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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
MARCH 31, 1999
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Date of Report (Date of earliest event reported)
ILLINOIS SUPERCONDUCTOR CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 0-22302 36-3688459
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(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
451 KINGSTON COURT, MT. PROSPECT, ILLINOIS 60056
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(Address of principal executive offices) (Zip Code)
(847) 391-9400
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
On March 31, 1999, Illinois Superconductor Corporation (the "Company")
issued a press release announcing the Company's financial results for the fourth
quarter and year ended December 31, 1998, the completion of a $3.3 million fixed
price convertible debt financing, and changes to the Company's Board of
Directors. A copy of such press release is attached hereto as Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
Exhibit 99.1: Press Release issued by Illinois Superconductor
Corporation (the "Company") on March 31, 1999 announcing the Company's financial
results for the fourth quarter and year ended December 31, 1998, the completion
of a $3.3 million fixed price convertible debt financing, and changes to the
Company's Board of Directors.
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SIGNATURE
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.
ILLINOIS SUPERCONDUCTOR CORPORATION
By: /s/ William M. Kochlefl
---------------------------------------------
William M. Kochlefl
Vice President, General Counsel and Secretary
Date: March 31, 1999
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EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION OF EXHIBITS
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99.1 Press Release issued by Illinois Superconductor Corporation (the
"Company") on March 31, 1999 announcing the Company's financial
results for the fourth quarter and year ended December 31, 1998,
the completion of a $3.3 million fixed price convertible debt
financing, and changes to the Company's Board of Directors.
<PAGE> 1
EXHIBIT 99.1
[LETTERHEAD OF ILLINOIS SUPERCONDUCTOR CORPORATION]
NEWS RELEASE
ILLINOIS SUPERCONDUCTOR REPORTS FOURTH QUARTER
AND FULL-YEAR 1998 RESULTS
Announces New $3.3 Million Financing and Changes to its Board of Directors
Mount Prospect, IL (March 31, 1999) -- Illinois Superconductor Corporation
(Nasdaq: ISCO), a leading supplier of superconducting technology for the
wireless telecommunications industry, today reported financial results for the
fourth quarter and year ended December 31, 1998. The Company also announced the
completion of a new $3.3 million financing and changes to its board of
directors.
Fourth quarter of 1998 net revenues were $1.5 million, a 432% increase
over the $282,000 in net revenues for the fourth quarter of 1997. Net revenues
for the full-year 1998 were a record $3.2 million, a 220% increase over the $1.0
million reported in the prior year. All revenues in 1998 resulted from
commercial sales of ISC's high performance filter products. Stated revenues are
net of the Company's return products reserve. Although the Company anticipates
significantly lower revenues in the first quarter of 1999 as compared to the
fourth quarter of 1998, it remains optimistic about its prospects for further
sales growth in the remainder of 1999.
Operating losses for the fourth quarter of 1998 increased to $4.7 million,
or $.37 per diluted share, compared to $2.8 million, or $.51 per diluted share,
in the fourth quarter of 1997. Operating losses for the year ended December 31,
1998 were $12.0 million, or $1.05 per diluted share, compared to $12.2 million,
or $2.36 per diluted share, for the four
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ILLINOIS SUPERCONDUCTOR CORP.
Fourth Quarter and Full-Year 1998 Results
March 31, 1999
PAGE-2-
quarters of 1997. ISC reported a fourth quarter net loss of $10.0 million, or
$0.80 per diluted share, compared to a net loss of $2.8 million, or $0.52 per
diluted share, in the fourth quarter of 1997. For the twelve months of 1998, net
losses were $21.9 million, or $1.93 per diluted share, compared to a net loss of
$12.1 million, or $2.34 per diluted share, in the same period of 1997. Net
losses in the twelve months of 1998 include a non-cash charge of $10.1 million,
or $0.89 per diluted share, which resulted from the financing entered into by
the Company in May 1998.
"We are pleased with our strong sales growth in the fourth quarter of
1998," said Edward W. Laves, president and chief executive officer. "Sales grew
rapidly due to our price restructuring and the large-scale deployment of our
products by one of the largest cellular operators in the United States, which
installed our filters in over 50 cell sites in the fourth quarter. During the
quarter we also expanded our customer base, sold product for use in CDMA digital
systems in the U.S. and received an order for a Third Generation (3G) wireless
trial system in Japan. During the year, we reduced our product costs by 40%,
enabling us to price our products more in line with competing products based on
conventional technology. We also expanded our product portfolio, which now has
over 30 different product varieties to fit the specific needs of various
operators."
ISC also announced that it has completed a $3.3 million fixed price
convertible debt financing. Under the terms of the new financing, ISC issued
$3.3 million in aggregate initial principal amount of senior convertible notes
to a syndicate which consists of Alexander Finance, L.P., Elliott Associates,
L.P., State Farm Mutual Automobile Insurance Company and Westgate International,
L.P. The new notes accrue interest at 6%, payable in cash or shares of ISC
common stock, are convertible into ISC common stock at a conversion price of
$1.125 per share, and mature on May 15, 2002. In connection with the issuance of
the new notes, ISC also issued three year warrants exercisable for an aggregate
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ILLINOIS SUPERCONDUCTOR CORP.
Fourth Quarter and Full-Year 1998 Results
March 31, 1999
PAGE-3-
of 1.32 million shares of ISC common stock at an exercise price of $ 1.4625 per
share. The new notes and warrants have not been registered under the Securities
Act of 1933 and may not be offered or sold in the United States absent
registration or an applicable exemption from the registration requirements of
such Act. The purchasers of the new notes and warrants have been granted certain
registration rights with respect to the ISC common stock issuable upon
conversion of the new notes and exercise of the new warrants.
Concurrently with the issuance of the new notes, ISC amended certain
terms of $5.5 million in aggregate principal amount of outstanding senior
convertible notes which were issued to the above-mentioned syndicate in May,
1998, and of related warrants exercisable for an aggregate of 2.2 million shares
of ISC common stock also issued in May 1998. The interest rate for the amended
notes was increased from 2% to 6% and the fixed conversion price for those notes
was reduced from $1.50 to $1.125 per share. The exercise price for the amended
warrants was reduced from $3.75 to $1.4625 per share. The financing proceeds
will be used for working capital and general corporate purposes. "This new
financing will support our continuing strategy to successfully exploit this
burgeoning market for our industry-leading products," said Mr. Laves. ISC
expects to need to raise additional funds in the third quarter of 1999.
ISC also announced the resignation of board members Peter Fuss and
Mark Brodsky. "ISC appreciates the service of these talented and productive
members of the board," commented Mr. Laves. "We extend our sincere thanks to
them for their contributions to the growth of the company." With these
resignations, the size of ISC's board of directors has been reduced from seven
to five directors. The Company also announced that its annual meeting of
stockholders will be held on Wednesday, June 9, 1999, with a record date of
April 14, 1999.
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ILLINOIS SUPERCONDUCTOR CORP.
Fourth Quarter and Full-Year 1998 Results
March 31, 1999
PAGE-4-
Illinois Superconductor Corporation is a leader in the commercialization of
high temperature superconducting technology for the wireless telecommunications
industry. The Company develops, manufactures and markets radio frequency (RF)
products to enhance the quality and capacity of cellular telephone, personal
communications services and other wireless telecommunications services. More
information about Illinois Superconductor is available on the Company's internet
web site at http://www.ilsc.com.
Statements contained in this news release that are not historical facts are
forward-looking statements. Such forward-looking statements are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995 and reflect the Company's current expectations regarding the future results
of operations, performance and achievements of the Company. The Company has
tried, whenever possible, to identify these forward-looking statements by using
words such as "anticipates," "believes", "estimates," "expects," "plans,"
"intends" and similar expressions. These statements reflect the Company's
current beliefs and are based on information currently available to it.
Accordingly, these statements are subject to certain risks, uncertainties, and
contingencies which could cause the Company's actual results, performance or
achievements for 1999 and beyond to differ materially from those expressed in,
or implied by, such statements. These important factors include, without
limitation, the Company's ability to obtain additional financing in the near
future; the Company's history of net losses and the lack of assurance that the
Company's earnings will be sufficient to cover fixed charges in the future; the
degree to which the Company is leveraged and restrictions imposed on the Company
under its existing debt instruments which may adversely affect the Company's
ability to finance its future operations, to compete effectively against better
capitalized competitors and to withstand downturns in its business or the
economy generally; the Company's current inability to satisfy the minimum
maintenance requirements for the continued listing of its shares of common stock
for trading on the Nasdaq National Market, which may have a material adverse
effect on the liquidity of the Company's common stock and the Company's ability
to obtain additional funding as needed if such shares are delisted; continued
downward pressure on the prices charged for the Company's products due to
competition of rival manufacturers of filters for the wireless
telecommunications market; the timing and receipt of customer orders; the
Company's ability to attract and retain key personnel; and the effects of legal
proceedings. A more complete description of these risks, uncertainties and
assumptions are included in the Company's filings with the Securities and
Exchange Commission, including those described under the heading "Risk Factors"
in the Company's Annual Report on Form 10-K for the year ended December 31,
1998. The Company undertakes no obligation to update or revise these
forward-looking statements to reflect new events or uncertainties.
(TABLE TO FOLLOW)
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ILLINOIS SUPERCONDUCTOR CORP.
Fourth Quarter and Full-Year 1998 Results
March 31, 1999
PAGE-5-
ILLINOIS SUPERCONDUCTOR CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Net revenues $ 1,504,497 $ 282,384 $ 3,242,930 $ 1,038,134
Costs and expenses:
Cost of revenues 3,582,277 1,329,649 7,047,347 4,401,077
Research and development 953,086 748,212 2,934,784 4,132,019
Selling and marketing 599,407 408,937 1,847,680 1,918,044
General and administrative 1,031,968 583,913 3,370,058 2,772,274
------------ ------------ ------------- -------------
Total costs and expenses 6,166,738 3,070,711 15,199,869 13,223,414
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Operating loss (4,662,241) (2,788,327) (11,956,939) (12,185,280)
Other income (expense):
Investment income 163,017 67,309 354,738 254,781
Noncash interest expense on Senior
Convertible Notes (5,405,708) - (10,101,401) -
Other interest expense (79,068) (4,364) (146,518) (17,969)
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(5,321,759) 62,945 (9,893,181) 236,812
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Net loss $(9,984,000) $(2,725,382) $(21,850,120) $(11,948,468)
============ ============ ============= =============
Preferred Stock dividends - (87,677) (61,834) (143,302)
Net loss plus Preferred Stock dividends $(9,984,000) $(2,813,059) $(21,911,954) $(12,091,770)
============ ============ ============= =============
Basic and diluted loss per common share $ (0.80) $ (0.52) $ (1.93) $ (2.34)
============ ============ ============= =============
Weighted average number of
common shares outstanding 12,557,344 5,414,482 11,345,540 5,156,663
============ ============ ============= =============
</TABLE>
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