<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[_] 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 0-23042
MK GOLD COMPANY
---------------
(Exact name of registrant as specified in its charter)
Delaware 82-0487047
-------------------- ------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
60 East South Temple, Suite 2100, Salt Lake City, Utah 84111
--------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(801) 297-6900
--------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
--------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. On November 6, 1998, there
were 19,464,466 outstanding shares of the Registrant's Common Stock, par value
$.01 per share.
<PAGE>
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
As more fully described in the accompanying notes, the unaudited interim
consolidated financial statements contained in this report should be read in
conjunction with the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 (the "1997 10-K"). The 1997 10-K contains information relevant
to an analysis of the financial information contained in this report and for
purposes of comparing the Company's results of operations for the three and nine
month periods ended September 30, 1998 with the same periods in the prior year.
2
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MK GOLD COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
(UNAUDITED) (UNAUDITED)
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue
Product sales $ 23 $ 1,433 $ 4,922 $ 10,246
Mining services 3,006 3,179 8,646 9,318
------------ ------------ ------------ ------------
Total revenue 3,029 4,612 13,568 19,564
Costs and operating expenses
Product sales 217 1,766 5,529 10,092
Mining services 2,366 2,521 6,692 7,592
------------ ------------ ------------ ------------
Total costs and operating expenses 2,583 4,287 12,221 17,684
Gross profit 446 325 1,347 1,880
Exploration and project
investigation costs (922) (715) (2,202) (1,541)
General and administrative expenses (361) (347) (1,234) (1,282)
------------ ------------ ------------ ------------
Loss from operations (837) (737) (2,089) (943)
Investment income 278 247 839 726
Interest expense (20) (34) (62) (104)
Gain (loss) on sale of assets 198 - 259 -
------------ ------------ ------------ ------------
Loss before income taxes (381) (524) (1,053) (321)
Income tax benefit (expense) - 10 (5) (71)
------------ ------------ ------------ ------------
Net loss $ (381) $ (514) $ (1,058) $ (392)
============ ============ ============ ============
Basic and diluted loss per share $ (0.02) $ (0.03) $ (0.05) $ (0.02)
Basic and diluted weighted average
shares used to compute loss per share 19,464,466 19,464,466 19,464,466 19,464,466
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
3
<PAGE>
MK GOLD COMPANY
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars except per share data)
- --------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
ASSETS 1998 1997
(UNAUDITED) (AUDITED)
----------- ---------
Current assets
Cash and cash equivalents $16,275 $18,189
Gold bullion held for sale 2,979 2,031
Receivables 1,671 1,637
Other Receivables 140 918
Refundable income taxes - 594
Inventories
Ore and in process 581 395
Materials and supplies 427 674
Deferred income taxes 175 175
Other 136 191
------- -------
Total current assets 22,384 24,804
------- -------
Property, plant and mine development, net 1,448 1,971
Deferred income taxes 412 412
Restricted cash 1,579 1,430
------- -------
TOTAL ASSETS $25,823 $28,617
======= =======
(CONTINUED)
4
<PAGE>
MK GOLD COMPANY
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
(UNAUDITED) (AUDITED)
----------- ---------
<S> <C> <C>
Current liabilities
Accounts payable $ 1,234 $ 1,358
Current portion of mine closure liabilities 1,449 1,934
Other accrued liabilities 843 1,149
-------- --------
Total current liabilities 3,526 4,441
-------- --------
Reclamation liabilities 641 569
Deferred revenue 3,162 4,055
-------- --------
Total liabilities 7,329 9,065
-------- --------
STOCKHOLDERS' EQUITY
Common stock, par value $.01, authorized 40,000,000 shares,
19,464,466 shares issued and outstanding at September 30, 1998
and December 31, 1997 195 195
Capital in excess of par value 67,272 67,272
Accumulated deficit (48,945) (47,887)
Deferred compensation (28) (28)
-------- --------
Total stockholders' equity 18,494 19,552
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,823 $ 28,617
======== ========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
(CONCLUDED)
5
<PAGE>
MK GOLD COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
September 30
1998 1997
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss ($1,058) $ (392)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation, depletion and amortization 772 1,857
Receivable from sale of assets (140) -
Deferred taxes - 10
Gain on sale of assets (259) (1,244)
Changes in operating assets and liabilities:
Gold bullion held for sale (948) 622
Receivables (34) (712)
Refundable income taxes 594 2,346
Inventories 61 1,433
Other current assets 55 (133)
Restricted cash (149) (50)
Deferred revenue (893) (1,177)
Mine closure and reclamation liabilities (413) 701
Accounts payable and other accrued liabilities (430) (240)
-------- -------
Total adjustments (1,784) 3,413
-------- -------
Net cash provided (used) by operating activities (2,842) 3,021
-------- -------
INVESTING ACTIVITIES:
Additions to property, plant and equipment (218) (1,242)
Proceeds from disposition of property, plant and mine development 1,146 382
-------- -------
Net cash provided (used) by investing activities 928 (860)
-------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,914) 2,161
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 18,189 13,925
-------- -------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 16,275 $16,086
======== =======
Supplemental disclosures of cash flow information:
Interest paid $ 38 $ 104
Income taxes paid (refund), net (594) (2,055)
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
6
<PAGE>
MK GOLD COMPANY
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands)
- --------------------------------------------------------------------------------
1. UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The financial information included herein is unaudited; however, the
information reflects all adjustments (consisting of normal recurring
adjustments) that are, in the opinion of management, necessary to the fair
presentation of the consolidated financial position, results of operations,
and cash flows for the interim periods. The consolidated financial
statements should be read in conjunction with the Notes to Consolidated
Financial Statements for the year ended December 31, 1997, which are
included in the Company's Annual Report on Form 10-K for such year (the
"1997 10-K"). The results of operations for the nine months ended
September 30, 1998, are not necessarily indicative of the results to be
expected for the full year. The consolidated balance sheet at December 31,
1997, was extracted from the audited consolidated financial statements
contained in the 1997 10-K and does not include all disclosures required by
generally accepted accounting principles for annual consolidated financial
statements.
2. RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with the
current year's presentation.
3. MINING JOINT VENTURES
The Company owns a 25% undivided interest in the Castle Mountain Venture
(the "CMV"), which operates a gold mine in San Bernardino County,
California. The results for the CMV have been proportionally reflected in
the accompanying consolidated financial statements. Any differences
between the Company's share of reported sales and income and the amounts
shown on these schedules are due to differences in the timing of revenue
and expense recognition. The amounts below reflect the balances on the
joint venture books and do not reflect the impairment previously recorded
by the Company.
CASTLE MOUNTAIN VENTURE
Total Venture MK GOLD'S SHARE
------------------- -------------------
Results of Operations
Nine Months Ended September 30 1998 1997 1998 1997
- ------------------------------ -------- ------- ------- -------
Product sales $ 20,284 $32,134 $ 5,071 $ 8,034
Loss before taxes $(12,264) $(7,518) $(3,066) $(1,880)
The loss before income taxes recorded on MK Gold's books for the CMV after
reflecting previously recorded impairment was $1,239 for the nine months ended
September 30, 1998.
The Company owns a 53% interest in the American Girl Mining Joint Venture (the
"AGMJV") which, prior to September 1996, operated a gold mine in Imperial
County, California. After an extensive review of the operations at the AGMJV,
the Company determined that continued operation at the AGMJV could not be
economically justified. On September 5, 1996, the Company announced the
suspension of operations at the AGMJV and subsequently began mine closure and
reclamation operations. Mine closure and reclamation activities continued during
the nine months ended September 30, 1998.
7
<PAGE>
4. NEW ACCOUNTING STANDARDS
Reporting Comprehensive Income - In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130
establishes standards for reporting and display of comprehensive income and
its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. SFAS No. 130 requires that an
enterprise (a) classify items of other comprehensive income by their nature
in a financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-
in-capital in the equity section of a statement of financial position.
Effective January 1, 1998, the Company adopted the provisions of SFAS No.
130. Accordingly, the Company determined that no transactions were
considered to be an additional component of comprehensive income.
Therefore, comprehensive income (loss) equaled net income (loss) for the
three and nine month periods ended September 30, 1998 and 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------ -----------------------------------------------------------------------
OF OPERATIONS
-------------
The purpose of this section is to discuss and analyze the Company's consolidated
financial condition, liquidity and capital resources and results of operations.
This analysis should be read in conjunction with the Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 (the
"1997 10-K").
GENERAL
During 1997, gold prices suffered a dramatic decline. This decline has had a
significant impact throughout the industry, causing mine closures, reduction of
operations at other mines and a reduction of exploration efforts. During 1997,
the Company reviewed its operations in light of the gold market conditions and
determined that it would not be able to recover its investment in the Castle
Mountain Venture (the "CMV"). As reported in the 1997 10-K, the Company
recorded an asset impairment of $1.8 million during the fourth quarter of 1997
relating to its investment in the CMV.
The Company owns a 53% interest in the American Girl Mining Joint Venture (the
"AGMJV"). Prior to September 1996, the AGMJV operated a gold mine in Imperial
County, California. In September 1996, the Company suspended operations at the
AGMJV and reclamation activities of the surface and underground operations were
initiated. The project is under budget and ahead of schedule. Closure and
reclamation activities at the AGMJV continued through the third quarter of 1998.
Physical completion of the project is expected by late 1998.
The Company has grassroots exploration programs in Nevada, Mexico and Brazil.
During the past year, these programs have resulted in the acquisition of 15
properties including six in Nevada, six in Mexico and three in Brazil.
Exploration efforts during the last nine months included mapping, sampling,
geophysical survey and over 19,000 feet of drilling. The results of this work
are being evaluated.
RESULTS OF OPERATIONS
Gold Production: The Company's attributable share of gold production for the
three and nine month periods ended September 30, 1998, was 5,184 ounces and
19,317 ounces, respectively, compared to 9,105 ounces and 27,144 ounces for the
three and nine month periods ended September 30, 1997. This represents a
decrease in production of 42% for the three month period and 17% for the nine
month period, compared to the same periods in 1997.
8
<PAGE>
Gold production at the CMV decreased 3,116 ounces to 5,173 ounces for the three
months ended September 30, 1998 and decreased 7,098 ounces to 20,046 ounces for
the nine months ended September 30, 1998. The decrease in production for the
three and nine months ended September 30, 1998 is attributable to the lower
grade ore experienced in the Oro Belle, Hart Tunnel and Jumbo pits, production
delays caused by a pitwall failure and mechanical problems associated with the
primary crusher. In addition, during the first nine months of 1997, the CMV
processed stockpiled high grade material which increased the average grade of
the material processed during that period.
Gold production at the AGMJV has significantly declined since the cessation of
mining operations at the AGMJV in 1996. The Company is conducting closure and
reclamation operations at the AGMJV. Gold production at AGMJV for the first
nine months of 1998 resulted from the continued leaching and rinsing of existing
leach pads.
Product sales revenue for the three and nine month periods ended September 30,
1998 decreased $1.4 million and $5.3 million, respectively, compared to the
corresponding periods in 1997. Because of low gold prices, the Company sold only
79 ounces of gold during the third quarter of 1998. During the nine months
ended September 30, 1998, 9,000 ounces were sold under forward sales contracts
at an average price of $324 per ounce. An additional 7,299 ounces were sold on
the spot market. Declining gold prices have had a negative impact on gold
revenues. Spot gold prices have declined approximately 14% compared to the
first nine months of 1997. Product sales revenue for the three and nine month
periods ended September 30, 1998 also includes deferred revenue of $.3 million
and $.9 million, respectively, associated with the settlement of a dispute in
1995 relating to the Company's mining contract at the CMV.
Revenue from mining services for the three and nine month periods ended
September 30, 1998 totaled $2.8 million and $7.8 million, respectively.
Revenues for the three month period ended September 30, 1998 were comparable to
the same period in 1997. Revenues for the nine months ended September 30, 1998
decreased compared to the same period in 1997 as a result of lower levels of
road and leach pad construction work.
HEDGING ACTIVITY: For the nine month period ended September 30, 1998, the
average gold price realized was $317 per ounce, compared to $361 per ounce for
the nine months ended September 30, 1997. The average spot price for the nine
month period ended September 30, 1998 was $295 per ounce.
GROSS PROFIT: The Company experienced a loss from product sales of $.2 million
and $.6 million for the three and nine month periods ended September 30, 1998,
respectively, compared to a loss of $.3 million and income of $.2 million for
the same periods in 1997. Gross profit for 1998 has been adversely impacted by
the decline in gold prices compared to the same periods in 1997.
Gross profit from contract mining operations for the three months ended
September 30, 1998 was comparable to the same period in 1997. Gross profit from
contract mining operations increased $.2 million for the nine months ended
September 30, 1998, compared to the same period in 1997. Reductions in operating
costs resulted in improved profit margins for the nine month period.
EXPLORATION COSTS: The Company's objective is to grow through the discovery and
acquisition of profitable mining properties and ventures. Pursuant to this
objective, the Company has increased exploration expenditures and established
various exploration programs over the past several months. Exploration and
project investigation costs were $.9 million and $2.2 million for the three and
nine month periods ended September 30, 1998, respectively, compared to $.7
million and $1.5 million for the three and nine month periods ended September
30, 1997.
The Company's exploration program in Nevada expanded in the third quarter with
the acquisition of a property in central Nevada and the staking of additional
claims near that location. Previously identified targets were drilled on three
of the Company's Nevada properties with drill results pending on two of the
properties. Mapping and sampling activities occurred on two other Nevada
properties.
The Company's exploration activities in Mexico focused on the identification and
acquisition of properties in central Mexico. Mapping and sampling began on the
six properties acquired during the quarter. These properties cover known
mineral showings in an area known as Piedra Gorda.
9
<PAGE>
Brazilian exploration efforts during the third quarter included the acquisition
of two properties. The Company is currently mapping and sampling these
properties. The Company completed a drilling program on a third property.
Drilling results are pending.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses were
$.4 million and $1.2 million for the three and nine month periods ended
September 30, 1998, respectively. This represents an increase of 4% for the
three months ended September 30, 1998 and a decrease of 4% for the nine months
ended September 30, 1998, compared to the same periods in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds are its available resources of cash and
cash equivalents and cash generated from mining operations and contract mining
services. In addition, the Company maintains a $20 million credit facility with
Leucadia National Corporation, which was renewed effective March 1, 1998 for a
period of three years. At September 30, 1998, the Company had cash and cash
equivalents of $16.3 million and gold bullion of $3 million representing a
decrease in cash and cash equivalents and gold bullion of $1 million from
December 31, 1997.
Net cash used by operating activities was $2.8 million for the nine months ended
September 30, 1998, compared to net cash provided by operating activities of $3
million for the same period in 1997. The Company's gold bullion inventories
increased during the first nine months of 1998. In addition, the Company
received a significant tax refund during the 1997 period.
During the quarter ended March 31, 1998, the Company received $.6 million of
income tax refunds relating to the tax loss reported for the year ended December
31, 1997. The Company also received $1.1 million of proceeds from the disposal
of plant and equipment, during 1998.
Additions to property, plant and mine development totaled $.2 million for the
nine months ended September 30, 1998, compared to $1.2 million for the same
period in 1997. For all periods presented, additions to property, plant and mine
development equipment consisted of (i) mine development expenditures; (ii)
construction expenditures for buildings, machinery, plant and equipment; and
(iii) expenditures for mobile mining service equipment.
Upon completion of production at a mine, the Company must make expenditures for
reclamation and closure of the mine. The Company provides for future
reclamation and mine closure liabilities on a units-of-production basis. At
September 30, 1998, $2.1 million were accrued for such costs. In addition to the
accruals, the Company and its joint venture partner are depositing cash in a
separate fund to cover future reclamation costs at the CMV properties. The
Company reviews the adequacy of its reclamation and mine closure liabilities in
light of current laws and regulations and adjusts it liabilities as necessary.
In October 1998, the Company announced a share repurchase program. The Board of
Directors of the Company has authorized the repurchase of up to 2 million
shares.
YEAR 2000 COMPLIANCE
The Company has performed an analysis and has implemented procedures to address
year 2000 issues. The Company is converting its financial systems to year 2000
systems with project completion scheduled for March 31, 1999. The Company does
not anticipate a significant cost to modify its systems to accommodate the
impact of the upcoming change in the century. Although the Company is working
cooperatively with certain third parties, the Company cannot give any assurances
that the systems of other parties will be year 2000 compliant on a timely basis.
CAUTIONARY STATEMENT FOR FORWARD-LOOKING INFORMATION
Certain information set forth in this report contains "forward-looking
statements" within the meaning of federal securities laws. Such statements are
based upon the Company's current expectations and may include information
10
<PAGE>
with respect to future revenues, income or loss and capital expenditures;
exploration efforts; plans for growth and future operations; financing needs; as
well as assumptions relating to the foregoing. There are a number of risks and
uncertainties that could cause actual results to differ materially from those
set forth in, contemplated by or underlying the forward-looking statements
contained in this report. These risks include, but are not limited to, economic
recessions, fluctuations in gold prices, risks associated with closure and
reclamation of mines, risks associated with exploration activities in foreign
countries and the United States, the ability of the Company to acquire and fund
new mining projects and other factors identified from time to time in the
Company's press releases and periodic reports filed with the Securities and
Exchange Commission. When used in this report, the words "estimates", "expects",
"anticipates", "forecasts", "plans", "intends", "believes", and variations of
such words or similar expressions are intended to identify forward-looking
statements that involve risks and uncertainties. Future events and actual
results could differ materially from those set forth in, contemplated by or
underlying the forward-looking statements. The Company's forward-looking
statements apply only as of the date made. The Company undertakes no obligation
to publicly release the results of any revisions to forward-looking statements
which may be made to reflect events or circumstances after the date made or to
reflect the occurrence of unanticipated events.
ITEM 5. OTHER INFORMATION
- ------ -----------------
In July 1998, the Company was informed it was not maintaining the minimum bid
price requirements for continued quotation on the Nasdaq National Market System
("Nasdaq NMS"), and that its common stock could be subject to delisting from
Nasdaq NMS. The Company has requested a hearing from the Nasdaq Hearings
Department and has submitted a plan to regain compliance with the minimum bid
price criteria. As part of this plan, the Board of Directors of the Company has
called a Special Meeting of its Stockholders to approve an amendment to the
Company's Certificate of Incorporation to effect a one for three reverse stock
split. The Special Meeting is scheduled for November 24, 1998. The Company
believes that the reverse stock split, if approved and implemented, will enable
the Company to regain compliance with the Nasdaq maintenance standards. If,
however, the Company is unable to regain compliance, the Company's Common Stock
may be delisted. If the Company's Common Stock is delisted, trading, if any, in
the Company's Common Stock may thereafter be conducted in the over-the-counter
market on an electronic bulletin board established for securities that do not
meet the Nasdaq listing requirements, or in what are commonly referred to as the
"pink sheets". As a result, an investor would find it more difficult to dispose
of, or to obtain accurate quotations as to the price of, the Company's Common
Stock. In addition, if the Company's Common Stock were delisted from Nasdaq NMS,
trading of the Common Stock would be subject to "penny stock" rules that impose
additional sales practice requirements on broker-dealers who sell such
securities. Consequently, delisting of the Company's Common Stock from Nasdaq
NMS, if it were to occur, could affect the ability or willingness of broker-
dealers to sell the Company's Common Stock and the ability of purchasers of the
Company's Common Stock to sell their securities in the secondary market.
11
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------ --------------------------------
(a) The following exhibits are filed with this report.
27 Financial Data Schedule
(b) No report on Form 8-K was filed during the quarter for which
this report is filed.
12
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MK GOLD COMPANY
/s/ John C. Farmer
-------------------------------------------
JOHN C. FARMER
Chief Financial Officer
(Authorized Signatory and
Principal Financial and Accounting Officer)
Date: November 12, 1998
13
<PAGE>
INDEX TO EXHIBITS
Exhibits
27 Financial Data Schedule.
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE BODY OF THE ACCOMPANYING FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 16,275
<SECURITIES> 0
<RECEIVABLES> 1,811
<ALLOWANCES> 0
<INVENTORY> 3,987
<CURRENT-ASSETS> 22,384
<PP&E> 30,615
<DEPRECIATION> 29,167
<TOTAL-ASSETS> 25,823
<CURRENT-LIABILITIES> 3,526
<BONDS> 0
0
0
<COMMON> 195
<OTHER-SE> 8,299
<TOTAL-LIABILITY-AND-EQUITY> 25,823
<SALES> 4,922
<TOTAL-REVENUES> 13,568
<CGS> 5,529
<TOTAL-COSTS> 12,221
<OTHER-EXPENSES> 3,436
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62
<INCOME-PRETAX> (1,053)
<INCOME-TAX> 5
<INCOME-CONTINUING> (1,058)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,058)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
