<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 March 31, 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)
CALIFORNIA 33-0502606
------------------------------------------------------------------------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.
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:
<TABLE>
<CAPTION>
Class Outstanding at March 31, 1998
----- -----------------------------
<S> <C>
Common Stock, no par value 5,310,313
</TABLE>
<PAGE> 2
PLANET POLYMER TECHNOLOGIES, INC.
FORM 10-QSB QUARTERLY REPORT
QUARTER ENDED MARCH 31, 1998
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheet (Unaudited)
March 31, 1998 2
Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, 1998 and 1997 3
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 1998 and 1997 4
Consolidated Statement of Shareholders' Equity (Unaudited)
Three Months Ended March 31, 1998 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 10
Item 2 Changes in Securities 10
Item 3 Defaults upon Senior Securities 10
Item 4 Submission of Matters to a Vote of Security Holders 10
Item 5 Other Information 10
Item 6 Exhibits and Reports on Form 8K 10
SIGNATURES 11
</TABLE>
<PAGE> 3
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
---------------
<TABLE>
<CAPTION>
MARCH 31,
ASSETS 1998
------------
<S> <C>
Current assets:
Cash and cash equivalents $ 1,284,445
Accounts receivable, net of allowance
for doubtful accounts of $10,000 355,431
Inventories, net 398,601
Prepaid expenses 72,301
Deferred income taxes 16,014
------------
Total current assets 2,126,792
Restricted cash 108,277
Property, plant and equipment, net 805,408
Goodwill, net 568,020
Patents and other, net 327,140
------------
Total assets $ 3,935,637
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 192,819
Notes payable 94,077
------------
Total current liabilities 286,896
Other liabilities 365,144
Deferred income taxes 9,721
------------
Total liabilities 661,761
------------
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 5,310,313 10,955,966
Accumulated deficit (8,486,525)
------------
Total shareholders' equity 3,273,876
------------
Total liabilities and shareholders' equity $ 3,935,637
============
</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 MARCH 31,
-------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Sales $ 589,806 $ 871,855
Cost of sales 511,397 650,446
----------- -----------
Gross profit 78,409 221,409
----------- -----------
Operating expenses:
General and administrative 227,839 250,512
Marketing 58,694 186,352
Research and development, net 112,364 106,352
----------- -----------
Total operating expenses 398,897 543,216
----------- -----------
Loss from operations (320,488) (321,807)
Other income, net 10,899 21,676
----------- -----------
Loss before income taxes (309,589) (300,131)
Income taxes 3,568 15,067
----------- -----------
Net loss $ (313,157) $ (315,198)
=========== ===========
Loss per share (Basic and Diluted) $ (0.06) $ (0.06)
=========== ===========
Shares used in per share computations 5,302,206 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 CASH FLOWS
---------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (313,157) $ (315,198)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 52,178 41,367
Gain on disposal of assets -- (375)
Changes in assets and liabilities:
Accounts receivable 30,626 (14,752)
Inventories, net 43,832 46,877
Prepaid expenses 11,457 (784)
Other assets 6,239 4,655
Accounts payable and accrued expenses (10,038) (117,939)
----------- -----------
Net cash used by operating activities (178,863) (356,149)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (25,134) (621)
Proceeds from the sale of property and equipment -- 3,000
Cost of patents and other (5,542) (4,260)
----------- -----------
Net cash used by investing activities (30,676) (1,881)
----------- -----------
Cash flows from financing activities:
Payments on short-term borrowings -- (26,229)
Payments on long-term debt (22,421) --
----------- -----------
Net cash used by financing activities (22,421) (26,229)
----------- -----------
Net decrease in cash and cash equivalents (231,960) (384,259)
Cash and cash equivalents at beginning of period 1,516,405 1,640,392
----------- -----------
Cash and cash equivalents at end of period $ 1,284,445 $ 1,256,133
=========== ===========
Supplemental disclosure of non-cash activity:
Issuance of Common Stock dividend on Preferred Stock $ 14,999 $ --
</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 -- -- 10,169 14,999 (14,999) --
Net loss for the three months
ended March 31, 1998 -- -- -- -- (313,157) (313,157)
----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 1998 500,000 $ 804,435 5,310,313 $10,955,966 $(8,486,525) $ 3,273,876
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 7
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 three month period ended March 31, 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 March 31, 1997 financial statements have been
reclassified to conform with the current period presentation.
2. Shareholders' Equity
On March 15, 1998 the Company issued to the holder of Series A Preferred
Stock a dividend of 10,169 shares of Common Stock valued at approximately
$14,999.
3. Stock Option Plan
On February 13, 1998, the Company's Board of Directors granted incentive
stock options to purchase 5,000 shares of Common Stock at an exercise price of
$1.875 per share to an employee under the 1995 Stock Option Plan. These options
were fully vested as of the date of grant and expire on February 12, 2008. As of
March 31, 1998, none of these options have been exercised.
6
<PAGE> 8
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. 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. The Company continues to
focus on commercializing its 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 and continued efforts are focused on Deltco's resins. 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 $8.5 million as of March 31, 1998. The
Company expects to incur additional losses for the foreseeable future.
RESULTS OF OPERATIONS
Revenue
The Company's revenues decreased from approximately $872,000 for the three
months ended March 31, 1997 to approximately $590,000 for the three months ended
March 31, 1998. This decrease was primarily attributed to declines in both sales
volume and sales price of approximately 14% and 13%, respectively, 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 and a decrease in demand for polypropylene in Asia.
7
<PAGE> 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
PLANET POLYMER TECHNOLOGIES, INC.
RESULTS OF OPERATIONS, CONTINUED
Cost of Sales
Cost of sales decreased from approximately $650,000 for the three months
ended March 31, 1997 to approximately $511,000 for the three months ended March
31, 1998. The decrease was primarily attributable to lower sales volume at
Deltco offset by increased raw material costs. The increased cost of raw
materials was primarily attributable to price increases from Deltco's preferred
supplier of scrap plastic. The Company expects that such price increases will
continue for the foreseeable future.
General and Administrative Expenses
General and administrative expenses decreased from approximately $251,000 for
the three months ended March 31, 1997 to approximately $228,000 for the three
months ended March 31, 1998. This decrease was primarily attributable to
decreased costs of outside services and a reduction in personnel.
Marketing Expenses
Marketing expenses decreased from approximately $186,000 for the three months
ended March 31, 1997 to approximately $59,000 for the three months ended March
31, 1998. This decrease was primarily attributable to the reduction of outside
services, sales and marketing personnel and international travel expenditures
offset by increased marketing efforts in North America.
Research and Development Expenses, Net
The Company's net research and development expenses increased from
approximately $106,000 for the three months ended March 31, 1997 to
approximately $112,000 for the three months ended March 31, 1998. This increase
was primarily due to the increased use of outside resin processors and outside
testing facilities, offset by higher research and development revenue at Planet.
Additionally, 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.
8
<PAGE> 10
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 ("IPO") 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 March
31, 1998 the loan balance was approximately $161,000. The Company has no
material commitments for capital expenditures, but anticipates expenditures in
the second quarter of 1998 of approximately $35,000 to update its computer
software to enable it to operate in years subsequent to 1999.
The Company used approximately $179,000 for operations for the three months
ended March 31, 1998. Such funds were used for research and development
activities, marketing efforts and administrative support.
The Company used approximately $31,000 for investing activities for the three
months ended March 31, 1998. Such funds were used for the preparation of patents
and for the purchase of equipment.
The Company used approximately $22,000 for the repayment of debt for the
three months ended March 31, 1998.
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 at least April
1999. There can be no assurance, however, that changes in the Company's plans or
other events affecting the Company's operating expenses will not result in the
expenditure of such resources before such time. The Company expects that it will
need to raise substantial additional funds to continue its current and planned
operations and establish large-scale manufacturing capabilities. 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.
9
<PAGE> 11
PART II - OTHER INFORMATION
PLANET POLYMER TECHNOLOGIES, INC.
Item 1 -Legal Proceedings:
None
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.
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
11.1 Statement of Computation of Common and Common
Equivalent Shares
27.1 Financial Data Schedule
</TABLE>
(b)Reports on Form 8-K:
None
10
<PAGE> 12
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: May 6, 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)
11
<PAGE> 1
PLANET POLYMER TECHNOLOGIES, INC. EXHIBIT 11.1
STATEMENT OF COMPUTATION OF COMMON AND COMMON EQUIVALENT SHARES
AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Shares outstanding at beginning of period 5,271,269 5,271,269
7,337 shares issued on December 15, 1997 7,337 0
21,538 shares accrued December 31, 1997 21,538 0
--------- ---------
Weighted average number of shares 5,300,144 5,271,269
=========
10,169 shares issued on March 15, 1998 2,062
---------
Weighted average number of shares 5,302,206
=========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's unaudited March 31, 1998 Balance Sheet and Statement of Operations for
the three months ended March 31, 1998 and is qualified in its entirety by
reference to such statements as filed in the Company's Form 10-QSB for the three
months ended March 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,284,445
<SECURITIES> 0
<RECEIVABLES> 365,431
<ALLOWANCES> (10,000)
<INVENTORY> 398,601
<CURRENT-ASSETS> 2,126,792
<PP&E> 1,617,753
<DEPRECIATION> (812,345)
<TOTAL-ASSETS> 3,935,637
<CURRENT-LIABILITIES> 286,896
<BONDS> 160,675
0
804,435
<COMMON> 10,955,966
<OTHER-SE> (8,486,525)
<TOTAL-LIABILITY-AND-EQUITY> 3,935,637
<SALES> 589,806
<TOTAL-REVENUES> 589,806
<CGS> 511,397
<TOTAL-COSTS> 511,397
<OTHER-EXPENSES> 398,897
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,179
<INCOME-PRETAX> (309,589)
<INCOME-TAX> 3,568
<INCOME-CONTINUING> (313,157)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (313,157)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
