SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the Transition Period From to
Commission File No. 0-16293
LANXIDE CORPORATION
(Exact name of Small Business Issuer in its charter)
Delaware 51-0270253
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1300 Marrows Road
P.O. Box 6077
Newark, DE 19714-6077
(Address of principal executive offices) (Zip Code)
(302) 456-6200
Issuer's telephone number, including area code
Check whether the Issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
Transitional Small Business Disclosure Format (check one):
[ ] Yes [ X ] No
The number of shares of Common Stock outstanding as of May 12, 1998 was:
1,325,598.
<PAGE>
THIS FORM 10-QSB CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO
THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF LANXIDE
CORPORATION, INCLUDING STATEMENTS UNDER ITEM 1. FINANCIAL STATEMENTS AND ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION. THESE FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND
UNCERTAINTIES. NO ASSURANCE CAN BE GIVEN THAT ANY SUCH MATTERS WILL BE REALIZED.
FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE
FOLLOWING POSSIBILITIES: (I) COMPETITIVE CONDITIONS IN THE INDUSTRIES IN WHICH
LANXIDE OPERATES; (II) FAILURE TO FURTHER COMMERCIALIZE ONE OR MORE OF THE
TECHNOLOGIES OF LANXIDE; (III) GENERAL ECONOMIC CONDITIONS THAT ARE LESS
FAVORABLE THAN EXPECTED AND (IV) ABILITY TO SECURE ADEQUATE FUNDING.
<PAGE>
LANXIDE CORPORATION
TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet at
March 31, 1998 and 1997 (Unaudited).........................2
Consolidated Statement of Operations
for the Three Months and Six Months Ended
March 31, 1998 and 1997 (Unaudited).........................3
Consolidated Statement of Cash Flows
for the Six Months Ended
March 31, 1998 and 1997 (Unaudited).........................4
Notes to Consolidated Financial
Statements (Unaudited)..................................5 - 9
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial
Condition.............................................10 - 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...........................15
<PAGE>
<TABLE>
<CAPTION>
Lanxide Corporation
Consolidated Balance Sheet
(Amounts in thousands, except per share data)
(Unaudited)
March 31, September 30,
1998 1997
----------- -----------
<S> <C> <C>
Assets
- ------
Cash and cash equivalents, including amounts restricted for use
by majority owned affiliate $1,769 $3,892
Accounts receivable 1,967 2,738
Inventories 453 3,036
Other current assets 447
----------- -----------
Total current assets 4,189 10,113
Property and equipment, net 3,132 9,681
Investment in affiliate 0 377
Other assets 290 346
=========== ===========
$7,611 $20,517
=========== ===========
Liabilities and Shareholders' Deficit
- -------------------------------------
Current portion of long term debt 10,076 6,789
Accounts payable and accrued expenses 3,501 4,237
Deferred compensation 539 1,357
Deferred revenue 390 380
----------- -----------
Total current liabilities 14,506 12,763
Long-term debt 253 14,079
Deferred credit 1,050 357
Deferred compensation 899 20
----------- -----------
2,202 14,456
Minority interest in consolidated affiliates 1,254 2,006
Redeemable Series E preferred stock (aggregate liquidation value, $261); 231 225
----------- -----------
<PAGE>
<CAPTION>
Lanxide Corporation
Consolidated Balance Sheet
(Amounts in thousands, except per share data)
(Unaudited)
March 31, September 30,
1998 1997
----------- -----------
<S> <C> <C>
Shareholders' deficit
Preferred stock 15,000,000 shares authorized
Series A preferred stock (aggregate liquidation value,$2,000) $.01 par value;
1,101,683 shares issued and outstanding 11 11
Series H preferred stock (aggregate liquidation value,$2,000) $.01 Par value;
20,000 shares issued and outstanding Common stock,$.01 par value,
25,000,000 shares authorized:
1,325,598 issued and outstanding 13 13
Additional paid-in capital 191,006 191,006
Accumulated deficit (202,734) (200,883)
Cumulative translation adjustment 1,122 920
=========== ===========
(10,582) (8,933)
=========== ===========
$7,611 $20,517
=========== ===========
</TABLE>
See notes to consolidated financial statements
Page 2
<PAGE>
<TABLE>
<CAPTION>
Lanxide Corporation
Consolidated Statement of Operations
(Amounts in thousands, except per share data)
(Unaudited)
Three Months ended March 31, Six Months ended March 31,
---------------------------- --------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Sales 1,051 2,778 4,299 4,634
Licensing revenue 5,300 7,177 8,200
Research and development contract revenue 329 1,256 1,397 2,984
---------- ---------- ---------- ----------
6,680 4,034 12,873 15,818
---------- ---------- ---------- ----------
Operating costs:
Cost of sales 1,502 2,573 3,893 4,248
Research and development costs 388 1,188 3,236 2,767
Product development and engineering 42 1,551 1,074 3,003
Selling, general and administration 1,562 2,053 3,317 4,248
---------- ---------- ---------- ----------
3,494 7,365 11,520 14,266
---------- ---------- ---------- ----------
Income (loss) from operations before
minority allocation 3,186 (3,331) 1,353 1,552
Minority allocation of operating income 81 51 173 (1,146)
---------- ---------- ---------- ----------
Income (loss) from operations 3,267 (3,280) 1,526 406
Write off of investment in affiliate (377) (377)
Loss on sale of affiliates (2,028) (2,028)
Interest expense (349) (456) (841) (857)
Other income 16 166 34 314
---------- ---------- ---------- ----------
Income (loss) before income taxes 529 (3,570) (1,686) (137)
Income tax expense (150) 40
---------- ---------- ---------- ----------
Net income (loss) 529 (3,570) (1,836) (177)
Dividends on mandatorily redeemable (8) (8) (15) (15)
preferred stock
Gain on redemption of of subsidiary's preferred stock 680
========== ========== ========== ==========
Net income (loss) applicable to common shares 521 (3,578) (1,851) 488
========== ========== ========== ==========
Income (loss) per share
Basic $0.39 ($2.70) ($1.40) $0.37
Diluted $0.30 ($2.70) ($1.40) $0.37
</TABLE>
See notes to consolidated financial statements
Page 3
<PAGE>
<TABLE>
<CAPTION>
Lanxide Corporation
Consolidated Statement of Cash Flows
(Amounts in thousands)
(Unaudited)
Six Months ended March 31,
--------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($1,836) ($177)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Depreciation and amortization 615 946
Loss on sale of affiliate 2,028
Write off of affiliate investment 377
Minority allocation of operating (loss) income (226) 1,146
Gain on the sale of equipment (6) (45)
Change in assets and liabilities:
Increase in receivables (72) (1,033)
Decrease(increase) in inventories 205 (280)
Decrease (increase) in other assets 466 420
Decrease (increase) in accounts payable and accrued expenses 787 (50)
Increase in deferred revenue and deferred credit 703 868
Increase in other liabilities 75
=========== ===========
Net cash provided by operating activities 3,041 1,870
=========== ===========
Cash flows from investing activities
Capital additions (573) (312)
Proceeds from the sale of equipment 6 90
=========== ===========
Net cash used in investing activities (567) (222)
=========== ===========
Cash flows from financing activities
Redemption of a subsidiary's preferred stock 0 (4,000)
Proceeds from issuance of debt obligations 0 3,825
Repayment of debt obligations (4,799) (32)
=========== ===========
Net cash used in financing activities (4,799) (207)
=========== ===========
Effect of exchange rate translations 202 (616)
----------- -----------
Net (decrease) increase (2,123) 825
Cash and cash equivalents, beginning of period 3,892 3,458
=========== ===========
Cash and cash equivalents, end of period $1,769 $4,283
=========== ===========
Cash paid for interest $621 $776
=========== ===========
</TABLE>
<PAGE>
Lanxide Corporation
Consolidated Statement of Cash Flows
(Amounts in thousands)
(Unaudited)
Supplemental Schedule of Noncash investing and Financing Activities
The Company sold all of the capital stock of Lanxide Electronic Components, Inc.
and Lanxide Armor Products, Inc for the cancellation of bank debt of $5,740. In
conjunction with the sale, bank debt was satisfied as follows:
Net book value of assets disposed of $7,831
Cancellation of debt (5,740)
Minority interest in accounts payable (63)
==========
Loss on disposal $2,028
==========
See notes to consolidated financial statements
Page 4
<PAGE>
LANXIDE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet at March 31, 1998, the consolidated
statements of operations and of cash flows for the six months ended March
31, 1998 and 1997 have been prepared by Lanxide Corporation (the Company)
and have not been audited by the Company's Independent Auditors. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows at March 31, 1998 and for all periods presented
have been made.
These consolidated financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Annual
Report on Form 10-KSB for the fiscal year ended September 30, 1997, filed
with the Securities and Exchange Commission. The results of operations for
the period ended March 31, 1998 are not necessarily indicative of operating
results for the full year.
2. CASH AND CASH EQUIVALENTS
All highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents. Included in the cash
balances at March 31, 1998 are $939,000 held by a subsidiary company which
amounts are not generally available to the Company.
3. INVENTORIES
Inventories are valued at the lower of cost (primarily average cost) or
market and consists of raw materials and supplies and are held by a
subsidiary company which amounts are not generally available to the
Company.
4. PER SHARE DATA
Net income (loss) per share is computed using the weighted average number
of common shares and potentially dilutive securities outstanding during the
period. The Company adopted the Financial Accounting Standards Board (FASB)
statement No. 128 "Earnings Per Share" for the periods presented below:
Page 5
<PAGE>
4. PER SHARE DATA (continued)
<TABLE>
<CAPTION>
Three Months ended March 31, Six Months ended March 31,
---------------------------- --------------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income (loss) 529 (3,570) (1,836) (177)
Dividends on mandatorily redeemable
preferred stock (8) (8) (15) (15)
Gain on redemption of
subsidiary's preferred stock 680
Net income (loss) applicable ------ ------ ------ ------
to common shareholders 521 (3,578) (1,851) 488
------ ------ ------ ------
Weighted average common
shares outstanding (basic) 1,326 1,326 1,326 1,326
Employe stock options (a) (b) (b) (b)
Warrants to purchase common shares (a) (b) (b) (b)
Convertible preferred stock 410 (b) (b) (b)
------ ------ ------ ------
Weighted average common
shares outstanding (diluted) 1,736 1,326 1,326 1,326
====== ====== ====== ======
Earnings (loss) per share-basic $ 0.39 ($2.70) ($1.40) $ 0.37
====== ====== ====== ======
Earnings (loss) per share-diluted $ 0.30 ($2.70) ($1.40) $ 0.37
====== ====== ====== ======
</TABLE>
(a) For the three months ended March 31, 1998, all employee options and
warrants to purchase common stock would have an anti-dilutive effect upon
earnings per share as calculated in accordance with SFAS 128.
(b) Due to the Company's net loss during these periods, a dilutive calculation
in accordance with SFAS 128 is not required.
As of March 31, 1998, the following employee stock options and warrants to
purchase shares of common stock were outstanding:
Exercise
Number Price
------ -----
Employee stock options 665,393 $1 - $320
Warrants to purchase common stock 354,763 $4.5 - $14
Page 6
<PAGE>
5. SIGNIFICANT EVENTS
Loan from Lanxide K.K.
On December 29, 1997, Lanxide K.K., a 65% owned Japanese subsidiary, agreed
to loan $1.8 million to the Company (the Lanxide K.K. Loan). The Company
received $1.3 million on December 29, 1997 and an additional $.5 million
was received on January 12, 1998. Cash held by Lanxide K.K. is generally
unavailable to the Company for general corporate purposes. The Lanxide K.K.
Loan was to mature on January 31, 1998 and bears interest at the rate of 6%
per annum. Upon an event of default under the Lanxide K.K. Loan, the
Company shall transfer to Lanxide K.K. its 10% ownership in DuPont Lanxide
Composites, Inc. (the DLC interest). The loan came due on February 10, 1998
and the Company is negotiating with Lanxide K.K. regarding the disposition
of the loan.
Termination of Employees
On February 3, 1998, the Company terminated all of its employees, as well
as those of three of its subsidiaries located at the Company's Newark,
Delaware offices, as a result of its inability to secure adequate funding
to continue its operations. The Company has subsequently hired back
approximately 30 employees and is in the process of restructuring its
operations.
Assignment of Option; Transfer of Subsidiaries
E.I Dupont de Nemours and Company, Inc. (Dupont) entered into an agreement
with PNC Bank (the Bank), pursuant to which DuPont agreed to guarantee the
Company's obligations to the Bank under a Revolving Credit and Term Note,
dated February 24, 1993, in the original principal amount of $5,970,000
(the PNC Bank Loan). In consideration for DuPont's guaranty, the Company
and DuPont had entered into a Loan Guarantee Letter Agreement, dated
December 15, 1992 (as amended, the Guarantee Agreement), pursuant to which
the Company granted to DuPont, as collateral, an option (the Option) to
acquire all of the outstanding common equity securities of Lanxide Armor
Products, Inc. (LAP) and Lanxide Electronic Components, Inc. (LEC).
DuPont's exercise of the Option would release the Company from all
obligations and liabilities under the PNC Bank Loan. Under the terms of the
Guarantee Agreement, the Option would become exercisable by DuPont upon the
Company's notification to DuPont of the Company's inability to meet its
obligations under the PNC Bank Loan.
In a letter agreement entered into between the Company and DuPont, dated
February 6, 1998 (the Letter Agreement), the Company notified DuPont that
the Company would not be able to meet its obligations under the PNC Bank
Loan. In the Letter Agreement, the Company consented to DuPont's assignment
of its right to exercise the Option to DHB Capital Group, Inc. (DHB) and
DuPont agreed to repay the Bank all amounts owed by the Company to the Bank
under the PNC Bank Loan.
Concurrent with the assignment of the Option by DuPont to DHB, the Company
entered into a Transfer Agreement, dated as of February 6, 1998 (the
Transfer Agreement), by and among the Company, DHB, LAP, LEC and Lanxide
Technology Company, L.P. (LTC), pursuant to which DHB elected to exercise
the Option and, accordingly, the Company transferred to DHB all of the
outstanding common equity securities of LEC and LAP. Pursuant to the
Transfer Agreement, DHB has agreed to use its best efforts to cause LEC and
LAP to hire, at a minimum, all of the persons employed as of February 2,
1998, by LEC and LAP, respectively. Pursuant to the Transfer Agreement, DHB
further agreed to transfer to LTC certain assets of LAP set forth on a
schedule attached to the Transfer Agreement (the Asset Sale) and (i) LTC
and LEC have each agreed to amend the License Agreement, dated as of July
25, 1995, between LTC and LEC and (ii) LTC and LAP have each agreed to
amend the License Agreement, dated as of March 31, 1987, between LTC and
LAP to provide for a royalty to LTC of all products containing the
Company's technology that are sold by LEC or LAP.
Page 7
<PAGE>
Termination of Voting Agreement; Resignation of Directors and Officers
As previously disclosed on the Company's Current Report on Form 8-K dated
July 3, 1997, Commodore Environmental Services, Inc., a Delaware
corporation (COES), assumed effective control of the Company pursuant to a
Voting Agreement, dated July 3, 1997, among the Company and certain of its
stockholders (the Voting Agreement) which was executed in connection with
certain transactions contemplated by a Securities Purchase Agreement, dated
July 3, 1997, between the Company and COES (the Securities Purchase
Agreement). Pursuant to the Voting Agreement, stockholders of the Company
who owned 664,329 shares of common stock, par value $.01 per share (the
Common Stock), or 50.1% of the outstanding Common Stock, granted proxies to
the members of the Board of Directors of COES (the Proxyholders) to vote
all shares of Common Stock held by each such stockholder until December 31,
1998.
In accordance with the Securities Purchase Agreement, the Board of
Directors of the Company increased the number of members on the Company's
Board of Directors to seven and elected Messrs. Michael Fullwood and
William Toller to fill the newly created directorships. In addition, the
Board of Directors of the Company appointed Mr. Toller to the position of
Vice Chairman and Senior Executive Officer of the Company and Mr. Fullwood
to the position of Senior Vice President, Chief Financial and
Administrative Officer and General Counsel of the Company.
On February 3, 1998, COES terminated the Voting Agreement in accordance
with its terms and Messrs. Fullwood and Toller resigned from their
respective positions as directors and officers of the Company. On February
6, 1998, Paul E. Hannesson, chairman of the Board of Directors of the
Company and COES, resigned from his position on the Company's Board of
Directors. Messrs. Stephen A. Weiss and J. Frederick Van Vranken, Jr.
resigned from their positions on the Company's Board of Directors on
February 11 and 12, 1998, respectively. On March 5, 1998 Michael J. Hollins
was appointed to serve on the Board of Directors, which currently consists
of three directors: Messrs. Bentley J. Blum, Marc S. Newkirk and Michael J.
Hollins.
Transactions with Commodore Environmental Services, Inc.
On March 5, 1998 the Company entered into a series of transactions with
Commodore Environmental Services, Inc. ("Commodore") and certain of its
subsidiaries pursuant to which, among other things, Commodore paid $500,000
cash and its subsidiaries agreed to cancel $4,500,000 in indebtedness plus
accrued interest to subsidiaries of Lanxide (which was guaranteed by
Lanxide) in exchange for the issuance of a royalty-bearing license to use
CERASET (TM) on a worldwide basis, excluding Japan (the "License"). The
License, which was issued pursuant to the terms of a Settlement and Release
agreement(the "Release Agreement"), grants Commodore certain business and
technology rights that do not conflict with the rights of Lanxide's other
licenses, or future licenses in the fields for metal matrix composites and
ceramic matrix composites. In connection with the issuance of the License,
Lanxide and Commodore amended the Securities Purchase agreement, dated July
3, 1997 (the "Purchase Agreement" and as amended, the "Amended Purchase
Agreement"). Pursuant to the Amended Purchase Agreement, among other
things, (i) Lanxide and Commodore each agreed to exchange all of the issued
and outstanding shares of Series G Preferred stock of Lanxide (Series G
Preferred Stock), which are held by Commodore, for an equal number of
Series H preferred Stock of Lanxide (the Series H Preferred Stock), (ii)
Commodore's right to purchase additional shares of Series G Preferred Stock
pursuant to the terms of the original purchase agreement was cancelled.;
(iii) Lanxide issued a warrant (the Warrant) to Commodore for the purchase
of up to 270,000 shares of Lanxide's common stock, at an exercise price of
$7.41 per share; and (iv) Commodore's right to purchase 250,000 shares of
Series F Preferred Stock of Lanxide ("Series F Preferred Stock") pursuant
to a warrant issued to Commodore on July 3, 1997 (the "1997 Warrant") was
cancelled.
The Company is considering alternatives to attempt to further resolve its
financial situation. No assurances can be given that any such alternatives
will allow the Company to continue any of its operations.
Page 8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following is a discussion of the consolidated financial condition
and results of operations of the Lanxide Corporation and its majority-owned
affiliates (the Company) for the six months ended March 31, 1998 and 1997, as
well as certain factors that may affect the Company's prospective financial
condition. This section should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto included elsewhere in this 10-QSB.
Overview
Historically, the Company's revenues have been derived primarily from
research contracts and development agreements with DuPont and the U.S.
Government and a substantial portion of the Company's research, development and
engineering and other operating costs were funded by Alcan Aluminium Limited and
its affiliates (Alcan), DuPont and Kanematsu Corporation (Kanematsu) through the
Company's consolidated affiliates. More recently, the Company's revenues consist
mainly of technology licensing revenue and sales to outside customers and, to a
lesser degree, contract funding. The Company operates principally in the United
States and to some degree in Japan through its subsidiary, Lanxide K.K.
During fiscal year 1995, the Company embarked on a program to license
its technology in certain specific market sectors by product and geography in
order to generate immediate cash for the Company. Since implementing this
strategy, the Company consummated license agreements with A.P. Green Industries,
Inc. (A.P. Green), Waupaca Foundry, Inc. (Waupaca), Sturm Ruger & Company, Inc.
(Sturm Ruger), Brembo S.p.A. (Brembo), AKN Corporation (AKN), Nihon Cement Co.,
Ltd. (Nihon Cement) and COES which have generated license fees, as well as
future royalties. In addition, the Company entered into two license agreements
pursuant to the sale of two wholly-owned subsidiaries and converted its joint
venture with Nihon Cement into a license arrangement.
In fiscal year 1998, the Company anticipates that its revenues will
continue to be derived primarily from technology licensing revenue, product
sales, and research and development contract revenue.
Results of Operations
Results of operations may vary from period to period depending on
several factors including licensing transactions. Revenues from license
agreements often do not occur evenly in each reporting period, which can cause
the results to fluctuate.
"Licensing and other related revenues" represent amounts earned by the
Company from licensing its technology by product and geographic area and are
recognized as revenue when the Company fulfills its obligation under the
applicable license agreement. Also included in this revenue category are
ancillary product sales that are produced solely in support of existing or
potential license agreements. Costs incurred by the Company from licensing its
technology are included in "Product development and engineering" (PD&E) costs.
PD&E also includes costs incurred for projects sponsored by the Company and/or
its joint venture partners through the Company's consolidated affiliates.
Operating income and losses allocated to commercial venture partners through the
Company's consolidated affiliates are reported under "Minority allocation of
operating (income) loss."
Revenues from research and development contracts and commercial
development agreements (other than the Company's agreements with its
consolidated affiliates) are reported under "Research and development contract
revenue" in the Company's Consolidated Statement of Operations. Expenses related
to these contracts and agreements are reported under operating costs as
"Research and development contract costs."
The Company's significant revenue sources in the first half of fiscal
year 1998 consist primarily of (i) technology licensing revenues; (ii) sales
revenues of consolidated subsidiaries of the Company; and (iii) revenues from a
brake component development program between the Company and AKN;
Page 9
<PAGE>
Percentage Relationship to Net Revenues
The following table sets forth the percentage relationship to net
revenues of certain items in the Company's Consolidated Statement of Operations
for the periods presented:
<TABLE>
<CAPTION>
Six months ended March 31,
--------------------------
1998 1997
---- ----
<S> <C> <C>
Revenues 100% 100%
Operating costs:
Cost of sales (30) (27)
Product development and engineering (8) (19)
Research and development contract costs (26) (17)
Selling, general, and administrative (26) (27)
Minority allocation of operating loss (income) 1 (7)
Interest expense (7) (5)
Other income 6
Net (loss) income (14) 3
</TABLE>
Six months ended March 31, 1998 compared to six months ended
March 31, 1997
The Company recorded a net loss of $1,851,000 for the six months ended
March 31, 1998, as compared to a $488,000 net income for the six months ended
March 31, 1997. The reduction in profitability was due to the loss on the sale
of affiliates of $2,028,000 and a write off an investment in affiliate of
$377,000.
Net Sales and Cost of Sales
Sales for the six months ended March 31, 1998 were $4,299,000 compared
to $4,634,000 for the six months ended March 31, 1997.The cost of goods sold for
the most recent six month period was $3,893,000 yielding a gross profit on sales
of $406,000, consistent with the gross profits earned for the six months ended
March 31, 1997.
Licensing and Other Related Revenues
Licensing and other related revenues were $7,177,000 and $8,200,000 for
the six months ended March 31, 1998 and 1997, respectively. During the second
quarter of this fiscal year the Company executed a license with COES, for
$5,300,000 in cash and debt cancellation and royalties on future sales .
Product Development and Engineering
Due to the employee lay-off and restructuring activities of the
Company, product development and engineering activities were sharply curtailed
in the three months ended March 31, 1998.
Research and Development Contract Revenue and Contract Costs
Due to the lay-off of the employees in early February 1998, the Company
booked significantly less research and development contract revenue during the
quarter ended March 31, 1998. For the six months ended March 31, 1998 and 1997,
revenue from research and development contract revenue was $1,397,000 and
$2,984,000 respectively, representing a gross revenue reduction for the most
recent six months of $1,587,000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were reduced during the
quarter ended March 31, 1998 due to the reduced number of administrative staff.
For the six months ended March 31, 1998 selling general and
Page 10
<PAGE>
administrative expenses of $3,317,000 were approximately $931,000 less than the
six months ended March 31, 1997.
Interest Expense
As a result of the cancellation of $5,740,000 bank debt by the sale of
two affiliates and the reduction of $4,500,000 of Commodore debt and accrued
interest through a licensing agreement, interest expense was reduced by 23% in
the quarter ended March 31, 1998.
Income Tax Expense
Income tax expense reflects taxes withheld on foreign source income for
the quarters presented.
Liquidity and Capital Resources
Since its inception, the Company has financed its working capital and
capital expenditure requirements with the proceeds from the sale of stock,
borrowings, product sales, research and development contracts and, more
recently, technology licensing revenues. The Company's working capital was a
deficit $10,317,000 at March 31, 1998, as compared to a deficit $2,650,000 at
September 30, 1997. The consolidated cash balance at March 31, 1998 was
$1,769,000 (including $939,000 held by a subsidiary company which is generally
unavailable to the Company for general corporate purposes). At March 31,1998,
the Company had no significant commitments to purchase capital equipment.
The Company has a $10.0 million secured note payable with Kanematsu. The Company
is presently renegotiating this loan to be repaid over a period of seven years.
No assurance can be given that the Company will be able to make these payments
when they become due.
No assurances can be given that any financing options will be obtained to allow
the Company to continue any of its operations.
Page 11
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 27 Financial Data Schedule
Page 12
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LANXIDE CORPORATION
Date: May 14, 1998 By: /s/Marc Newkirk
---------------
Marc S. Newkirk
President and Chief Executive Officer
Page 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Company's Consolidated Balance Sheet at March 31, 1998 and Consolidated
Statement of Operations for the 6 months ended March 31, 1998, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-1-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,769
<SECURITIES> 0
<RECEIVABLES> 2,026
<ALLOWANCES> (59)
<INVENTORY> 453
<CURRENT-ASSETS> 4,189
<PP&E> 16,184
<DEPRECIATION> (13,052)
<TOTAL-ASSETS> 7,611
<CURRENT-LIABILITIES> 14,506
<BONDS> 10,000
231
11
<COMMON> 13
<OTHER-SE> 191,006
<TOTAL-LIABILITY-AND-EQUITY> 7,611
<SALES> 4,299
<TOTAL-REVENUES> 12,873
<CGS> 3,893
<TOTAL-COSTS> 8,203
<OTHER-EXPENSES> 3,317
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 841
<INCOME-PRETAX> 1,686
<INCOME-TAX> 150
<INCOME-CONTINUING> 569
<DISCONTINUED> 2,405
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,851
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
</TABLE>