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 DECEMBER 31, 1997.
[ ] 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: 0-16159
LECTEC CORPORATION
(Exact name of Registrant as specified in its charter)
Minnesota 41-1301878
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10701 Red Circle Drive, Minnetonka, Minnesota 55343
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 933-2291
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common stock, par
value $0.01 per
share.
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 [ ]
The number of shares outstanding of the registrant's common stock as of February
10, 1998 was 4,064,766 shares.
LECTEC CORPORATION
FORM 10-Q - REPORT FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements and Notes to Financial Statements. . . . . I-1
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . . . . . . I-8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . .II-1
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . . .II-1
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . .II-1
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . II-1
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . .II-2
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . .II-2
Signature Page. . . . . . . . . . . . . . . . . . . . . . . . . II-3
PART I - FINANCIAL INFORMATION
ITEM 1- FINANCIAL STATEMENTS
LECTEC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, June 30,
1997 1997
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,584,347 $ 665,190
Short-term investments 166,066 577,587
Receivables
Trade, net of allowances of $88,839 (unaudited) and $67,126
at December 31, 1997 and June 30, 1997 2,679,053 2,178,984
Refundable income taxes 72,669 401,263
Other 19,634 22,780
------------ ------------
2,771,356 2,603,027
Inventories
Raw materials 1,746,916 1,655,924
Work-in-process 106,400 184,208
Finished goods 617,685 736,889
------------ ------------
Total inventories 2,471,001 2,577,021
Prepaid expenses and other 126,042 84,871
Deferred income taxes 366,000 366,000
------------ ------------
Total current assets 7,484,812 6,873,696
PROPERTY, PLANT AND EQUIPMENT - AT COST
Building and improvements 1,790,023 1,635,157
Equipment 6,693,746 6,578,960
Furniture and fixtures 372,530 371,670
------------ ------------
8,856,299 8,585,787
Less accumulated depreciation 4,585,814 4,241,214
------------ ------------
4,270,485 4,344,573
Land 247,731 247,731
------------ ------------
4,518,216 4,592,304
OTHER ASSETS
Patents and trademarks, less accumulated amortization of $931,440
(unaudited) and $846,914 at December 31, 1997 and June 30, 1997 320,215 363,343
Long-term investments 8,013 8,013
------------ ------------
328,228 371,356
------------ ------------
$ 12,331,256 $ 11,837,356
============ ============
See accompanying notes to the consolidated financial statements.
LECTEC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, June 30,
1997 1997
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,102,151 $ 779,699
Accrued expenses
Payroll related 369,572 324,381
Restructuring charge 101,911 1,521,107
Other 214,980 213,425
------------- -------------
Total current liabilities 1,788,614 2,838,612
DEFERRED INCOME TAXES 211,000 211,000
SHAREHOLDERS' EQUITY
Common stock, $.01 par value: 15,000,000 shares authorized; issued and
outstanding 4,064,800 shares (unaudited) at December 31, 1997 and
3,842,800 shares at June 30, 1997 40,648 38,428
Additional paid-in capital 11,843,619 10,476,428
Unrealized losses on securities available-for-sale (12,485) (33,372)
Retained deficit (1,540,140) (1,693,740)
------------- -------------
10,331,642 8,787,744
------------- -------------
$ 12,331,256 $ 11,837,356
============= =============
See accompanying notes to the consolidated financial statements.
LECTEC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended Six months ended
December 31, December 31,
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
Net sales $ 3,308,962 $ 3,028,118 $ 6,939,772 $ 6,001,601
Cost of goods sold 2,362,392 1,938,591 4,784,343 3,836,985
------------ ------------ ------------ ------------
Gross profit 946,570 1,089,527 2,155,429 2,164,616
Operating expenses
Sales and marketing 244,879 145,579 505,224 255,141
General and administrative 470,347 736,578 1,001,693 1,180,232
Research and development 261,737 411,726 508,329 911,928
------------ ------------ ------------ ------------
976,963 1,293,883 2,015,246 2,347,301
------------ ------------ ------------ ------------
Earnings (loss) from operations (30,393) (204,356) 140,183 (182,685)
Other income (expense)
Interest income 13,565 (8,737) 19,837 8,018
Dividend income 4,314 10,117 12,262 19,549
Interest expense (506) (33) (872) (1,263)
Other (4,750) -- (9,810) 15,000
------------ ------------ ------------ ------------
12,623 1,347 21,417 41,304
------------ ------------ ------------ ------------
Earnings (loss) before income taxes and
equity in losses of unconsolidated
subsidiary (17,770) (203,009) 161,600 (141,381)
Income tax expense (benefit) (19,677) 913 8,000 2,316
------------ ------------ ------------ ------------
Earnings (loss) before equity in losses of
unconsolidated subsidiary 1,907 (203,922) 153,600 (143,697)
Equity in losses of unconsolidated subsidiary -- 60,402 -- 83,243
------------ ------------ ------------ ------------
Net earnings (loss) $ 1,907 $ (264,324) $ 153,600 $ (226,940)
============ ============ ============ ============
Net earnings (loss) per share
Basic $ 0.00 $ (0.07) $ 0.04 $ (0.06)
============ ============ ============ ============
Diluted $ 0.00 $ (0.07) $ 0.04 $ (0.06)
============ ============ ============ ============
Weighted average shares outstanding
Basic 4,062,354 3,835,989 3,952,586 3,835,973
============ ============ ============ ============
Diluted 4,081,219 3,835,989 3,975,411 3,835,973
============ ============ ============ ============
See accompanying notes to the consolidated financial statements.
LECTEC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended December 31,
-----------------------------
1997 1996
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 153,600 $ (226,940)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 427,226 526,525
Loss on sale of investments 9,810 --
Gain on sale of equipment -- (15,000)
Equity in losses of unconsolidated subsidiary -- 83,243
Changes in operating assets and liabilities:
Trade and other receivables (496,923) (192,612)
Refundable income taxes 328,094 --
Inventories 106,020 (341,920)
Prepaid expenses and other (41,171) (38,808)
Accounts payable 322,452 (75,124)
Accrued expenses (2,539) 220,896
------------ ------------
Net cash provided by (used in) operating activities 806,569 (59,740)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (270,512) (101,744)
Proceeds from sale of equipment -- 15,000
Investment in patents and trademarks (39,498) (64,905)
Sale of investments 422,598 --
------------ ------------
Net cash provided by (used in) investing activities 112,588 (151,649)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock -- 1,128
------------ ------------
Net cash provided by financing activities -- 1,128
------------ ------------
Net increase (decrease) in cash and cash equivalents 919,157 (210,261)
Cash and cash equivalents at beginning of period 665,190 800,693
------------ ------------
Cash and cash equivalents at end of period $ 1,584,347 $ 590,432
============ ============
See accompanying notes to the consolidated financial statements.
LECTEC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended December 31,
-----------------------------
1997 1996
------------ -------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest expense $ 872 $ 5,957
Income taxes 10,676 6,000
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
Conversion of subsidiary's notes payable to shareholders' equity $ -- $ 83,595
Conversion of Pharmadyne minority shareholders' interest in the
Pharmadyne subsidiary into LecTec Corporation common stock $ 1,369,411 $ --
See accompanying notes to the consolidated financial statements.
LECTEC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
(UNAUDITED)
(1) GENERAL
The accompanying consolidated financial statements include the accounts of
LecTec Corporation (the "Company"), LecTec International Corporation, a
wholly-owned subsidiary, and Pharmadyne Corporation, a wholly-owned owned
subsidiary which was merged into LecTec Corporation on December 31, 1997. (See
note 2 below.) All significant intercompany balances and transactions have been
eliminated in consolidation. The Company's financial statements for the three
and six months ended December 31, 1997 should be read in conjunction with its
Annual Report on Form 10-K and its Annual Report to Shareholders for the fiscal
year ended June 30, 1997. The interim financial statements are unaudited and in
the opinion of management, reflect all adjustments necessary for a fair
presentation of results for the periods presented. Results for interim periods
are not necessarily indicative of results for the year.
(2) PHARMADYNE CORPORATION AND RESTRUCTURING CHARGE
During fiscal 1997 the Company adopted a plan for eliminating the Pharmadyne
Corporation subsidiary and recorded a nonrecurring restructuring charge of
$2,180,353. The restructuring charge included approximately $1,369,000 for the
planned acquisition of the minority interests in Pharmadyne in exchange for
newly issued shares of LecTec Corporation common stock. In October 1997, the
Company issued 221,948 new shares of its common stock to acquire the minority
interests in Pharmadyne. In November 1997, the newly issued shares were
registered with the Securities and Exchange Commission. Effective October 2,
1997, Pharmadyne became a wholly-owned subsidiary of the Company and on December
31, 1997, Pharmadyne Corporation was merged into LecTec Corporation.
(3) RECENTLY ADOPTED ACCOUNTING STANDARD
On December 31, 1997, the Company adopted Statement of Financial Accounting
Standards No. 128 - "Earnings per Share" ("SFAS 128"). As required by SFAS 128,
all current and prior year earnings (loss) per share data have been restated to
conform to the provisions of SFAS 128.
The Company's basic net earnings (loss) per share amounts have been computed by
dividing net earnings (loss) by the weighted average number of outstanding
common shares. The Company's diluted net earnings (loss) per share amounts have
been computed by dividing net earnings (loss) by the weighted average number of
outstanding common shares and common share equivalents, when dilutive. For the
three months and six months ended December 31, 1997, 18,865 and 22,825 shares of
common stock equivalents were included in the computation of diluted net
earnings per share. For the three months and six months ended December 31, 1996
no shares of common stock equivalents were included in the computation of
diluted net loss per share. Options to purchase 740,650 and 629,627 shares of
common stock with a weighted average exercise price of $8.48 and $9.34 were
outstanding during the three months ended December 31, 1997 and 1996 and options
to purchase 667,424 and 379,814 shares of common stock with a weighted average
exercise price of $8.73 and $9.71 were outstanding during the six months ended
December 31, 1997 and 1996, but were excluded from the computation of common
share equivalents because they were antidilutive.
(4) NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income," and
SFAS 131, "Disclosures about Segments of an Enterprise and Related Information,"
which are effective for fiscal year 1999. SFAS 130 will require the Company to
display an amount representing total comprehensive income, as defined by the
statement, as part of the Company's basic financial statements. Comprehensive
income will include items such as unrealized gains or losses on certain
investment securities. SFAS 131 will require the Company to disclose financial
and other information about its business segments, their products and services,
geographic areas, major customers, sales, profits, assets and other information.
The adoption of these statements is not expected to have a material effect on
the consolidated financial statements of the Company.
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
RESULTS OF OPERATIONS
NET SALES
Net sales for the second quarter of fiscal 1998 were $3,308,962 compared to net
sales of $3,028,118 for the second quarter of fiscal 1997, an increase of 9.3%.
The increase was primarily the result of increased medical tape sales.
Conductive product sales, the Company's largest product group, increased by 5.0%
from the prior year while medical tape product sales, the Company's second
largest product group, increased by 36.6% and therapeutic product sales
decreased by 68.3%. The conductive sales increase was primarily the result of
increased volumes to existing customers. Medical tape sales increased primarily
due to increased sales volume to a number of customers, including a large
customer who purchases intermittently, which more than offset the absence of
sales in fiscal 1998 to a customer who discontinued their medical tape business.
The therapeutic sales decrease was due to the absence of analgesic patch sales
to the Company's two major distributors in the second quarter of fiscal 1998.
Net sales for the first six months of fiscal 1998 were $6,939,772 compared to
net sales of $6,001,601 for the first six months of fiscal 1997, an increase of
15.6%. The increase was primarily the result of increased medical tape product
sales. Conductive product sales increased by 4.7% from the prior year while
medical tape product sales increased by 37.9% and therapeutic product sales
increased by 28.2%. The conductive and medical tape sales increases for the
first six months were primarily due to the same factors as the sales increases
for the second quarter. The therapeutic sales increase for the first six months
of fiscal 1998 was primarily the result of increased analgesic patch sales
volume in the first quarter which more than offset decreased sales of corn,
callous and wart remover products.
GROSS PROFIT
Gross profit for the second quarter of fiscal 1998 was $946,570 compared to
$1,089,527 for the second quarter of fiscal 1997. Gross profit as a percent of
net sales for the second quarter of fiscal 1998 was 28.6% compared to 36.0% for
the second quarter of fiscal 1997. The decrease in gross profit percent for the
quarter resulted primarily from a shift in labor costs from research and
development to manufacturing, and a shift in the sales mix from higher margin
conductive and therapeutic products to lower margin medical tape products.
Gross profit for the first six months of fiscal 1998 was $2,155,429 compared to
$2,164,616 for the first six months of fiscal 1997. Gross profit as a percent of
net sales for the first six months of fiscal 1998 was 31.1% compared to 36.1%
for the first six months of fiscal 1997. The decrease in gross profit percent
for the first six months resulted primarily from a shift in the sales mix from
higher margin conductive and therapeutic products to lower margin medical tape
products, a shift in labor costs from research and development to manufacturing,
and increased overtime and incentive labor costs necessary to meet peak
production levels.
SALES AND MARKETING EXPENSES
Sales and marketing expenses were $244,879 and $145,579 for the second quarters
of fiscal 1998 and 1997, and as a percentage of net sales, were 7.4% and 4.8%.
Sales and marketing expenses were $505,224 and $255,141 for the first six months
of fiscal 1998 and 1997, and as a percentage of net sales, were 7.3% and 4.3%.
The increase in sales and marketing expense for both the quarter and the first
six months was primarily due to staffing level increases and increased sales
promotion and consulting expenses. The Company anticipates that due to increased
sales and marketing efforts, future sales and
marketing expense as a percent of sales will be comparable to the second quarter
and first six months of fiscal 1998.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $470,347 and $736,578 for the second
quarters of fiscal 1998 and 1997, and as a percentage of net sales, were 14.2%
and 24.3%. General and administrative expenses were $1,001,693 and $1,180,232
for the first six months of fiscal 1998 and 1997, and as a percentage of net
sales, were 14.4% and 19.7%. The decrease in general and administrative expenses
for both the quarter and the first six months was primarily due to lower legal
fees associated with Pharmadyne, lower fees associated with executive
recruitment and no goodwill amortization.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for the second quarters of fiscal 1998 and
1997 were $261,737 and $411,726, and as a percentage of net sales, were 7.9% and
13.6%. Research and development expenses for the first six months of fiscal 1998
and 1997 were $508,329 and $911,928, and as a percentage of net sales, were 7.3%
and 15.2%. The decrease in research and development expense for both the quarter
and first six months primarily reflects reductions in research costs associated
with the internal development of the cotinine-based smoking cessation product as
well as a shift in labor costs to manufacturing as discussed above. The Company
is pursuing potential strategic partners to assist in the further development
and potential ultimate commercialization of a cotinine-based pill.
OTHER INCOME (EXPENSE)
Other income increased in the second quarter of fiscal 1998 to $12,623 from
$1,347 in the second quarter of 1997. The increase in other income for the
quarter was primarily due to increased interest income. Other income decreased
in the first six months of fiscal 1998 to $21,417 from $41,304 in the first six
months of fiscal 1997. Other income was lower in fiscal 1998 primarily due to a
gain on the sale of equipment present in fiscal 1997.
EARNINGS (LOSS) BEFORE INCOME TAXES AND EQUITY IN LOSSES OF UNCONSOLIDATED
SUBSIDIARY
The loss before income taxes and equity in losses of an unconsolidated
subsidiary was $17,770 for the second quarter of fiscal 1998 compared to a loss
of $203,009 for the second quarter of 1997. The loss for the current quarter was
less than the prior year primarily due to decreased operating expenses which
more than offset a decline in the gross margin. For the first six months of
fiscal 1998 earnings before income taxes and equity in losses of an
unconsolidated subsidiary were $161,600 as compared to a loss before income
taxes and equity in losses of an unconsolidated subsidiary of $141,381 in the
prior year. Earnings for the first six months of the current year, as compared
to a loss in the prior year, were also primarily the result of decreased
operating expenses which more than offset a decline in the gross profit percent.
INCOME TAX EXPENSE (BENEFIT)
The Company recorded an income tax benefit of $19,677 in the second quarter of
fiscal 1998 compared to income tax expense of $913 in 1997. For the first six
months of fiscal 1998 the Company recorded income tax expense of $8,000 compared
to income tax expense in the first six months of the prior year of $2,316.
Amounts recorded in the second quarter and first six months of both fiscal years
reflect minimal income tax expense due to the utilization of NOL carryforwards.
EQUITY IN LOSSES OF UNCONSOLIDATED SUBSIDIARY
In fiscal 1996, the Company contributed the direct marketing related assets of
Pharmadyne Corporation to Natus L.L.C. (an Arizona limited liability company) in
exchange for a 15% interest in Natus L.L.C. This
investment was accounted for using the equity method. During the second quarter
and first six months of fiscal 1997, the Company recorded $60,402 and $83,243 of
equity in the losses of Natus L.L.C. The investment in Natus L.L.C. was fully
written off in the third quarter of fiscal 1997.
EFFECT OF INFLATION
Inflation has not had a significant impact on the Company as it has generally
had an immaterial impact on the costs of materials and other expenses.
NET EARNINGS (LOSS) PER SHARE
On December 31, 1997, the Company adopted Statement of Financial Accounting
Standards No. 128 - "Earnings per Share" ("SFAS 128"). As required by SFAS 128,
all current and prior year net earnings (loss) per share data have been restated
to conform to the provisions of SFAS 128.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of fiscal 1998 cash and cash equivalents increased
by $919,157 to $1,584,347 at December 31, 1997. Short and long-term investments
decreased by $411,521 to $174,079 during the first six months of fiscal 1998 due
primarily to the sale of investments. Trade accounts receivable increased by
$500,069 to $2,679,053 during the first six months of fiscal 1998 due primarily
to increased sales in the month of December. Refundable income taxes decreased
by $328,594 due to receipt of an income tax refund in October 1997. Accounts
payable increased by $322,452 to $1,102,151 during the first six months of
fiscal 1998 primarily due to a planned increase in the average number of days
outstanding before payment. Capital spending for plant renovations, upgrades and
various equipment totaled $270,512 for the first six months of fiscal 1998.
There were no material commitments for capital expenditures at December 31,
1997.
Working capital, at the end of the first six months of fiscal 1998, had
increased to $5,696,198 from $4,035,084 at the end of fiscal 1997. The Company
had a current ratio at the end of the first six months of fiscal 1998 of 4.2 as
compared to 2.4 at the end of fiscal 1997. The increase in working capital and
improved current ratio as of December 31, 1997 resulted primarily from the
reduction of the accrued restructuring charge at June 30, 1997 due to the
issuance of LecTec Corporation common stock to the Pharmadyne minority
shareholders. (See note 2 of the Notes to Consolidated Financial Statements.)
The Company had no short or long-term debt as of December 31, 1997. During
August 1997, the Company obtained an unsecured $1,000,000 working capital line
of credit which expires in September 1998. The previous working capital line of
credit expired January 1, 1997. There were no borrowings outstanding on the line
of credit during the first six months of fiscal 1998 nor during all of fiscal
1997. Shareholders' equity increased by $1,543,898 to $10,331,642 during the
first six months of fiscal 1998 due primarily to the issuance of LecTec
Corporation common stock in connection with the acquisition of the minority
interest in Pharmadyne Corporation. (See note 2 of the Notes to Consolidated
Financial Statements.)
Management believes that internally-generated cash-flow and the existing
short-term line of credit will be sufficient to support anticipated operating
and capital spending requirements for the remainder of fiscal 1998.
FORWARD-LOOKING STATEMENTS
From time to time, in reports filed with the Securities and Exchange Commission,
in press releases, and in other communications to shareholders or the investment
community, the Company may provide forward-looking statements concerning
possible or anticipated future results of operations or business developments
which are typically preceded by the words "believes", "expects", "anticipates",
"intends", "will", "may", "should" or similar expressions. Such forward-looking
statements are subject to risks and uncertainties which could cause results or
developments to differ materially from those indicated in the forward-looking
statements. Such risks and uncertainties include, but are not limited to, the
buying patterns of major customers; competitive forces including new products or
pricing pressures; costs associated with and acceptance of the Company's new
brand strategy; impact of interruptions to production; dependence on key
personnel; need for regulatory approvals; changes in governmental regulatory
requirements or accounting pronouncements; and ability to satisfy funding
requirements for operating needs, expansion or capital expenditures.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES
There have been no changes in the rights of security holders.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Regular Annual Meeting of Shareholders of the Company was held
on November 20, 1997. The following matters were voted on by
Shareholders:
1. The election of seven directors to serve on the Board of
Directors for a term of one year and until their successors
are duly elected and qualified.
2. The ratification of the appointment of Grant Thornton LLP as
the Company's independent auditor for the Company's current
fiscal year.
The results of the voting on these matters were as follows:
1. Board of Directors:
Withhold
For Authority Total
--- --------- -----
Lee M. Berlin 2,960,495 519,052 3,479,547
Alan C. Hymes, M.D. 3,407,538 72,009 3,479,547
Paul O. Johnson 2,975,333 504,214 3,479,547
Bert J. McKasy 3,437,282 42,265 3,479,547
Marilyn K. Speedie, Ph.D. 3,444,307 35,240 3,479,547
Donald C. Wegmiller 3,444,327 35,220 3,479,547
Rodney A. Young 3,442,548 36,999 3,479,547
2. Appointment of Grant Thornton LLP as independent auditor for
the Company:
Against/
For Abstain Total
--- ------- -----
3,432,768 46,779 3,479,547
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Financial data schedule.
(b) REPORTS ON FORM 8-K
None.
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.
LECTEC CORPORATION
Date February 13, 1998 /s/ Rodney A. Young
------------------- ---------------------------------------------------
Rodney A. Young, Chief Executive Officer & President
Date February 13, 1998 /s/ Deborah L. Moore
------------------- ---------------------------------------------------
Deborah L. Moore, Chief Financial Officer