<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal quarter ended: December 31, 1996 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: 0-25012
CENSTOR CORP.
(Exact name of registrant as specified in its charter)
California 94-2775712
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2105 Hamilton Ave., #270
San Jose, California 95125
(address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (408) 298-8400
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 No X
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT DECEMBER 31, 1996
Common Stock - no par value 9,303,344
-1-
<PAGE> 2
CENSTOR CORP.
INDEX
<TABLE>
<CAPTION>
Page No.
---------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements:
Condensed Consolidated Balance Sheets
June 30, 1996 and December 31, 1996 (unaudited) 3
Condensed Consolidated Statements of Operations (unaudited)
three and six months ended December 31, 1995 and 1996 4
Condensed Consolidated Statements of Cash Flows (unaudited)
six months ended December 31, 1995 and 1996 5
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 13
</TABLE>
-2-
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENSTOR CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1996 1996
------------- -------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $199,998 $94,713
Receivables 14,336 2,251,232
Prepaid expenses and other current assets 111,135 35,046
Property and equipment held for sale 911,055 --
------------- -------------
Total current assets 1,236,524 2,380,991
Property and equipment, net 11,823 9,045
Restricted cash 94,450 --
Deposits and other assets 138,970 4,250
------------- -------------
Total assets $1,481,767 $2,394,286
============= =============
LIABILITIES AND NET CAPITAL DEFICIENCY
Current liabilities:
Notes payable $6,450,000 $ --
Accounts payable 974,889 298,383
Notes payable to related parties 1,000,000 453,325
Accrued payroll and related expenses 232,278 113,317
Deferred revenue -- 3,083,333
Other current liabilities 378,257 72,680
Obligations under capital leases 607,843 --
------------- -------------
Total current liabilities 9,643,267 4,021,038
Long-term obligations:
Deferred revenue -- 6,000,001
Subordinated debentures 14,488,311 --
Restructured debt obligation -- 12,679,377
Net capital deficiency:
Preferred stock 32,509,031 32,509,031
Common stock 50,508,593 50,508,593
Warrants to purchase shares of preferred stock 253,050 253,050
Capital surplus 2,263,708 2,263,708
Accumulated deficit (107,906,450) (105,562,769)
------------- -------------
(22,372,068) (20,028,387)
Notes receivable from shareholders (277,743) (277,743)
------------- -------------
Net capital deficiency (22,649,811) (20,306,130)
------------- -------------
Total liabilities and net capital deficiency $1,481,767 $2,394,286
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE> 4
CENSTOR CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
---------------------------- ----------------------------
1995 1996 1995 1996
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues - license fees $1,127,190 $1,083,333 $2,466,772 $1,921,666
Costs and expenses:
Research and development 3,100,041 -- 5,860,862 --
Selling, general, and administrative 506,941 467,114 1,097,109 1,017,242
----------- ---------- ----------- -----------
Total expenses 3,606,982 467,114 6,957,971 1,017,242
----------- ---------- ----------- -----------
Operating income (loss) (2,479,792) 616,219 (4,491,199) 904,424
Interest and other expenses, net 271,267 8,101 365,735 (1,489,257)
Minority interest in loss of subsidiary (17,612) -- (194,642) --
----------- ---------- ----------- -----------
Income (loss) before income taxes (2,733,447) 608,118 (4,662,292) 2,393,681
Income tax expense (benefit) 110,000 (550,000) 246,117 50,000
----------- ---------- ----------- -----------
Net income (loss) ($2,843,447) $1,158,118 ($4,908,409) $2,343,681
=========== ========== =========== ===========
Net income (loss) per share ($0.31) $0.05 ($0.53) $0.10
=========== ========== =========== ===========
Weighted average number of shares used in
computing per share amounts (in thousands) 9,301 24,291 9,301 24,291
=========== ========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-4-
<PAGE> 5
CENSTOR CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
----------------------------
1995 1996
----------- -----------
<S> <C> <C>
Operating activities:
Net income (loss) ($4,908,409) $2,343,681
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 729,955 15,266
Gain on sale of fixed assets (169,314) --
Gain on transfer of research and development operation -- (1,596,706)
Interest on subordinated debentures 405,329 191,066
Loss applicable to minority interest (194,642) --
Changes in assets and liabilities:
Receivables (12,013) (2,236,896)
Prepaid expenses and other current assets 91,217 76,089
Accounts payable 273,917 (676,506)
Accrued payroll and related expenses (291,957) (118,961)
Deferred revenue (1,329,166) 6,083,334
Other current liabilities 256,569 (305,577)
----------- -----------
(240,105) 1,431,109
----------- -----------
Net cash provided by (used in) operating activities (5,148,514) 3,774,790
Investing activities:
Additions to property and equipment (136,758) --
Deposits and other assets -- 122,220
Proceeds from sale of fixed assets and transfer of assembled workforce 550,050 1,025,000
----------- -----------
Net cash provided by investing activities 413,292 1,147,220
----------- -----------
Financing activities:
Proceeds from issuance of short-term debt 4,000,000 350,000
Principal payments of short- and long-term debt -- (5,447,920)
Principal payments under capital leases (737,706) (23,825)
Release of certificate of deposit in connection with leases -- 94,450
Sale of preferred stock of subsidiary 540,000 --
Sale of common stock 100 --
----------- -----------
Net cash provided by (used in) financing activities 3,802,394 (5,027,295)
----------- -----------
Net decrease in cash and cash equivalents (932,828) (105,285)
Cash and cash equivalents at beginning of period 1,368,891 199,998
----------- -----------
Cash and cash equivalents at end of period $436,063 $94,713
=========== ===========
Supplemental disclosure of noncash financing activities:
Equipment purchased under capital leases $24,851 $ --
Conversion of note payable to license -- $3,000,000
Assignment of leases in connection with sale of assets -- $584,018
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-5-
<PAGE> 6
CENSTOR CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 1996
NOTE 1 -- BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements
have been prepared by Censtor Corp. ("Censtor" or the "Company") in accordance
with generally accepted accounting principles for interim financial
information, and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for annual
consolidated financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for the six
months ended December 31, 1996 are not necessarily indicative of the results
that may be expected for the full year ended June 30, 1997. The financial
information presented herein should be read in conjunction with the Company's
audited consolidated financial statements and notes thereto for the year ended
June 30, 1996 included in the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission (as amended).
NOTE 2 -- NET INCOME (LOSS) PER SHARE:
Net income per share is computed based upon the weighted average
number of shares outstanding of the Company's common stock and convertible
preferred stock on an if-converted basis, and dilutive common stock equivalents
from the exercise of stock options and warrants (using the treasury stock
method). Common stock equivalents from stock options and warrants are excluded
from the computation if their effect is antidilutive. The Company's common
stock equivalent shares were antidilutive for the three and six month periods
ended December 31, 1996 and accordingly, were not included in the weighted
average number of shares.
Net loss per share is computed based on the weighted average number of
shares of the Company's common stock. The Company's common stock equivalent
shares from convertible preferred stock and from stock options and warrants
were antidilutive for the three and six month periods ended December 31, 1995
and, accordingly, were not included in the weighted average number of shares.
NOTE 3 -- INCOME TAXES:
The Company has recorded a benefit income tax provision of $550,000
for the quarter ended December 31, 1996. The benefit provision for the quarter
ended December 31, 1996 reflects a revision to the Company's estimate of its
potential alternative minimum tax liability on earnings for the six months
ended December 31, 1996. In the three and six months ended December 31, 1995,
the Company recorded a tax provision of $110,000 and $246,000, respectively,
relating to the 10% Japanese withholding tax on the sale of licenses.
NOTE 4 -- THE READ-RITE TRANSACTION:
On March 29, 1996, the Company entered into an agreement (the
"Agreement") with Read-Rite Corporation ("Read-Rite"), a large manufacturer of
components for disk drives, that provided for the transfer to Read-Rite of the
Company's research and development operations, including the hiring of 84 of
its employees, and the sale of certain of the Company's physical assets and
rights and obligations under contracts related thereto (the "Read-Rite
Transaction"). The Agreement was approved by Censtor's shareholders on July 11,
1996 and the Read-Rite Transaction closed on July 18, 1996 (the "Closing").
Additionally, on the Closing of the Read-Rite Transaction, the Company
granted a non-exclusive irrevocable world-wide license to Read-Rite covering
the Company's intellectual property, including the Company's rights in patents,
technology and software.
-6-
<PAGE> 7
Gross proceeds to the Company in connection with the Read-Rite
Transaction are approximately $9.0 million subject to certain adjustments under
the agreement, $6.5 million of which was received on the Closing, $250,000 of
which was received in November 1996, and another $250,000 of which was received
in January 1997, with the balance receivable in installments from March through
April 18, 1997, subject to certain conditions. The gross proceeds were reduced
by approximately $1.9 million, related to partial repayment of the outstanding
balance on certain notes payable to Read-Rite. The remaining balance on the
notes payable of approximately $900,000 was forgiven (see Note 6).
Of the total proceeds, $8.0 million was in consideration for the grant
of the license and $1.0 million for the sale of assets and transfer of the
assembled workforce. The Company recognized a gain of approximately $700,000
in connection with the sale of assets and the transfer of the assembled
workforce.
Of the net proceeds from the Read-Rite Transaction, the Company used
approximately $3.6 million to pay down obligations that were due as of the
Closing, including a $2.0 million payment to partially repay outstanding
accrued interest on certain subordinated debentures (see Note 7), $1.0 million
to repay the Company's line of credit, and $598,000, including accrued
interest, to partially repay certain convertible promissory notes (see Note 6)
from investors. The remainder of the proceeds will be used for general working
capital purposes with respect to the Company's ongoing licensing operations.
The Company has granted to Read-Rite a security interest in its
intellectual property to secure certain obligations and warranties with respect
to the intellectual property for a period of six years following the effective
date of the Agreement. After the third year following the effective date of
the Agreement, Censtor may terminate the security interest by depositing $4.0
million in an escrow account. Such amount is reduced by $1.0 million in each
of the two succeeding years, and the escrow terminates the following year.
The Company believes that all of the license fee payable by Read-Rite
may not be realized due to amounts that will have to be paid out of an escrow
fund or amounts that will have to be paid prior to the establishment of such
escrow. Accordingly, the Company is recognizing $4.0 million of such license
fee ratably over the first three years following the Closing of the Read-Rite
Transaction, which approximates the time period during which the Company
expects to be incurring costs to maintain its patents in support of the
Company's license agreement with Read-Rite. Subsequently, amounts will be
recognized as the escrow fund described above is reduced.
NOTE 5 -- LICENSE ARRANGEMENTS:
In August 1996, a promissory note issued to a potential licensee by a
subsidiary of the Company was assigned to Censtor and converted to a
world-wide, non-exclusive license.
NOTE 6 -- BRIDGE LOANS:
In January 1996, several of the existing investors of Censtor loaned
the Company $1.0 million in exchange for promissory notes convertible into
shares of the next security issued by the Company. The Company repaid
approximately $598,000, including accrued interest of $51,000 out of the
proceeds from the Closing of the Read-Rite Transaction, and the due date of the
balance of such notes was extended until nine months after the Closing.
Between February and July 1996, the Company obtained bridge loans
totalling $2.8 million from Read-Rite as part of negotiations in connection
with the Read-Rite Transaction. These bridge loans were used to pay the
operating expenses of the Company until the Closing. Accordingly, on the
Closing, the Company received a net amount of $4.6 million from Read-Rite out
of the $6.5 million first installment payable by Read-Rite in connection with
the Read-Rite Transaction.
-7-
<PAGE> 8
NOTE 7 -- SUBORDINATED DEBENTURES:
On February 22, 1996, certain subordinated debentures issued by the
Company were modified such that the Company was obligated to pay $2.0 million
against the outstanding accrued interest on such debentures by July 31, 1996.
This amount was paid upon the Closing of the Read-Rite Transaction.
Furthermore, the debenture holder agreed, if certain financial conditions were
not met, to forgive the remaining outstanding principal and accrued interest on
September 30, 1996 in return for 5% of any royalties Censtor receives from its
present and future licenses through the year 2001. The Company did not meet the
financial conditions and consequently, the outstanding interest and principal
of $12.7 million was forgiven. The future cash payments related to the royalty
payments now owed to such former debenture holder are currently indeterminate
and may exceed the carrying value of the debentures prior to the debt being
forgiven. Therefore, the Company has deferred recognition of any gain as a
result of the debt being forgiven until such time as the future cash payments
become estimable.
NOTE 8 -- STOCK OPTION REPRICING:
On October 3, 1996, the Company adjusted the exercise price of certain
stock options granted to employees and consultants of the Company to purchase
an aggregate of 1,473,408 shares of the Company's common stock to $0.046 per
share, the fair market value on such date as determined by the Company's Board
of Directors and an independent consultant.
-8-
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following contains projections or other forward-looking statements
regarding future events or the future financial performance of Censtor Corp.
("Censtor" of the "Company"), including statements related to Censtor's 1997
operating plans, receipt of payments from Read-Rite Corporation ("Read-Rite"),
sale of licenses by the Company and future Censtor operating expenses and cash
flows. Actual events or results may differ materially as a result of risks and
uncertainties, including those set forth in documents the Company files from
time to time with the Securities and Exchange Commission, including the
Company's last filed Form 10-K and Form 10-Q, each as amended.
In the following discussion and analysis, forward-looking statements
are made in the Overview, Liquidity and Capital Resources, and Results of
Operations sections.
OVERVIEW
The Company was formed in 1981 to develop perpendicular recording
technology and to manufacture head and disk components for disk drives. The
Company subsequently shifted the focus of its development efforts from
perpendicular to longitudinal contact recording technology. To date, the
Company's principal source of revenue has been license fees from disk drive
manufacturers. While the Company's license agreements typically provide for
on-going royalty payments by licensees based upon sales of products
incorporating the Company's technology, to date none of the Company's licensees
has commercialized products using the Company's technology and the Company has
received no recurring royalty revenue. Until the first quarter of fiscal 1997,
the Company had not been profitable in any fiscal period since inception, and
as of December 31, 1996 Censtor had an accumulated deficit of $105.6 million.
There can be no assurance that the Company will be able to sustain its recent
profitability or achieve or sustain significant revenues or profitability in
the future.
On March 29, 1996, the Company entered into an agreement with
Read-Rite Corporation, a large manufacturer of components for disk drives, that
provided for the transfer to Read-Rite of the Company's research and
development operations, including the hiring of 84 of its employees, and the
sale to Read-Rite of certain of the Company's physical assets and rights and
obligations under contracts related thereto (the "Read-Rite Transaction"). The
agreement was approved by Censtor's shareholders on July 11, 1996 and the
Read-Rite Transaction closed on July 18, 1996 (the "Closing").
Censtor's operating plans for fiscal 1997 focus on the perfection of
the Company's patent protection and other proprietary rights and the possible
exploitation of such rights through licenses or other strategic transactions
with disk drive manufacturers and other related companies. The Company expects
to finance these operations through payments from Read-Rite in connection with
the Read-Rite Transaction and possibly through sales of additional licenses.
The Company will not be able to sustain its operations beyond 1997 without the
sale of such additional licenses or other cash-generating activity.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily
through private placements of its equity and debt securities and, to a lesser
extent, through licensing and research and development agreements.
During the six months ended December 31, 1996, the Company used net
cash from financing activities of $5.0 million, primarily to repay $5.4 million
of debt. In comparison, in the six months ended December 31, 1995, Censtor
generated net cash from financing activities of $3.8 million, primarily through
the receipt of $4.0 million on two notes payable and the sale of stock in a
subsidiary of the Company for $540,000, offset by payments on capital leases.
During the six months ended December 31, 1996, the Company generated cash in
its operations of $3.8 million primarily from the receipt of $5.8 million of
the license fee from Read-Rite, a significant
-9-
<PAGE> 10
portion of which was recorded as deferred revenue, offset by operating expenses
and changes in operating net assets. The Company used cash of $5.1 million in
operations in the six months ended December 31, 1995. The Company generated
cash from investing activities of $1.1 million for the six months ended
December 31, 1996 primarily from the Read-Rite Transaction and generated
$413,000 for the six months ended December 31, 1995 primarily from the sale of
fixed assets.
As of December 31, 1996, the Company had negative working capital of
approximately $1.6 million. The Company expects to maintain its current
expense rate at approximately its current level for the forseeable future as,
in the Read-Rite Transaction, Read-Rite acquired the majority of Censtor's
tangible assets and related lease liabilities and hired all but five of
Censtor's employees effective February 5, 1996, reducing Censtor's quarterly
spending to its current level.
On February 22, 1996, certain subordinated debentures issued by the
Company were modified such that the Company was obligated to pay $2.0 million
against the outstanding accrued interest on such debentures by July 31, 1996.
This amount was paid upon the Closing of the Read-Rite Transaction.
Furthermore, the debenture holder agreed, if certain financial conditions were
not met, to forgive the remaining outstanding principal and accrued interest on
such debentures on September 30, 1996 in return for 5% of any royalties Censtor
receives from its present and future licenses through the year 2001. The
Company did not meet the financial conditions and consequently the outstanding
interest and principal of $12.7 million was forgiven. The future cash payments
related to royalty payments now owed to such former debenture holder are
currently indeterminate and may exceed the carrying value of the debentures
prior to the debt being forgiven. Therefore, the Company has deferred
recognition of any gain as a result of the debt being forgiven until such time
as the future cash payments become estimable.
The Company's ability to fund its cash requirements through fiscal
1997 depends largely upon its success in collecting the remaining $2.0 million
to be paid by Read-Rite in connection with the Read-Rite Transaction. The
payment of this amount is subject to certain conditions, and is subject to
reduction for any claims by Read-Rite for damages in the event the Company
breaches or has breached the Asset Sale Agreement or License Agreement entered
into by the Company in connection with the Read-Rite Transaction, although the
Company is not currently aware of any such claims at the present time. The
Company also continues to seek new licensees, but there can be no assurance
that the Company can enter into a new license agreement in fiscal 1997 or at
any subsequent time and any such failure would have a material adverse effect
on the Company's business, financial condition and results of operations.
The Company's commitments for cash payments in fiscal year 1997 are
primarily for operating expenses, which are expected to decrease, in the
aggregate, as compared to operating expenses incurred during fiscal 1996, due
to the Company's reduction in size and scope of operations in connection with
the Read-Rite Transaction. If the Company is successful in collecting a
significant portion of the remaining fee due from Read-Rite, which it
anticipates doing, it believes that it will be able to finance its operations
through the first quarter of fiscal 1998. There can be no assurance, however,
that the Company will be successful in this endeavor or that the amount
actually collected will be adequate to fund the Company's operations.
RESULTS OF OPERATIONS
Revenues
-10-
<PAGE> 11
The Company's major revenue source has been fees from the sale of
license agreements with disk drive manufacturers. License fees are generally
recognized over the estimated period in which the Company expects to provide
support in connection with the license. All deferred revenue pertaining to
existing licenses sold to disk drive manufacturers was recognized as revenue in
fiscal 1996 since the Company can no longer provide technical support to its
licensees as a result of the Read-Rite Transaction.
Accordingly, revenues for both the quarter and the six months ended
December 31, 1996, $1.1 million and $1.9 million respectively, relate to the
recognition of deferred revenues associated with certain licenses to Read-Rite
and to Western Digital Corp. ("WD") entered into during the first quarter of
fiscal 1997. The Company is recognizing $4.0 million of the Read-Rite license
fee ratably over the first three years following the Closing of the Read-Rite
Transaction, which approximates the time period during which the Company
expects to be incurring costs to maintain its patents in support of its license
agreement with Read-Rite. Subsequently, the remaining $4.0 million will be
recognized over three years in line with the reduction of the amount the
Company may deposit in an escrow account to terminate a security interest
granted in connection with the Read-Rite Transaction. The Company is
recognizing the WD license fee over 12 months as the Company is contractually
obligated to maintain, until July 31, 1997, a patent prosecution effort
sufficient to maximize the value of Censtor's patent portfolio. The $1.1
million and $2.5 million in recognized revenue for the quarter and six months
ended December 31, 1995 respectively, were derived primarily from a license
agreement with Hitachi, Ltd. which was entered into in December 1994 and a
license with NEC Corporation that was entered into in August 1995.
Research and Development
The Company incurred no research and development expenditures for the
quarter or six months ended December 31, 1996, due to Read-Rite's hiring of all
the Company's engineering personnel on February 5, 1996 and subsequent
acquisition of the Company's research and development operations. In the
future, as a result of the Read-Rite Transaction, the Company expects no
material research and development expense. Research and development expense
for the three and six months periods ending December 31, 1995 were $3.1 million
and $5.9 million respectively.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased from $507,000
for the quarter and $1.1 million for the six months ended December 31, 1995 to
$467,000 in the quarter and $1.0 million in the six months ended December 31,
1996. This decrease was largely the result of lower headcount and reduced
expenses associated with Company's smaller scope of operations following the
Read-Rite Transaction.
Interest and Other Expenses, Net
Interest and other expense, net for the quarter ended December 31,
1996 was $8,000 as compared to $271,000 for the quarter ended December 31,
1995. This decrease was caused by the Company's substantial reduction of
indebtedness in connection with and following the Read-Rite Transaction.
Interest and other expense, net, for the six months ended December 31, 1996
includes a gain of $1.6 million relating to the Read-Rite Transaction, of which
$899,000 relates to the forgiveness of certain promissory notes and $698,000
relates to the gain on sale of fixed assets and the transfer of the Company's
workforce, and the recognition of a deferred gain of $250,000 related to the
sale of fixed assets not connected with the Read-Rite Transaction. Interest
and other expenses net for the quarter ended December 31, 1995 was $271,000.
Interest and other expense net for the six months ended December 31, 1995 was
$366,000 and includes a gain of $170,000 on the sale of fixed assets.
Income Taxes
The Company has recorded a benefit income tax provision of $550,000 for
the quarter ended December 31, 1996, resulting in an income tax provision of
$50,000 for the six months ended December 31, 1996. The benefit provision for
the quarter ended December 31, 1996 reflects a revision to the Company's
estimate of its potential alternative minimum tax liability on earnings for
the six months ended December 31, 1996. In the quarter and six months ended
December 31, 1995, the Company recorded a
-11-
<PAGE> 12
tax provision of $110,000 and $246,000, respectively, relating to the 10%
Japanese withholding tax on the sale of certain licenses in December 1994 and
August 1995.
-12-
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
EXHIBIT 27.1 Financial Data Schedule
(b) Reports on Form 8-K.
No report on Form 8-K were filed by the Company during the
quarter ended December 31, 1996.
-13-
<PAGE> 14
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.
CENSTOR CORP.
Registrant
BY: /s/ RUSSELL M. KRAPF
---------------------------------
Russell M. Krapf
President
Chief Executive Officer
Dated: February 13, 1997
-14-
<PAGE> 15
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.
CENSTOR CORP.
Registrant
BY: /s/ RUSSELL M. KRAPF
---------------------------------
Russell M. Krapf
President
Chief Executive Officer
Dated: February 13, 1997
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 94,713
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,380,991
<PP&E> 45,703
<DEPRECIATION> (36,658)
<TOTAL-ASSETS> 2,394,286
<CURRENT-LIABILITIES> 4,021,038
<BONDS> 0
0
32,509,031
<COMMON> 50,508,593
<OTHER-SE> (103,323,754)
<TOTAL-LIABILITY-AND-EQUITY> 2,394,286
<SALES> 0
<TOTAL-REVENUES> 1,921,666
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,017,242
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,489,257)
<INCOME-PRETAX> 2,393,681
<INCOME-TAX> 50,000
<INCOME-CONTINUING> 2,343,681
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,343,681
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
