<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarterly Period Ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number: 0-26804
PLANET POLYMER TECHNOLOGIES, INC.
------------------------------------------------------------------------
(Exact name of small business issuer as specified in its character)
<TABLE>
<S> <C>
CALIFORNIA 33-0502606
----------------------------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization) I.R.S. Employer Identification No.
</TABLE>
9985 Businesspark Ave., Suite A, San Diego, California 92131
------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(619) 549-5130
------------------------------------------------------------------------
(Issuer'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.
[X] YES [ ] NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at September 30, 1998
----- ---------------------------------
Common Stock, no par value 5,332,491
<PAGE> 2
PLANET POLYMER TECHNOLOGIES, INC.
FORM 10-QSB QUARTERLY REPORT
QUARTER ENDED SEPTEMBER 30, 1998
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheet (Unaudited)
September 30, 1998 2
Consolidated Statements of Operations (Unaudited)
Three Months Ended September 30, 1998 and 1997 3
Consolidated Statements of Operations (Unaudited)
Nine Months Ended September 30, 1998 and 1997 4
Consolidated Statement of Shareholders' Equity (Unaudited)
Nine Months Ended September 30, 1998 5
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 1998 and 1997 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 13
Item 2 Changes in Securities 13
Item 3 Defaults upon Senior Securities 13
Item 4 Submission of Matters to a Vote of Security Holders 13
Item 5 Other Information 13
Item 6 Exhibits and Reports on Form 8K 13
SIGNATURES 14
</TABLE>
<PAGE> 3
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
---------------
<TABLE>
<CAPTION>
SEPTEMBER 30,
ASSETS 1998
------------
<S> <C>
Current assets:
Cash and cash equivalents $ 510,250
Accounts receivable, net of allowance for doubtful accounts of $10,000 169,796
Inventories, net 498,556
Prepaid expenses 85,693
Deferred income taxes 16,014
------------
Total current assets 1,280,309
Restricted cash 108,277
Property, plant and equipment, net 755,780
Goodwill, net 552,019
Patents and other, net 328,342
------------
Total assets $ 3,024,727
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 144,956
Notes payable 104,377
------------
Total current liabilities 249,333
Other liabilities 324,626
Deferred income taxes 9,721
------------
Total liabilities 583,680
------------
Shareholders' equity:
Preferred Stock, no par value
Authorized shares 4,250,000
No shares issued or outstanding --
Series A Convertible Preferred Stock, no par value
Authorized shares 750,000
Issued and outstanding 500,000 804,435
Liquidation preference $2 per share
Common Stock, no par value
Authorized shares 20,000,000
Issued and outstanding 5,332,491 10,994,206
Accumulated deficit (9,357,594)
------------
Total shareholders' equity 2,441,047
------------
Total liabilities and shareholders' equity $ 3,024,727
============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE> 4
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
---------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Sales $ 204,367 $ 709,514
Cost of sales 216,990 555,291
------------ ------------
Gross profit (12,623) 154,223
------------ ------------
Operating expenses:
General and administrative 187,962 225,286
Marketing 57,107 58,384
Research and development, net 136,086 109,115
------------ ------------
Total operating expenses 381,155 392,785
------------ ------------
Loss from operations (393,778) (238,562)
Other income, net 8,291 8,683
------------ ------------
Loss before income taxes (385,487) (229,879)
Income taxes -- 20,000
------------ ------------
Net loss $ (385,487) $ (249,879)
============ ============
Loss per share (Basic and Diluted) $ (0.07) $ (0.05)
============ ============
Shares used in per share computations 5,321,206 5,271,269
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 5
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Sales $ 1,256,551 $ 2,449,771
Cost of sales 1,210,930 1,844,084
------------ ------------
Gross profit 45,621 605,687
------------ ------------
Operating expenses:
General and administrative 629,877 741,355
Marketing 184,887 252,501
Research and development, net 410,627 286,335
------------ ------------
Total operating expenses 1,225,391 1,280,191
------------ ------------
Loss from operations (1,179,770) (674,504)
Other income, net 27,458 39,333
------------ ------------
Loss before income taxes (1,152,312) (635,171)
Income taxes 1,915 49,094
------------ ------------
Net loss $ (1,154,227) $ (684,265)
============ ============
Loss per share (Basic and Diluted) $ (0.22) $ (0.13)
============ ============
Shares used in per share computations 5,311,705 5,271,269
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 6
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
---------------
<TABLE>
<CAPTION>
SERIES A PREFERRED STOCK COMMON STOCK
-------------------------- -------------------------- ACCUMULATED
SHARES AMOUNT SHARES AMOUNT DEFICIT TOTAL
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 500,000 $ 804,435 5,300,144 $10,940,967 $(8,158,369) $ 3,587,033
Issuance of Common Stock as a dividend on
Convertible Preferred Stock on March 15, 1998 -- -- 10,169 14,999 (14,999) --
Issuance of Common Stock as a dividend on
Convertible Preferred Stock on June 15, 1998 -- -- 8,695 14,999 (14,999) --
Issuance of Common Stock as a dividend on
Convertible Preferred Stock on September 15, 1998 -- -- 13,483 15,000 (15,000) --
Fair Market Value of Stock Options
granted to a scientific advisor -- -- -- 8,241 -- 8,241
Net loss for the nine months
ended September 30, 1998 -- -- -- -- (1,154,227) (1,154,227)
----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 1998 500,000 $ 804,435 5,332,491 $10,994,206 $(9,357,594) $ 2,441,047
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 7
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,154,227) $ (684,265)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 157,054 128,404
Compensation expense -- non-cash 8,241 (60,555)
Gain on disposal of assets -- (56)
Changes in assets and liabilities:
Accounts receivable 216,261 196,924
Inventories, net (56,122) 24,454
Prepaid expenses (1,935) (19,503)
Other assets 3,068 14,678
Accounts payable and accrued expenses (58,426) 5,943
Other liabilities 952 --
------------ ------------
Net cash used by operating activities (885,134) (393,976)
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (52,098) (15,893)
Proceeds from the sale of property and equipment -- 4,140
Cost of patents and other (15,852) (18,177)
------------ ------------
Net cash used by investing activities (67,950) (29,930)
------------ ------------
Cash flows from financing activities:
Proceeds from preferred stock and warrants, net -- 897,500
Payments on short-term borrowings -- (71,005)
Proceeds from equipment lease 15,677 --
Payments on long-term debt (68,748) --
------------ ------------
Net cash (used) provided by financing activities (53,071) 826,495
------------ ------------
Net (decrease) increase in cash and cash equivalents (1,006,155) 402,589
Cash and cash equivalents at beginning of period 1,516,405 1,640,392
------------ ------------
Cash and cash equivalents at end of period $ 510,250 $ 2,042,981
============ ============
Supplemental disclosure of non-cash activity:
Stock options granted to a consultant $ -- $ 2,816
Stock options granted to a scientific advisor 8,241 --
Issuance of Common Stock dividend on Preferred Stock 44,998 --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE> 8
PLANET POLYMER TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited financial statements of Planet Polymer
Technologies, Inc. (the "Company" or "Planet") have been prepared in accordance
with the interim reporting requirements of Form 10-QSB, pursuant to the rules
and regulations of the Securities and Exchange Commission. 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 only normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the nine month period ended September 30, 1998
are not necessarily indicative of results that may be expected for the year
ending December 31, 1998. For additional information, refer to the Company's
financial statements and notes thereto for the year ended December 31, 1997
contained in the Company's Form 10-KSB for the fiscal year ended December 31,
1997.
Certain items shown in the September 30, 1997 financial statements have been
reclassified to conform with the current period presentation.
2. Shareholders' Equity
On September 15, 1998 the Company issued to the holder of Series A Preferred
Stock a dividend of 13,483 shares of Common Stock valued at approximately
$15,000.
3. Stock Option Plan
On July 1, 1998, the Company's Board of Directors granted incentive stock
options to purchase 12,500 shares of Common Stock at an exercise price of $1.625
per share to an employee under the 1995 Stock Option Plan. These options become
vested and exercisable on December 31, 1998 and expire on June 30, 2008. As of
September 30, 1998, none of these options have been exercised.
7
<PAGE> 9
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PLANET POLYMER TECHNOLOGIES, INC.
Except for the historical information contained herein, the discussions in this
report contain forward looking statements that involve certain risks and
uncertainties. The Company's actual results could differ materially from those
discussed in this report. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and in the
Company's Form 10-KSB for the fiscal year ended December 31, 1997.
OVERVIEW
Planet Polymer Technologies, Inc. (the "Company" or "Planet") is a specialty
chemical Company that designs, develops, manufactures and markets degradable and
recycled polymer materials. The Company's proprietary polymer materials, which
are marketed under the trademarks EnviroPlastic(R) and Aquadro(TM), can be used
to produce films, coatings and injection molded parts that serve as
environmentally compatible alternatives to conventional plastics. Planet is also
focusing on its AQUAMIM(TM) technology, a novel water debinding metal injection
molding feedstock, which can be used to injection mold metal parts for use in
various industrial and consumer products. The Company emerged from the
development stage as a result of its acquisition of Deltco of Wisconsin, Inc., a
Wisconsin corporation ("Deltco"), effective January 1, 1996. Prior to this
acquisition, substantially all of the Company's resources had been devoted to
the development and commercialization of its EnviroPlastic(R) and Aquadro(TM)
technologies and products.
Deltco is a manufacturer and reprocessor of thermoplastic scrap resins and is
located in Ashland, Wisconsin. The Company maintains Deltco as a wholly owned
subsidiary, and uses its plant, equipment and other physical property in the
manner in which it was used prior to the acquisition.
During this quarter, Planet continued to focus on internally-funded, rather
than customer-funded product development. The Company will continue to
participate in customer-funded development when appropriate, but believes
internally-funded development is advantageous as to certain technologies and
applications.
The Company continues to focus on commercializing its AQUAMIM(TM),
EnviroPlastic(R) and Aquadro(TM) technologies and growing Deltco's manufacturing
business. The Company expects that research and development and marketing
expenses may increase significantly in the future as the Company's products are
commercialized. The Company does not expect that general and administrative
expenses will increase significantly in the next three months.
Planet has incurred operating losses since its inception and has an
accumulated deficit of approximately $9.4 million as of September 30, 1998. The
Company expects to incur additional losses for the foreseeable future.
8
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
PLANET POLYMER TECHNOLOGIES, INC.
RESULTS OF OPERATIONS
Revenue
The Company's revenues decreased from approximately $710,000 for the three
months ended September 30, 1997 to approximately $204,000 for the three months
ended September 30, 1998 and from approximately $2,450,000 for the nine months
ended September 30, 1997 to approximately $1,257,000 for the nine months ended
September 30, 1998. These decreases were primarily attributed to declines in
both sales volume and sales price of approximately 40% and 38%, respectively,
for the three months ended September 30, 1998 and from approximately 25% and
17%, respectively, for the nine months ended September 30, 1998 for Deltco's
recycled polypropylene due to price decreases in virgin polypropylene. Since
Deltco's recycled polypropylene is generally a lower cost substitute for virgin
polypropylene such price decreases lessened demand for Deltco's recycled
material. The price decreases in virgin polypropylene were substantially related
to the low cost of oil, a decrease in demand for polypropylene in Asia and the
General Motors strike. The Company expects this trend to continue for the
foreseeable future.
Cost of Sales
Cost of sales decreased from approximately $555,000 for the three months
ended September 30, 1997 to approximately $217,000 for the three months ended
September 30, 1998 and from approximately $1,844,000 for the nine months ended
September 30, 1997 to approximately $1,211,000 for the nine months ended
September 30, 1998. These decreases were primarily attributable to lower sales
volume at Deltco, offset by write-offs of obsolete inventory and a write-down of
inventory to market.
General and Administrative Expenses
General and administrative expenses decreased from approximately $225,000 for
the three months ended September 30, 1997 to approximately $188,000 for the
three months ended September 30, 1998 and from approximately $741,000 for the
nine months ended September 30, 1997 to approximately $630,000 for the nine
months ended September 30, 1998. These decreases were primarily attributable to
decreased costs of outside services.
Marketing Expenses
Marketing expenses decreased from approximately $58,000 for the three months
ended September 30, 1997 to approximately $57,000 for the three months ended
September 30, 1998 and from approximately $253,000 for the nine months ended
September 30, 1997 to approximately $185,000 for the nine months ended September
30, 1998. The year to date decrease was primarily attributable to reductions in
outside services and sales and marketing personnel. The Company also incurred a
$63,000 downward revision, during the three months ended June 30, 1997, to the
December 31, 1996 estimated fair value of non-cash incentive compensation
expense of stock granted to the president of Deltco.
9
<PAGE> 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
PLANET POLYMER TECHNOLOGIES, INC.
RESULTS OF OPERATIONS, CONTINUED
Research and Development Expenses, Net
The Company's net research and development expenses increased from
approximately $109,000 for the three months ended September 30, 1997 to
approximately $136,000 for the three months ended September 30, 1998 and from
approximately $286,000 for the nine months ended September 30, 1997 to
approximately $411,000 for the nine months ended September 30, 1998. These
increases were primarily due to the addition of research and development
personnel and increased costs associated with advancing AQUAMIM(TM),
EnviroPlastic(R) CRT and Aquadro(TM) technologies, including customer production
trials and efficacy and safety testing. Additionally, offsetting research and
development revenue decreased from approximately $96,000 to approximately
$55,000 for the nine months ended September 30, 1998 as compared to the nine
months ended September 30, 1997.
10
<PAGE> 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
PLANET POLYMER TECHNOLOGIES, INC.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, Planet has financed its operations primarily through the
sale of equity securities and revenue from customer development agreements. The
Company has raised approximately $4 million (net of issuance costs) from the
private sale of Common Stock. In September 1995, the Company completed its
initial public offering in which it sold an aggregate of 1,150,000 shares of
Common Stock and received net proceeds of approximately $5.6 million.
In January 1996, the Company used $1,125,000 in cash and issued 96,775 shares
of restricted Common Stock valued at approximately $508,000 to acquire Deltco in
a purchase transaction. In connection with the purchase, the Company has one
outstanding debt agreement related to a Small Business Administration loan
collateralized by a certificate of deposit and inventory at Deltco. As of
September 30, 1998 the loan balance was approximately $117,000. The Company has
no material commitments for capital expenditures.
The Company recognizes the need to ensure that its operations will not be
impacted by the year 2000 issue that results from computer applications being
written along two digits rather than four to define the application year. As a
result of the year 2000 issue, computer applications may recognize a date using
"00" as the year 1900 rather than the year 2000, resulting in system failures or
miscalculations causing disruption of operations. The Company has reviewed its
material computer applications for year 2000 compliance and is working with
vendors and suppliers to make its computer applications year 2000 compliant.
The Company has developed a plan to modify its information technology in
recognition of the year 2000 issue. The plan calls for updating existing
software and hardware to newer versions that incorporate corrections to
eliminate the problem. The Company has estimated that the total cost of updating
the Company's technology in order to be year 2000 compliant will be
approximately $35,000. The Company does not expect the year 2000 issue and the
plan to resolve it to have a significant impact on its operations. However, if
such plans cannot be completed on a timely basis, the year 2000 issue could have
a material adverse impact on the Company's business, financial condition and
results of operations. Because of the many uncertainties associated with year
2000 compliance issues, and because the Company's assessment is necessarily
based on information from third party vendors and suppliers, there can be no
assurance as to whether such assessment is correct or as to the materiality or
effect if such assessment is not correct. For example, to the extent that
customers would be unable to order products or pay invoices or suppliers would
be unable to manufacture or deliver product, the Company's operations would be
affected.
The Company used approximately $885,000 for operations for the nine months
ended September 30, 1998. Such funds were used for research and development
activities, working capital, marketing efforts and administrative support.
The Company used approximately $68,000 for investing activities for the nine
months ended September 30, 1998. Such funds were used for the purchase of
equipment and for the preparation of patents.
The Company used approximately $53,000 for financing activities for the nine
months ended September 30, 1998. Such funds were used for the repayment of debt,
partially offset by proceeds from an equipment lease.
11
<PAGE> 13
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
PLANET POLYMER TECHNOLOGIES, INC.
LIQUIDITY AND CAPITAL RESOURCES, CONTINUED
The Company believes that its existing sources of liquidity and anticipated
revenue, including revenues generated from Deltco, will satisfy the Company's
projected working capital and other cash requirements through January 1999. Such
time period has been shortened from previous estimates as a result of decreases
in the Company's revenues associated with declines in both sales volumes and
sales prices for Deltco's recycled polypropylene. There can be no assurance,
however, that future revenue decreases or changes in the Company's plans or
other events affecting the Company's operating expenses will not result in the
expenditure of the Company's resources. The Company expects that it will need to
raise substantial additional funds to continue its current and planned
operations. The Company intends to seek additional funding from existing and
potential customers or through public or private equity or debt financing. There
can be no assurance that additional financing will be available on acceptable
terms, or at all.
12
<PAGE> 14
PART II - OTHER INFORMATION
PLANET POLYMER TECHNOLOGIES, INC.
Item 1 - Legal Proceedings:
In November 1998, the Company initiated litigation against Brian To, a
former director of the Company, Tarrenz Management Consultants, Inc., and
Tarrenz, Inc. entities owned by Brian To, in the Superior Court of the State of
California for the County of San Diego. The complaint alleges breach of
fiduciary duty, fraud, conversion, negligent misrepresentation and breach of
contract, recission, constructive trust, and negligence arising from services
the defendants performed for or on behalf of the Company. The Company is seeking
actual and consequential damages in excess of $1 million, as well as punitive
and exemplary damages. It is too early to determine the impact, if any, of this
proceeding on the Company, its financial condition or the results of the
Company's operations.
Item 2 - Changes in Securities:
None
Item 3 - Defaults upon Senior Securities:
None
Item 4 - Submission of Matters to a Vote of Security Holders:
None
Item 5 - Other Information:
None
Item 6 - Exhibits and Reports on Form 8-K:
(a) Exhibits:
Exhibit Number Description
-------------- -----------
11.1 Statement of Computation of Common and Common
Equivalent Shares
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
None
13
<PAGE> 15
PLANET POLYMER TECHNOLOGIES, INC.
SIGNATURES
In accordance with 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.
Date: November 9, 1998 Planet Polymer Technologies, Inc.
/s/ ROBERT J. PETCAVICH
---------------------------------------
Robert J. Petcavich
President, Chief Executive Officer and Director
(On behalf of Registrant and as
Registrant's Principal Financial and
Accounting Officer)
14
<PAGE> 1
PLANET POLYMER TECHNOLOGIES, INC. EXHIBIT 11.1
STATEMENT OF COMPUTATION OF COMMON AND COMMON EQUIVALENT SHARES
AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
------------------------------- -------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares outstanding at beginning of period 5,271,269 5,271,269 5,271,269 5,271,269
7,337 shares issued on December 15, 1997 7,337 -- 7,337 --
21,538 shares accrued December 31, 1997 21,538 -- 21,538 --
------------ ------------ ------------ ------------
Weighted average number of shares 5,300,144 5,271,269 5,300,144 5,271,269
============ ============
10,169 shares issued on March 15, 1998 10,169 7,413
8,695 shares issued on June 15, 1998 8,695 3,408
13,483 shares issued on September 15, 1998 2,198 740
------------ ------------
Weighted average number of shares 5,321,206 5,311,705
============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED SEPTEMBER 30, 1998 BALANCE SHEET AND STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH STATEMENTS AS FILED IN THE COMPANY'S FORM 10-QSB FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 510,250
<SECURITIES> 0
<RECEIVABLES> 179,796
<ALLOWANCES> (10,000)
<INVENTORY> 498,556
<CURRENT-ASSETS> 1,280,309
<PP&E> 1,644,717
<DEPRECIATION> (888,937)
<TOTAL-ASSETS> 3,024,727
<CURRENT-LIABILITIES> 249,333
<BONDS> 117,340
0
804,435
<COMMON> 10,994,206
<OTHER-SE> (9,357,594)
<TOTAL-LIABILITY-AND-EQUITY> 3,024,727
<SALES> 1,256,551
<TOTAL-REVENUES> 1,256,551
<CGS> 1,210,930
<TOTAL-COSTS> 1,210,930
<OTHER-EXPENSES> 1,225,391
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,469
<INCOME-PRETAX> (1,152,312)
<INCOME-TAX> 1,915
<INCOME-CONTINUING> (1,154,227)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,154,227)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> (0.22)
</TABLE>
