<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 June 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)
CALIFORNIA 33-0502606
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation I.R.S. Employer
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 June 30, 1998
----- ----------------------------
<S> <C>
Common Stock, no par value 5,319,008
</TABLE>
<PAGE> 2
PLANET POLYMER TECHNOLOGIES, INC.
FORM 10-QSB QUARTERLY REPORT
QUARTER ENDED JUNE 30, 1998
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheet (Unaudited)
June 30, 1998 2
Consolidated Statements of Operations (Unaudited)
Three Months Ended June 30, 1998 and 1997 3
Consolidated Statements of Operations (Unaudited)
Six Months Ended June 30, 1998 and 1997 4
Consolidated Statement of Shareholders' Equity (Unaudited)
Six Months Ended June 30, 1998 5
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 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 12
Item 2 Changes in Securities 12
Item 3 Defaults upon Senior Securities 12
Item 4 Submission of Matters to a Vote of Security Holders 12
Item 5 Other Information 12
Item 6 Exhibits and Reports on Form 8K 12
SIGNATURES 13
</TABLE>
<PAGE> 3
PLANET POLYMER TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
---------------
<TABLE>
<CAPTION>
JUNE 30,
ASSETS 1998
------------
<S> <C>
Current assets:
Cash and cash equivalents $ 933,569
Accounts receivable, net of allowance for doubtful accounts of $10,000 308,950
Inventories, net 360,659
Prepaid expenses 66,107
Deferred income taxes 16,014
------------
Total current assets 1,685,299
Restricted cash 108,277
Property, plant and equipment, net 793,962
Goodwill, net 560,019
Patents and other, net 325,433
------------
Total assets $ 3,472,990
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 188,876
Notes payable 96,263
------------
Total current liabilities 285,139
Other liabilities 351,597
Deferred income taxes 9,721
------------
Total liabilities 646,457
------------
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 5,319,008 10,979,206
Accumulated deficit (8,957,108)
------------
Total shareholders' equity 2,826,533
------------
Total liabilities and shareholders' equity $ 3,472,990
============
</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 JUNE 30,
-------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Sales $ 462,378 $ 868,402
Cost of sales 477,951 640,673
----------- -----------
Gross profit (15,573) 227,729
----------- -----------
Operating expenses:
General and administrative 218,668 263,231
Marketing 69,088 7,765
Research and development, net 162,176 70,867
----------- -----------
Total operating expenses 449,932 341,863
----------- -----------
Loss from operations (465,505) (114,134)
Other income, net 8,269 8,973
----------- -----------
Loss before income taxes (457,236) (105,161)
Income taxes (1,653) 14,027
----------- -----------
Net loss $ (455,583) $ (119,188)
=========== ===========
Loss per share (Basic and Diluted) $ (0.09) $ (0.02)
=========== ===========
Shares used in per share computations 5,311,746 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>
SIX MONTHS ENDED JUNE 30,
-------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Sales $ 1,052,184 $ 1,740,257
Cost of sales 993,940 1,288,794
----------- -----------
Gross profit 58,244 451,463
----------- -----------
Operating expenses:
General and administrative 441,914 516,068
Marketing 127,782 194,117
Research and development, net 274,541 177,219
----------- -----------
Total operating expenses 844,237 887,404
----------- -----------
Loss from operations (785,993) (435,941)
Other income, net 19,167 30,649
----------- -----------
Loss before income taxes (766,826) (405,292)
Income taxes 1,915 29,094
----------- -----------
Net loss $ (768,741) $ (434,386)
=========== ===========
Loss per share (Basic and Diluted) $ (0.14) $ (0.08)
=========== ===========
Shares used in per share computations 5,304,842 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) --
Fair Market Value of Stock Options
granted to a scientific advisor -- -- -- 8,241 -- 8,241
Net loss for the six months
ended June 30, 1998 -- -- -- -- (768,741) (768,741)
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1998 500,000 $ 804,435 5,319,008 $10,979,206 $(8,957,108) $ 2,826,533
=========== =========== =========== =========== =========== ===========
</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>
SIX MONTHS ENDED JUNE 30,
------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (768,741) $ (434,386)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 104,731 85,959
Compensation expense -- non-cash 8,241 (62,667)
Gain on disposal of assets -- (375)
Changes in assets and liabilities:
Accounts receivable 77,107 103,716
Inventories, net 81,774 83,921
Prepaid expenses 17,651 13,424
Other assets 5,859 7,503
Accounts payable and accrued expenses (19,967) (105,159)
Other liabilities 6,199 --
----------- -----------
Net cash used by operating activities (487,146) (308,064)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (52,098) (621)
Proceeds from the sale of property and equipment -- 3,000
Cost of patents and other (9,598) (9,536)
----------- -----------
Net cash used by investing activities (61,696) (7,157)
----------- -----------
Cash flows from financing activities:
Payments on short-term borrowings -- (48,935)
Proceeds from equipment lease 11,317 --
Payments on long-term debt (45,311) --
----------- -----------
Net cash used by financing activities (33,994) (48,935)
----------- -----------
Net decrease in cash and cash equivalents (582,836) (364,156)
Cash and cash equivalents at beginning of period 1,516,405 1,640,392
----------- -----------
Cash and cash equivalents at end of period $ 933,569 $ 1,276,236
=========== ===========
Supplemental disclosure of non-cash activity:
Stock options granted to a consultant $ -- $ 704
Stock options granted to a scientific advisor 8,241 --
Issuance of Common Stock dividend on Preferred Stock 29,998 --
</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 six month period ended June 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 June 30, 1997 financial statements have been
reclassified to conform with the current period presentation.
2. Shareholders' Equity
On June 15, 1998 the Company issued to the holder of Series A Preferred
Stock a dividend of 8,695 shares of Common Stock valued at approximately
$14,999.
3. Stock Option Plan
On April 29, 1998, the Company's Board of Directors granted non-statutory
stock options to purchase 10,000 shares of Common Stock at an exercise price of
$1.75 per share to a scientific advisor of the Company under the 1995 Stock
Option Plan. These options vest ratably over the one-year term of the agreement
and expire on April 28, 2008. In connection with this transaction, the Company
recorded a charge to income, for the three months ended June 30, 1998, of
approximately $8,241, based on the Black Scholes option-pricing model. As of
June 30, 1998, none of these options have been exercised.
On May 21, 1998, the Company's Board of Directors granted non-statutory
stock options to purchase an aggregate of 36,000 shares of Common Stock at an
exercise price of $2.00 per share to outside directors under the 1995 Stock
Option Plan. These options vest fully as of the date of grant and expire on May
20, 2008. As of June 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. 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. Additionally, during this quarter, the president of Deltco
resigned to pursue other career opportunities. His responsibilities have been
reassigned and the Company does not expect his departure to have a material
impact on operations.
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 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 $9.0 million as of June 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 $868,000 for the three
months ended June 30, 1997 to approximately $462,000 for the three months ended
June 30, 1998 and from approximately $1,740,000 for the six months ended June
30, 1997 to approximately $1,052,000 for the six months ended June 30, 1998.
This decrease was primarily attributed to declines in both sales volume and
sales price of approximately 17% and 17%, respectively, for the three months
ended June 30, 1998 and from approximately 16% and 13%, respectively, for the
six months ended June 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 and a decrease
in demand for polypropylene in Asia. The Company expects this trend to continue
for the foreseeable future.
Cost of Sales
Cost of sales decreased from approximately $641,000 for the three months
ended June 30, 1997 to approximately $478,000 for the three months ended June
30, 1998 and from approximately $1,289,000 for the six months ended June 30,
1997 to approximately $994,000 for the six months ended June 30, 1998. The
decrease was primarily attributable to lower sales volume at Deltco, offset by
additional costs at Deltco associated with the qualifying of additional
suppliers of scrap resin, write-offs of obsolete inventory and an inventory
reserve of approximately $33,000 to reflect market values less than cost.
General and Administrative Expenses
General and administrative expenses decreased from approximately $263,000
for the three months ended June 30, 1997 to approximately $219,000 for the three
months ended June 30, 1998 and from approximately $516,000 for the six months
ended June 30, 1997 to approximately $442,000 for the six months ended June 30,
1998. This decrease was primarily attributable to decreased costs of outside
services.
Marketing Expenses
Marketing expenses increased from approximately $8,000 for the three months
ended June 30, 1997 to approximately $69,000 for the three months ended June 30,
1998. This increase was primarily attributable to 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
Marketing expenses decreased from approximately $194,000 for the six months
ended June 30, 1997 to approximately $128,000 for the six months ended June 30,
1998. This decrease was primarily attributable to the $63,000 revision
previously discussed and reductions in 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 $71,000 for the three months ended June 30, 1997 to approximately
$162,000 for the three months ended June 30, 1998 and from approximately
$177,000 for the six months ended June 30, 1997 to approximately $275,000 for
the six months ended June 30, 1998. This increase was primarily due to lower
research and development revenue at Planet and increases in costs associated
with advancing AQUAMIM(TM), EnviroPlastic(R) CRT and Aquadro(TM) technologies.
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 ("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
June 30, 1998 the loan balance was approximately $139,000. 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. Thus, 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 plan was postponed during
the second quarter due to time constraints caused from production trials and
internal planning for the commercialization of AQUAMIM(TM). 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, there is no guarantee that the Company will
address all year 2000 issues in a timely fashion or that the systems of other
companies on which Planet's systems rely will be timely converted and would not
have an adverse effect on the Company's systems. 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 $487,000 for operations for the six months
ended June 30, 1998. Such funds were used for research and development
activities, marketing efforts and administrative support.
The Company used approximately $62,000 for investing activities for the six
months ended June 30, 1998. Such funds were used for the preparation of patents
and for the purchase of equipment.
The Company used approximately $34,000 for financing activities for the six
months ended June 30, 1998. Such funds were used for the repayment of debt,
partially offset by proceeds from an equipment lease.
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 March
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.
11
<PAGE> 13
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:
The Annual Meeting of Shareholders of Planet Polymer Technologies, Inc.
(the "Annual Meeting") was held on May 22, 1998 in San Diego,
California.
Proposal 1 - Election of Directors
Each of the candidates listed below were duly elected to the Board of
Directors at the Annual Meeting by the tally indicated.
<TABLE>
<CAPTION>
Candidate Votes in Favor Votes Withheld
--------- -------------- --------------
<S> <C> <C>
Robert J. Petcavich, Ph.D 4,999,436 14,328
Michael M. Coleman, Ph.D 5,000,436 13,328
Thomas M. Connelly 5,000,361 13,403
H.M. Busby 4,131,822 881,942
Thomas A. Landshof 4,996,311 17,453
</TABLE>
Proposal 2 - Ratification of Selection of Independent Auditors
<TABLE>
<CAPTION>
Votes in Favor Votes Against Votes Abstained
-------------- ------------- ---------------
<S> <C> <C>
5,004,436 2,778 6,550
</TABLE>
Item 5 - Other Information:
Pursuant to the recent changes in the proxy rules, unless a shareholder
who wishes to bring a matter before the shareholders at the Company's
1999 annual meeting notifies the Company of such a matter prior to
March 3, 1999, management will have discretionary authority to vote all
shares for which it has proxies in opposition to such matter.
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
12
<PAGE> 14
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: August 12, 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)
13
<PAGE> 1
EXHIBIT 11.1
PLANET POLYMER TECHNOLOGIES, INC.
STATEMENT OF COMPUTATION OF COMMON AND COMMON EQUIVALENT SHARES
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 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 3,978
8,695 shares issued on June 15, 1998 1,433 721
--------- ---------
Weighted average number of shares 5,311,746 5,304,842
========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED JUNE 30, 1998 BALANCE SHEET AND STATEMENT OF OPERATIONS FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH STATEMENTS AS FILED IN THE COMPANY'S FORM 10-QSB FOR THE SIX MONTHS
ENDED JUNE 30, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 933,569
<SECURITIES> 0
<RECEIVABLES> 318,950
<ALLOWANCES> (10,000)
<INVENTORY> 360,659
<CURRENT-ASSETS> 1,685,299
<PP&E> 1,644,718
<DEPRECIATION> (850,756)
<TOTAL-ASSETS> 3,472,990
<CURRENT-LIABILITIES> 285,139
<BONDS> 139,252
0
804,435
<COMMON> 10,979,206
<OTHER-SE> (8,957,108)
<TOTAL-LIABILITY-AND-EQUITY> 3,472,990
<SALES> 1,052,184
<TOTAL-REVENUES> 1,052,184
<CGS> 993,940
<TOTAL-COSTS> 993,940
<OTHER-EXPENSES> 844,237
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,037
<INCOME-PRETAX> (766,826)
<INCOME-TAX> 1,915
<INCOME-CONTINUING> (768,741)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (768,741)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
