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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: March 31, 1998
Commission File Number: 0-22303
ILLINOIS SUPERCONDUCTOR CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-3688459
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
451 KINGSTON COURT, MOUNT PROSPECT, IL 60056
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (847) 391-9400
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
--- ---
As of May 13, 1998 there were outstanding 12,556,773 shares of common
stock, par value $.001, of the registrant.
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ILLINOIS SUPERCONDUCTOR CORPORATION
QUARTER ENDED MARCH 31, 1998
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of March 31, 1998 (unaudited) and December 31, 1997 ........................ 3
Condensed Statements Of Operations (unaudited) for the three months ended March 31, 1998
and 1997............................................................................................. 4
Condensed Statements Of Cash Flows (unaudited) for the three months ended March 31, 1998
and 1997............................................................................................. 5
Notes To Condensed Financial Statements ................................................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .............................................................................. 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk ......................................... 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings .................................................................................. 10
Item 2. Changes in Securities and Use of Proceeds .......................................................... 12
Item 3. Default Upon Senior Securities ..................................................................... 12
Item 4. Submission of Matters to a Vote of Security Holders ................................................ 12
Item 5. Other Information .................................................................................. 12
Item 6. Exhibits and Reports on Form 8-K ................................................................... 12
SIGNATURES .................................................................................................. 13
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ILLINOIS SUPERCONDUCTOR CORPORATION
CONDENSED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
MARCH 31, DECEMBER 31,
1998 1997
------------- -------------
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents $ 338,778 $ 2,766,886
Investments 500,313 500,313
Inventories 1,555,127 1,726,141
Accounts receivable, net 953,947 586,501
Prepaid expenses and other 290,828 471,928
------------- -------------
Total current assets 3,638,993 6,051,769
Property and equipment, net 4,306,126 4,523,054
Other assets:
Restricted certificates of deposit 380,000 380,000
Patents and trademarks, net 594,413 579,486
------------- -------------
974,413 959,486
------------- -------------
Total assets $ 8,919,532 $ 11,534,309
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 574,884 $ 717,425
Accrued liabilities 313,526 587,285
Current portion of long-term debt 65,389 78,077
------------- -------------
Total current liabilities 953,799 1,382,787
Long term debt, less current portion 5,028 13,541
Deferred occupancy costs 91,362 91,412
Stockholders' equity:
Series B Convertible Preferred Stock at liquidation value; 0 and 95 shares issued and
outstanding at March 31, 1998 and December 31, 1997, respectively --- 488,534
Series C Convertible Preferred Stock at liquidation value; 105 and 600 shares issued and
outstanding at March 31, 1998 and December 31, 1997, respectively 536,916 3,038,424
Series G Convertible Preferred Stock at liquidation value; 52 and 700 shares issued and
outstanding at March 31, 1998 and December 31, 1997, respectively 265,490 3,530,206
Common stock ($.001 par value); 15,000,000 shares authorized and 11,801,774 and
6,001,925 issued and outstanding at March 31, 1998 and December 31, 1997, respectively 11,802 6,002
Additional paid-in capital 48,208,361 41,991,941
Notes receivable from stockholders (698,508) (698,508)
Accumulated deficit (40,454,718) (38,310,030)
------------- -------------
Total stockholders' equity 7,869,343 10,046,569
------------- -------------
Total liabilities and stockholders' equity $ 8,919,532 $ 11,534,309
============= =============
NOTE: The condensed balance sheet at December 31, 1997 has been derived from
the audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See Accompanying Notes to Condensed Financial Statements
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ILLINOIS SUPERCONDUCTOR CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------------------------
1998 1997
------------ ------------
Net Revenues $ 697,169 $ 450,000
Costs and expenses:
Cost of revenues 1,045,197 1,175,757
Research and development 751,040 1,264,534
Selling and marketing 367,754 566,502
General and administrative 681,217 658,559
------------ ------------
Total costs and expenses 2,845,208 3,665,352
------------ ------------
Operating income (loss) (2,148,039) (3,215,352)
Other income (expense):
Investment income 7,382 83,014
Interest expense (4,033) (6,428)
------------ ------------
3,349 76,586
------------ ------------
Net loss $(2,144,690) $(3,138,766)
============ ============
Preferred Stock dividends (61,740) -
------------ ------------
Net loss plus Preferred Stock dividends $(2,206,430) $(3,138,766)
============ ============
Basic and diluted loss per common share $(0.29) $(0.62)
============ ============
Weighted average number of common
shares outstanding 7,714,379 5,023,510
============ ============
See Accompanying Notes to Condensed Financial Statements
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ILLINOIS SUPERCONDUCTOR CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-----------------------------
1998 1997
----------- -----------
OPERATING ACTIVITIES:
Net loss $(2,144,690) $(3,138,766)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 233,831 357,245
Payment of patent costs (17,387) (14,101)
Changes in operating assets and liabilities (431,681) 90,884
----------- -----------
Net cash used in operating activities (2,359,927) (2,704,738)
INVESTING ACTIVITIES:
Acquisitions of property and equipment (14,443) (28,372)
----------- -----------
Net cash used in investing activities (14,443) (28,372)
FINANCING ACTIVITIES:
Net proceeds from issuance of preferred stock (39,896) -
Net proceeds from issuance of common stock - (8,537)
Exercise of stock options 7,359 14,941
Collection of notes receivable from stockholders - 426,433
Payments on long-term debt (21,201) (19,497)
----------- -----------
Net cash provided by (used in) financing activities (53,738) 413,340
----------- -----------
Decrease in cash and cash equivalents (2,428,108) (2,319,770)
Cash and cash equivalents at beginning of period 2,766,886 5,188,047
----------- -----------
Cash and cash equivalents at end of period $ 338,778 $ 2,868,277
=========== ===========
See Accompanying Notes to Condensed Financial Statements
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ILLINOIS SUPERCONDUCTOR CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three months
ended March 31, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. For further information, refer
to the financial statements and footnotes thereto included in Illinois
Superconductor Corporation's annual report on Form 10-K for the year ended
December 31, 1997.
NOTE 2 - NET LOSS PER COMMON SHARE
In 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which replaced the calculation for primary and fully
diluted earnings per share with basic and diluted earnings per share. Basic
and diluted net loss per common share is computed based on the weighted average
number of common shares outstanding. Common shares issuable upon the exercise
of options and warrants are not included in the per share calculations since
the effect of their inclusion would be antidilutive. All the earnings per
share amounts for all periods have been presented and, where appropriate,
restated to conform to the Statement 128 requirements.
NOTE 3 - COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Financial Accounting Standards
Board's Statement No. 130, Reporting Comprehensive Income. Statement 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of this Statement had no impact on the
Company's net income or stockholders' equity.
During the first quarter of 1998 and 1997, total comprehensive income
(loss) amounted to $(2,144,690) and $(3,138,766), respectively.
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NOTE 4 - CAPITAL STOCK
Through March 31, 1998, $3,000,000 (600 shares) of Series B Convertible
Preferred Stock were converted into 1,072,663 shares of Common Stock. Accrued
dividends of $74,932 were also converted into 27,800 shares of Common Stock.
Through March 31, 1998, $2,475,000 (495 shares) of Series C Convertible
Preferred Stock were converted into 2,133,331 shares of Common Stock. Accrued
dividends of $50,885 were also converted into 43,797 shares of Common Stock.
Through March 31, 1998, $3,240,000 (648 shares) of Series G Convertible
Preferred Stock were converted into 3,248,447 shares of Common Stock. Accrued
dividends of $61,913 were also converted into 62,075 shares of Common Stock.
Subsequent to March 31, 1998, $525,000 (105 shares) of Series C
Convertible Preferred Stock have been converted into 477,968 shares of Common
Stock. Accrued dividends of $11,916 have also been converted into 10,849
shares of Common Stock. Also subsequent to March 31, 1998, $260,000 (52
shares) of Series G Convertible Preferred Stock have been converted into
260,678 shares of Common Stock. Accrued dividends of $5,490 have also been
converted into 5,504 shares of Common Stock. Currently, no shares of Series B,
Series C or Series G Convertible Preferred Stock remain outstanding.
NOTE 5 - INVENTORIES
Inventories at March 31, 1998 consisted of the following:
Raw materials.......................... $ 893,612
Work in process........................ 311,681
Finished product....................... 349,834
----------
Total Inventory........................ $1,555,127
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Because ILLINOIS SUPERCONDUCTOR ("the Company") wants to provide
investors with more meaningful and useful information, this Quarterly Report
on Form 10-Q contains certain "forward-looking statements"(as such term is
defined in Section 21E of the Securities and Exchange Act of 1934, as amended)
that reflect the Company's current expectations regarding the future results
of operations, performance and achievements of the Company. Such forward-
looking statements are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The Company has tried,
wherever 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 1998 and beyond to differ materially from those expressed
in, or implied by, such statements. These important factors include, without
limitation, demand for, and acceptance of, the Company's products; the
Company's ability to manufacture commercial quantities of the Company's
products on an efficient and cost-effective basis; competition by rival
manufacturers of filters for the wireless telecommunications market; the
Company's ability to obtain additional financing; changes in technology; the
Company's ability to attract and retain, key personnel; costs and other
effects of legal proceedings and claims; general business conditions of, and
growth in, the wireless telephony industry; and general economic conditions.
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
Registration Statement on Form S-3 filed in December 1997. The Company
undertakes no obligation to update or revise these forward-looking statements
to reflect new events or uncertainties.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company was founded in 1989 by ARCH Development Corporation, an
affiliate of the University of Chicago, to commercialize superconducting
technologies primarily for the wireless telecommunications industry. The
Company uses its patented and proprietary high temperature superconducting
("HTS") materials technologies to develop and manufacture radio frequency
("RF") front-end products which are designed to enhance the quality, capacity,
coverage, and flexibility of cellular, personal communications services
("PCS"), and other wireless telephony services.
The Company began commercial sales of its RF filter products in 1996.
All product revenues during the first quarters of 1998 and 1997 were from
commercial sales of the Company's RF front-end products. The Company expects
sales of its RF front-end products to continue to increase during 1998 from
1997 levels.
RESULTS OF OPERATIONS
The Company's net revenues increased $247,169, or 54.9%, from $450,000
for the three months ended March 31, 1997, to $697,169 for the three months
ended March 31, 1998, as a result of increased sales of the Company's RF
front-end products. Net revenues from product sales during the 1998 period
represented gross product shipments less a reserve for potential returns.
Such reserves are based on the Company's historical product return rates.
Cost of revenues decreased to $1,045,197 for the three months ended March
31, 1998, from $1,175,757 for the same period in 1997. Cost of revenues for
the three months ended March 31, 1998 consisted of direct materials, labor,
and overhead costs associated with the products shipped during the period,
plus approximately $200,000 of costs, consisting primarily of manufacturing
overhead costs which were incurred to produce units in ending finished goods
inventory in excess of net realizable value. The reduction in cost of
revenues was due to improvements in direct materials costs per unit, greater
labor efficiencies, and reduced manufacturing overhead costs. The Company
expects those improvements to continue during 1998. The Company, however,
expects the cost of revenues to exceed the revenues realized until it
manufactures and ships a more significant amount of its commercial products.
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The Company's net research and development expenses decreased 40.6% from
$1,264,534 for the period ended March 31, 1997, to $751,040 for the same
period in 1998. Research and development costs were reduced in the 1998
period due to a reduction in personnel, engineering material, and other
operating costs. The Company expects that its research and development
expenses during 1998 will continue to be reduced from 1997 levels.
Selling and marketing expenses decreased 35.1% from $566,502 for the
three months ended March 31, 1997, to $367,754 for the same period in 1998.
The decrease in expenses was due to reduced marketing personnel costs and
related expenses, reductions in field trial consulting services, and lower
advertising costs.
General and administrative expenses increased 3.4% from $658,559 for the
three months ended March 31,1997, to $681,217 for the same period in 1998.
The increase was primarily attributable to increased legal expenses, and was
partially offset by reduced financial services expense and personnel costs.
Investment income, net of interest expense, decreased to $3,349 for the
three months ended March 31, 1998 from $76,586 for the same period in 1997.
The decrease was primarily due to a reduced average investment portfolio
during the three months ended March 31, 1998 as compared to the same period in
1997.
IMPACT OF YEAR 2000
Based on a recent assessment, the Company has determined that it will
require very little modification to its software to comply with Year 2000
transition requirements. Most of the software used by the Company in
operational applications has been acquired within the past 18 months and such
software already addresses Year 2000 issues. The Company expects to complete
any other modifications that may be necessary by December 31, 1998, which is
prior to any anticipated impact to the Company's operating systems. The
Company realizes, however, that the failure by it or those with which it
transacts business to address the Year 2000 issue could adversely affect the
Company.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company's cash, cash equivalents and investments,
including certain restricted investments, were $1,219,000, reflecting a
decrease of $2,428,000 from $3,647,000 at December 31, 1997.
During 1995 and 1996, the Company financed a portion of its leasehold
improvements and capital equipment additions through various borrowings
approximating $743,000, of which $70,000 was outstanding at March 31, 1998.
This remaining balance is due in monthly installments through May 1999 and
bears interest at 8.5% per annum. Approximately $699,000 in principal amount
of promissory notes, plus approximately $105,000 of accrued interest thereon,
from certain stockholders was outstanding as of March 31, 1998. This
receivable was due on April 30, 1997. The Company has filed a lawsuit to
collect on the outstanding balance, but there can be no assurance when and if
such promissory notes will be repaid. (See "Part II - Item 1. Legal
Proceedings").
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The Company to date has generated limited revenues from product sales. The
continuing development of and expansion in sales of the Company's RF filter
product lines will require continued commitment of substantial funds to
undertake continued product development and manufacturing activities and to
market and sell its RF front-end products. The actual amount of the Company's
future funding requirements will depend on many factors, including: the amount
and timing of future revenues, the level of product marketing and sales efforts
to support the Company's commercialization plans, the magnitude of its research
and product development programs, the cost of additional plant and equipment
for manufacturing and the costs involved in protecting the Company's patents or
other intellectual property. As a result of these factors and the Company's
recent funding requirements, on May 15, 1998, the Company entered into a
Securities Purchase Agreement with a group of investors whereby the Company
issued $10.35 million of Senior Convertible Notes. In connection with the
Securities Purchase Agreement, the Company also issued warrants to purchase
4,140,000 shares of the Company's Common Stock.
Without consideration of any funds from ongoing sales of its products, or
proceeds from additional financings, the Company believes that its available
cash, cash equivalents and investments is sufficient to finance the Company's
current operating plans for at least the next twelve months. The Company will
continue to evaluate its needs for capital and may pursue additional sources of
capital it considers appropriate based upon Company requirements and market
conditions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - Not
Applicable
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On June 5, 1996, Craig M. Siegler filed a complaint against the Company
in the Circuit Court of Cook County, Illinois, County Department, Chancery
Division. The complaint alleged that, in connection with the Company's
private placement of securities in November 1995, the Company breached and
repudiated an oral contract with Mr. Siegler for the issuance and sale by the
Company to Mr. Siegler of 370,370.37 shares of Common Stock, plus warrants
(immediately exercisable at $12.96 per share) to purchase an additional
370,370.37 shares of the Common Stock, for a total price of $4,000,000. The
remedy sought by Mr. Siegler was a sale to him of such securities on the terms
of the November 1995 private placement. On August 16, 1996, the Company's
motion to dismiss Mr. Siegler's complaint was granted with leave to amend. On
September 19, 1996, Mr. Siegler's motion for reconsideration was denied.
On October 10, 1996, Mr. Siegler filed his First Amended Verified
Complaint and Jury Demand, seeking a jury trial and money damages equal to the
difference between $8,800,000 (370,370.37 shares at $10.80 per share and
370,370.37 shares at $12.96 per share) and 740,740.74 multiplied by the
highest price at which the Common Stock traded on The Nasdaq Stock Market
between November 20, 1995 and the date of judgment. Mr. Siegler also
preserved his claim for specific performance for purposes of appeal. On
November 1, 1996, the case was transferred to the Circuit Court of Cook
County, Illinois, County Department, Law Division. The Company's Answer was
filed on November 21, 1996 and the parties are in the midst of discovery.
The Company believes that the suit is without merit and intends to
continue to defend itself vigorously in this litigation. However, if Mr.
Siegler prevails in this litigation and is awarded damages in accordance with
the formula described above, such judgment would have a material adverse
effect on the Company's operating results and financial condition.
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On July 10, 1997, the Company filed a complaint against Sheldon Drobny;
Howard L. "Buzz" Simons, joint tenant with Aric and Corey Simons; Aaron
Fischer; Stewart Shiman; Sharon D. Gonsky, d/b/a SDG Associates; Gregg
Rosenberg; Stacey Rosenberg; Merrill Weber & Co., Inc.; Drobny/Fischer
Partnership, an Illinois general partnership; and Rueben Rosenberg
(collectively, the "Borrowers"), and Paradigm Venture Investors, L.L.C. (the
"Guarantor") in the Circuit Court of Cook County, Illinois, County Department,
Law Division. The complaint seeks to enforce the terms of loans made to the
Borrowers by the Company and evidenced by promissory notes dated December 12,
1996, in the aggregate principal amount of $698,508 and the guarantee by the
Guarantor of the Borrowers' obligations under these promissory notes. The
Borrowers' notes were issued to the Company in connection with the Borrowers'
exercise of warrants to purchase shares of the Company's common stock (the
"Common Stock") in December 1996.
On September 30, 1997, the Borrowers and the Guarantor responded to the
Company's complaint. Concurrently, the Borrowers filed a counterclaim
alleging that they exercised the warrants in reliance on the Company's alleged
fraudulent representations to certain of the Borrowers concerning a
third-party's future underwriting of a secondary public offering of the Common
Stock. The counterclaim sought an amount of damages which the Borrowers
allege "cannot currently be determined." On December 10, 1997, the Company's
motion to strike the Borrowers' fraud defense and dismiss their counterclaim
was granted with leave to amend.
On January 14, 1998, the Borrowers filed amended defenses and
counterclaims based on substantially similar allegations of supposed fraud by
the Company. The Company's answer was filed on April 30, 1998 and the parties
recently began discovery. The Company regards the amended fraud defense and
counterclaim as without factual or legal merit. The Company intends to
vigorously pursue recovery of the moneys owed by the Borrowers and the
Guarantor under the promissory notes and the guarantee.
On November 21, 1997, a stockholder, Sheldon Drobny, sued the Company and
seven of its former or current directors: Edward W. Laves, Leonard A.
Batterson, Paul G. Yovovich, Peter S. Fuss, Steven Lazarus, Tom L. Powers and
Ora E. Smith (collectively, the "Directors") in the Circuit Court of Cook
County, Illinois, County Department, Law Division. The complaint alleged that
the Directors breached their duties of loyalty and due care to Mr. Drobny by
selecting financing for the Company in June 1997 which supposedly entrenched
the Directors, eroded the Common Stock price and diluted Mr. Drobny's equity
in the Company. Mr. Drobny's complaint sought an unspecified amount of
compensatory damages in excess of $50,000.
The Company and the Directors regard the suit as without factual or legal
merit. Accordingly, on January 16, 1998, the Company and the Directors filed
a motion to dismiss Mr. Drobny's complaint. The motion presented arguments
that Mr. Drobny's claims are barred by the business judgment rule, Mr. Drobny
lacks standing to assert his claims against the Directors and the complaint
has various technical pleading defects. To date, Mr. Drobny has not responded
to the Company's and the Directors' motion to dismiss. Instead, Mr. Drobny
filed a motion seeking voluntary dismissal of his complaint on February 25,
1998. Mr. Drobny's motion alleges that he "wishes to become part of the class
action" filed by Mr. Lipman (as described below), "instead of prosecuting
[his] separate but parallel case." On March 11, 1998, and again on May 1,
1998, the court continued Mr. Drobny's motion for voluntary dismissal. A
further hearing on that motion has been schedule for June 1, 1998.
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On January 6, 1998, Jerome H. Lipman, individually and on behalf of all
others similarly situated, filed a complaint against the Company and eight of
its former or current directors: Leonard A. Batterson, Michael J. Friduss,
Peter S. Fuss, Edward W. Laves, Steven Lazarus, Tom L. Powers, Ora E. Smith
and Paul G. Yovovich (collectively, the "Board") in the Circuit Court of Cook
County, Illinois, County Department, Chancery Division. The complaint alleged
that the Board breached its duty of loyalty and due care to the putative class
of stockholders by selecting financing for the Company in June 1997 which
supposedly entrenched the Board and reduced the Common Stock price. The
complaint also alleged that the Board breached its duty of disclosure by not
informing the stockholders that the selected financing would erode the Common
Stock price. Mr. Lipman's complaint sought certification of a class
consisting of all owners of the Company's Common Stock during the period from
June 6, 1997 through November 21, 1997, excluding the Board and Sheldon
Drobny. The complaint also seeks an unspecified amount of compensatory and
punitive damages, and attorneys' fees.
The Company and the Board regard the suit as without factual or legal
merit. Accordingly, on February 17, 1998, the Company and the Board filed a
motion to dismiss Mr. Lipman's complaint. The motion presented arguments that
the claims of Mr. Lipman and the putative class are barred by the business
judgment rule and the plaintiff's failure to fulfill the legal prerequisites
for filing an action against the Board. Prior to a hearing on the Company's
and the Board's motion to dismiss, Mr. Lipman filed a motion on March 16,
1998, seeking both to amend his proposed putative class to include Mr. Drobny
and to certify the class.
Following oral argument on the Company's and the Board's motion to
dismiss on May 1, 1998, the court requested certain additional briefing and
indicated that it anticipated deciding the motion to dismiss at a further
hearing scheduled for June 1, 1998. Mr. Lipman's motion to amend his proposed
putative class and certify the class also has been continued to June 1, 1998.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS - Not Applicable
ITEM 3. DEFAULT UPON SENIOR SECURITIES - Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Not Applicable
ITEM 5. OTHER INFORMATION - Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
Exhibit 27 Financial Data Schedule
B. REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K dated January
16, 1998, reporting Item 5.
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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.
CORPORATION ILLINOIS SUPERCONDUCTOR
Registrant
Date: May 15, 1998 By: /s/ Edward W. Laves
-------------------------------------
Edward W. Laves
President and Chief Executive Officer
Date: May 15, 1998 By: /s/ Stephen G. Wasko
-------------------------------------
Stephen G. Wasko
Senior Vice President and
Chief Financial Officer
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