased by $7,000, or 26%, from $27,000 in the first nine
months of 1997 to $20,000 in the first nine months of 1998, due to the reduction
in the Company's note payable and capitalized lease obligations, prior to
borrowings under the new financing agreement in the third quarter of 1998
described in Note E above.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and short-term investments increased by $426,000, or
12%, from $3,537,000 on December 31, 1997 to $3,963,000 on September 26, 1998.
The increase is the result of private placements of approximately $8.875 million
and capital lease financing of $1 million, offset by operating losses of $6.5
million and purchases of new equipment in the amount of $2.8 million for
expansion of manufacturing operations.
The Company's principal resource commitments at September 26, 1998 consist of
accounts payable and accrued employee compensation of $2,188,000 and $592,000,
respectively, and equipment financing commitments of approximately $811,000.
In addition to completing the private placements and capital lease financing
discussed in Notes D and E in Notes to Financial Statements, the Company is
currently in discussions with two companies to provide an additional $1.2
million of lease financing for equipment either in place or to be acquired over
the next several months. The Company is also in negotiation for a working
capital line of credit for approximately $1.5 million. The Company believes that
the additional financing will provide adequate capital for its operational needs
over the next 12 months. However, in the event that the debt financing is not
successfully completed, the Company will be required to seek alternative
financing. There can be no assurances that the negotiations in process will
result in execution of credit agreements or that other additional financing
would be available on terms acceptable to the Company, if at all. Depending upon
the timing of market acceptance of the Company's products and the manufacturing
ramp-up necessary to support the market acceptance, additional working capital
financing may be required to fully implement the Company's business plan. The
Company's inability to fully implement its business plan, including the
inability to obtain additional financing, would have a material adverse effect
on the Company's business, operating results and financial condition.
7
<PAGE> 8
IMPACT OF YEAR 2000
The Company currently uses a limited number of software products that are not
Year 2000 compliant. However, the Company has acquired manufacturing software,
which replaces substantially all non-Year 2000 compliant software, in order to
support its expansion efforts. The software developer has represented that the
new software is Year 2000 compliant. The Company has reviewed the remaining
software programs that are not Year 2000 compliant and believes that with
modification to existing software or cessation of utilization of non-compliant
software, the Year 2000 problem will not pose significant operational problems.
The Company currently does not expect the amounts required to be incurred to
become Year 2000 compliant to have a material effect on its business, operating
results or financial condition.
FACTORS AFFECTING FUTURE BUSINESS OPERATIONS
EARLY STAGE OF THE COMMERCIAL SUPERCONDUCTOR PRODUCTS MARKET: MARKET ACCEPTANCE
AND RELIABILITY
The commercial superconductor products market has experienced limited product
commercialization to date. Moreover, since inception, the Company has been
principally engaged in research and development activities and has only limited
experience in the commercialization of its products. The Company's ability to
grow will depend on its ability to successfully transition its expertise in HTS
filter and cryogenics technologies and applications to commercial markets,
including the wireless communications market. There can be no assurance that the
Company will be able to produce its products in sufficient volume or on a
reliable basis to meet market demand or that any of the Company's products will
achieve full market acceptance. The failure to successfully manufacture and
market its products for its target markets would have a material adverse effect
on the Company's business, operating results and financial condition.
DEPENDENCE ON SALES TO SERVICE PROVIDERS AND OEMS
Most of the Company's products, including those developed for wireless
communications base stations and government applications, are intended for use
as components or subsystems in base station systems or other complex systems.
Therefore, to gain market acceptance, particularly in the wireless market, the
Company must demonstrate that its products will provide advantages to the
service providers who utilize base station systems and OEMs that manufacture
base station systems. These advantages include a decrease in system size, an
increase in base station range and a reduction in interference. There can be no
assurance that upon acceptance, the Company's products will be able to achieve
any of these advantages. Moreover, even if the Company is able to demonstrate
such advantages, there can be no assurance that service providers and OEMs will
elect to incorporate the Company's products into their systems or, if they do,
that related system and manufacturing requirements can or will be met.
LIMITED MANUFACTURING EXPERIENCE
To date, the Company has sold products only in limited quantities, primarily for
use in field-testing as well as development and prototypes. During the first
nine months of 1998 the Company has significantly increased its manufacturing
capacity in order to meet the increased demand for its products as well as for
expected future requirements. While the Company has increased its manufacturing
capacity, there can be no assurance that the Company will be successful in
overcoming the technological, engineering and management challenges associated
with the production of commercial quantities of superconducting or cryogenic
products at acceptable costs and on a timely basis.
HIGH DEGREE OF DEPENDENCE ON GOVERNMENT CONTRACTS
Since inception, a significant portion of the Company's net revenues has been
from research and development contract sales directly to the government or to
resellers to the government. Although the Company recently has been devoting
substantial resources to the development of commercial markets for its products,
the Company is, and expects to continue to be in the near term, dependent on
government funding for its research and development projects. Government
contract revenues have historically fluctuated from period to period. This
variability is attributable to government contract budgeting and funding
patterns, as the government procurement process is lengthy and may involve
competing budget considerations, making the timing of the Company's revenues
difficult to predict. Funds authorized by the government under any development
contract may be reduced or eliminated at any time, and there can be no assurance
that the Company will receive all or any part of the funds under any of the
Company's existing government contracts not yet performed.
8
<PAGE> 9
UNCERTAINTY OF PATENTS AND PROPRIETARY RIGHTS
The Company relies on a combination of patent, trademark, trade secret and
copyright law and internal procedures and nondisclosure agreements to protect
its intellectual property. There can be no assurance that the Company's
intellectual property rights can be successfully asserted in the future or will
not be invalidated, circumvented or challenged. In addition, the laws of certain
foreign countries in which the Company's products may be produced or sold do not
protect the Company's intellectual property rights to the same extent as the
laws of the United States. The failure of the Company to protect its proprietary
information could have a material adverse effect on the Company's business,
results of operations and financial condition.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended September 26, 1998.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUPERCONDUCTOR TECHNOLOGIES INC.
(Registrant)
Dated: November 9, 1998 /s/ James G. Evans, Jr.
--------------------------------------
James G. Evans, Jr.
Vice President, Chief Financial Officer
9
<PAGE> 10
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-26-1998
<CASH> 963,000
<SECURITIES> 3,000,000
<RECEIVABLES> 1,340,000
<ALLOWANCES> 0
<INVENTORY> 1,778,000
<CURRENT-ASSETS> 7,262,000
<PP&E> 11,511,000
<DEPRECIATION> 6,864,000
<TOTAL-ASSETS> 14,096,000
<CURRENT-LIABILITIES> 2,942,000
<BONDS> 0
0
9,003,000
<COMMON> 8,000
<OTHER-SE> 35,067,000
<TOTAL-LIABILITY-AND-EQUITY> 14,096,000
<SALES> 1,031,000
<TOTAL-REVENUES> 6,209,000
<CGS> 4,266,000
<TOTAL-COSTS> 11,876,000
<OTHER-EXPENSES> 892,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,000
<INCOME-PRETAX> (6,520,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (33,573,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,520,000)
<EPS-PRIMARY> (.87)
<EPS-DILUTED> (.87)
</TABLE>
