25

   
                                    FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                  Annual Report Pursuant to Section 13 or 15(d)
                     Of the Securities Exchange Act of 1934

                   For the fiscal year ended December 31, 1998
                        Commission file number 000-21153.

                                ALYN CORPORATION
             (Exact name of registrant as specified in its charter)

           DELAWARE                                          33-0709359
(State or other jurisdiction of                             (IRS Employer
incorporation or organization)                           Identification No.)

                   16761 Hale Avenue, Irvine, California 92606
          (Address of principal executive offices, including zip code)

                                 (949) 475-1525
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act: None

Securities registered pursuant to Section 12 (g) of the Act: None

                     Common Stock, par value $.001 per share
                               Title of Each Class

        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 [ ]

        Indicate by check mark if disclosure of  delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]

        The  approximate  aggregate  market  value of the  voting  stock held by
non-affiliates of the registrant as of February 2, 1999 was $42,777,162 based on
the closing price of $4.00 that date.

        As of February 2, 1999, the aggregate  number of  outstanding  shares of
common stock of the registrant was 11,107,878.

                       DOCUMENTS INCORPORATED BY REFERENCE

        The registrant's  Proxy Statement for the Annual Meeting of Stockholders
scheduled to be held on June 10, 1999, is  incorporated  by reference  into Part
III (Items 10, 11, 12 and 13) of this Form 10-K.

<PAGE>



                                TABLE OF CONTENTS


SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER
THE SECURITIES LITIGATION REFORM ACT OF 1995

PART I.
1.      BUSINESS
2.      PROPERTIES
3.      LEGAL PROCEEDINGS
4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II.
5.      MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
               STOCKHOLDER MATTERS
6.      SELECTED FINANCIAL DATA
7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATION
8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

PART III.
10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
11.     EXECUTIVE COMPENSATION
12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
               MANAGEMENT
13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV.
14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
               ON FORM 8-K

SIGNATURES





















Boralyn(R) is a registered trademark of Alyn Corporation
    


<PAGE>


   
                                     PART I

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE SECURITIES LITIGATION
REFORM ACT OF 1995



Except for historical  information  contained herein, this Annual Report on Form
10-K  contains  forward-looking  statements  within the  meaning of the  Private
Securities Litigation Reform Act of 1995.  Forward-looking  statements generally
can be  identified  by the use of  forward-looking  terminology  such as  "may,"
"will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or
the  negatives  thereof or  variations  thereon or  similar  terminology.  These
statements  involve known and unknown risks and uncertainties that may cause the
Company's  actual  results or outcomes  to be  materially  different  from those
anticipated and discussed herein.  Further,  the Company operates in an industry
sector where securities  values may be volatile and may be influenced by factors
beyond the Company's control.  Important factors that the Company believes might
cause such differences are discussed in the cautionary  statements  accompanying
the  forward-looking  statements and in the risk factors detailed in this Annual
Report on Form 10-K. In assessing  forward-looking  statements contained herein,
readers are urged to read carefully all cautionary  statements contained in this
Annual  Report on Form 10-K..  The Company is under no duty to update any of the
forward-looking  statements  contained  in this  Annual  Report  on Form 10-K to
conform these statements to actual results.


ITEM 1.     BUSINESS.

        Unless  otherwise  indicated,  all  information in this Annual Report on
Form  10-K  gives  effect  to  the  merger,  effective  May  2,  1996,  of  Alyn
Corporation,   a  California  corporation  ("Old  Alyn"),  with  and  into  Alyn
Corporation,  a Delaware corporation formerly named AC Acquisition Corp. ("Alyn"
or the "Company").  Unless the context otherwise  requires,  the term Company as
used  in  this  annual  Report  on  Form  10-K  includes  the  Company  and  its
predecessor, Old Alyn.

Development of the Company's Business

        Alyn  Corporation  provides  customized  metal  matrix  composite  (MMC)
solutions to meet the specific  product  needs of its  customers in consumer and
industrial  markets.  Alyn  is  a  vertically-integrated  MMC  company  offering
advanced MMCs, customer-driven engineering solutions and strategically developed
manufacturing processes. Alyn engages in joint development projects with many of
its  customers in selected  large  markets  where the design and  production  of
MMC-based  products  provide  customers  with  innovative  products,   reduce  a
customer's  overall  production  or  operating  cost,  or  provide   value-added
performance.

        In  January  1996,  the  Company  obtained  its  initial  patent for the
application  of a ceramic  material  in  combination  with a light  metal or its
alloys.  The ceramics  include boron carbide,  silicon carbide or aluminum oxide
and the metals  include  aluminum,  titanium  and  magnesium.  Boron  carbide in
combination with aluminum and its alloys is the Company's  primary initial focus
and is marketed  under the name Boralyn.  Boron  carbide is an advanced  ceramic
that is the  third  hardest  material  in the  world  and the  hardest  material
available at commercially  reasonable  cost. The Company  believes that no other
commercially available material offers a range of properties comparable to those
of Boralyn.  Boralyn is lighter and can be more easily fabricated than titanium.
It has a higher specific  stiffness than aluminum and commonly-used  titanium or
steel alloys.  Boralyn is one-third the density of most steels and has a greater
resistance to wear than aluminum, specialty steel and titanium.

        Since its  initial  public  offering  in October  1996,  the Company has
focused on the design and  installation of significant  manufacturing  assets to
meet anticipated  production  requirements in its targeted markets. Alyn now has
two production facilities in Irvine,  California, a 35,000 square foot precision
pressure casting facility at its Hale Avenue location, and an 84,000 square foot
extrusion  and  forging  facility at its Von Karman  location.  Alyn also has an
installed  fabrication  capability  that  can  process  Boralyn  and  hard-alloy
aluminum   materials.   Boralyn  and  other  MMC  ingot  and  billet  production
capabilities are scalable as sales levels increase.

        The Company  utilizes  project teams to address  customer product needs,
optimize  Boralyn  and  manufacturing  methods  and to  bring  the  products  to
production.  In  addition,  the  Company  targets  markets  which are  suited to
capitalize on  premium-priced  Boralyn and the Company's  other MMCs for product
breakthroughs  or cost savings in selected  markets such as: (i)  premium-priced
golf club heads and shafts;  (ii)  nuclear  containment  for spent fuel  storage
casks;  (iii) automotive  components;  (iv) aerospace  components;  and (v) disk
substrates  for  computer  hard  drives.  Based on  initial  production  orders,
responses  received in connection with its currently  ongoing joint  development
projects and a high level of request for product  quotes,  the Company  believes
these markets provide  opportunities for growth.  The Company intends to develop
products  for other  markets,  such as  bicycle  components  and other  high-end
sporting  goods and defense  applications,  where  MMC-based  products  may also
provide premium pricing for value added benefits.

        The  Company  has  also  developed  what  it  believes  to  be  superior
manufacturing processes,  which benefit from the characteristics of Boralyn. The
Company was issued a U.S.  patent for its soluble  core method of  manufacturing
MMC die-cast metal structures,  which allows for forming complex hollow chambers
and passages,  often within a one-piece structure,  without the need for welding
together separate  components or other secondary  manufacturing  processes.  The
Company  has  filed  numerous  patent  applications   pertaining  to  materials,
processes and applications, of which eight US patents have been awarded to date.
Application  patents  have  been  awarded  for the use of  Boralyn  for  nuclear
containment and computer hard disks.

Company Strategy

        Alyn's  objectives  are to  become  a  leader  in  providing  engineered
solutions to customers'  product needs through MMC  technologies  and associated
manufacturing  processes,  and to establish market share and brand awareness for
Boralyn in markets  where  value-added  premiums  may be  obtained.  The Company
intends to achieve these  objectives  by: (i) focusing on customer  markets with
high  value-added  needs;  (ii) partnering with customers to develop  engineered
solutions to their specific  product needs;  (iii)  capitalizing on its existing
proprietary   technology  and  patented   processes  for  producing  MMCs;  (iv)
manufacturing  customers'  products;  (v) ensuring  effective  execution through
target market teams and  individual  product  teams;  and (vi)  providing a high
level of customer satisfaction.

        Focusing on High Value-added  Markets. The Company is initially focusing
its sales and development efforts on five markets,  which have significant needs
in areas where the Company's  materials and processes  should offer great value.
These  markets are golf,  nuclear  containment,  automotive,  aerospace and disk
substrates for computer  hard-drives.  The  significance of the needs in each of
these markets allows  premium-pricing  for the Company's  products,  while still
providing value-added product innovation and/or cost savings for the customer.

        Partnering  with  Customers.  This element of the Company's  strategy is
central to the overall  objective of  "Providing  Engineered  Solutions  Through
Metal Matrix Technologies".  The Company utilizes  state-of-the-art  software to
work with its customers' marketing, design, engineering and production personnel
in  addressing  their  specific  product  needs.   Such  needs  include  product
innovation and  fundamental  technology  advances,  weight  reduction,  enhanced
structural properties,  improved quality and fabrication  improvements to reduce
cost.

        Capitalizing  on Metal Matrix  Technologies.  The Company has  developed
patented and  proprietary  technology for the making of MMC materials  utilizing
aluminum,  titanium or  magnesium as the base metal and boron  carbide,  silicon
carbide  or  aluminum  oxide as the  ceramic  component.  The  Company  has also
developed  proprietary  processes  for the  manufacture  of products.  By mixing
different  materials in varying percentages and adjusting the processes used for
MMC  production,  the Company is able to "dial-in"  material  properties  to fit
specific customer needs.

        Manufacturing  Customer  Products.  The Company's metal matrix composite
materials  can be fabricated  into  products by extrusion,  forging and casting.
Proprietary  processes  have been  developed  for  fabrication  of the Company's
products,   providing  a  competitive  advantage  in  production   capabilities,
independent  of  the  use of  the  MMCs  themselves.  In  addition,  significant
proprietary  "know-how" has been developed for the  manufacture of products from
MMCs.  The  Company  has  strategically   invested  in  developing   significant
manufacturing  capacity  to be able to offer a fully  integrated  service to its
customers requiring both limited and large production quantities.

        Managing Through Teams. The Company's integration of engineering design,
development of material  properties to address  specific  customer needs and the
production   and  delivery  of  the  finished   product,   requires  the  active
participation and coordination of all functions within the Company.  In order to
effectively manage this process and deliver customer  satisfaction,  the Company
utilizes project teams with  responsibility  and  accountability  for delivering
"on-time and on-spec",  with a single point of reference and  communication  for
each  customer.  The Company  believes  that this  methodology  is  essential to
delivering the highest levels of customer satisfaction.

        Providing Customer Satisfaction.  The Company believes that by providing
superior  customer  satisfaction,  it  can  maintain  a  preferred  position  in
developing  long-term  relationships  with its customers,  which can be expanded
into broader roles within their respective companies and industries.

Characteristics of Boralyn

        Boralyn is the Company's  initial  commercially  available  metal matrix
composite  material,  composed  principally of aluminum alloy and boron carbide.
The Company believes that in target markets Boralyn compares  favorably to other
materials with which it will compete with respect to weight (density),  specific
strength,  specific  stiffness,   resistance  to  wear,  fatigue  and  corrosion
resistance  and vibration  and  resonance.  Boron  carbide  contains a naturally
occurring   isotope,   which  also  makes  Boralyn  well  suited  for  radiation
containment in nuclear applications.

        Broad Range of Available Grades.  Boralyn is available in various grades
depending  principally  on the choice of aluminum alloy and the percent of boron
carbide.  A specific  grade can be matched  to a  specific  application  where a
specific property or properties are to be highlighted. For example, in aerospace
applications,  where  thermal  expansion is a problem due to the extremes of the
environment,  the  percentage  of boron  carbide can be  increased  to lower the
thermal expansion. As another example, for better wearability, the percentage of
boron carbide can be increased to create harder surfaces.

        Specific  Strength/Specific  Stiffness.  The specific  strength range of
Boralyn,  which is variable dependent on the grade of Boralyn being produced, is
substantially higher than that of aluminum and somewhat higher than that of many
specialty steels and titanium.  Boralyn has greater specific  stiffness compared
to titanium alloy,  aluminum alloy and specialty steel.  For many  applications,
less Boralyn is required to provide necessary strength and stiffness, and, thus,
reduces the overall product weight. Conversely, for the same weight, Boralyn can
provide   significantly   more  strength  and  stiffness  than  other  competing
materials.

        Resistance to Wear.  Boralyn provides greater wear resistance than 
aluminum or steel due to the extreme hardness of boron carbide.

        Fatigue  and  Corrosion   Resistance.   Boralyn,  in  a  5%  salt  moist
environment,  endures a higher number of stress cycles than aluminum alloy. This
property  makes Boralyn  superior to aluminum alloy for  applications,  in which
many  stress  cycles  are   encountered,   particularly  in  certain   corrosive
environments.  Any structural  support where stress is applied  repeatedly needs
high fatigue characteristics.

        Vibration and Resonance. Boralyn, due in part to its high stiffness, has
lower vibration and resonance  characteristics  than aluminum computer hard-disk
substrates,  and for some grades of Boralyn  lower than glass,  over  rotational
speeds ranging from 1,000 to 10,000 revolutions per minute.

        Neutron Absorption. Boron carbide contains a naturally occurring isotope
of boron which absorbs (attenuates)  neutron radiation,  the hazardous radiation
element of nuclear energy generation and various military applications.  Neutron
absorption  in Boralyn is  primarily a function of the density  (referred  to as
areal density) and degree of uniformity of distribution  (i.e.,  homogeneity) of
boron carbide  particles  within the material.  The  predictable  homogeneity of
Boralyn   allows  for  the  design  of  structures   specific  to  a  customer's
requirements, without incorporating significant additional material.

        Variety of Fabrication  Methods. In addition to the properties described
above,  Boralyn can be extruded and forged,  can be used in a variety of casting
processes,  and some grades can be brazed and welded.  The Company has developed
what it believes to be superior manufacturing processes that are tailored to the
production  of Boralyn.  Among these  processes  is the  Company's  soluble core
technology that allows for forming complex, hollow chambers and passages,  often
within a one-piece structure,  thereby eliminating the need for welding or other
secondary manufacturing processes. In many instances,  this may result in a cost
savings to the Company's customers.
   
Products and Applications

        The growth of interest  in metal  matrix  composites  is a result of the
engineering  properties of these  composites.  Metal matrix  composites  compare
favorably to other materials with respect to weight, stiffness and strength, and
can be fabricated by standard methods  utilizing normal  equipment.  Engineering
analyses  demonstrate  that these materials can provide  significant  savings in
weight and greater  stiffness,  compared to traditional  metallic alloys,  while
retaining key structural and design properties. They also compare favorably with
certain other composite materials,  namely polymer-matrix  materials,  that have
temperature  and strength  limitations,  are  sensitive to moisture and, in some
cases, also release gases or moisture.

        Golf Club Heads and Shafts. The U.S. wholesale market for golf equipment
in 1997 was  estimated by industry  sources to be  approximately  $2.4  billion.
Wholesale  golf  club  sales  in the  U.S.  increased  from  1992  to  1997 at a
compounded  growth rate of  approximately  13%.  This is primarily the result of
three factors:  (i) the increasing  number of new golf courses  available to the
general public; (ii) increasing interest from non-traditional golfers; and (iii)
favorable  population trends,  including the aging of Baby Boomers.  The Company
believes that the higher specific stiffness,  higher specific strength and other
properties of Boralyn allow golf club heads to be designed and manufactured with
a larger  "sweet spot" and better mass  distribution  (such as a lower center of
gravity),  compared with titanium and other heads. The effect is to produce what
golfers term a "more  forgiving"  golf club.  The higher  specific  stiffness of
Boralyn  enables the  production  of a club shaft with the "feel" of steel (i.e.
greater control), but with a lighter weight.

        In August and September  1998 the Company  received  initial  production
orders from MacGregor Golf for a new line of Tourney(R) Boralyn putters and from
Carbite  Golf  for  a  new  Polar  Balanced(R)  Boralyn  putter,   respectively.
Production  deliveries of the Tourney(R)  Boralyn putters were delayed until the
second  quarter of 1999 due to late  delivery  of weights  for the putter from a
third  party  vendor.  Production  of the Carbite  putter was delayed  until the
second  quarter  of 1999  due to late  delivery  of the  production  tooling  by
Carbite.  Taylor Made Golf has deferred introduction of their Boralyn metal wood
driver  primarily as a result of the success of their recently  introduced  Fire
Sole(R) line of clubs.  However,  the Company continues working with Taylor Made
to bring this product to market.

        In May 1997,  the Company  reached  agreement with True Temper Sports to
market golf club shafts using Boralyn on an exclusive basis. While the exclusive
license  has  expired,  material  and  production  methodology  refinements  are
continuing.

        Radiation   Containment.   Materials   traditionally  used  for  neutron
absorption  in spent  fuel rod  storage  require  a  separate  neutron-absorbing
material,  such as boron carbide,  encased in layers of metallic alloy,  such as
aluminum, in order to provide stiffness and structural integrity.  This material
is then  placed  inside the  actual  storage  container.  The  Company  believes
competing materials require additional material to compensate for irregular size
and  distribution of  neutron-absorbing  particles to achieve adequate levels of
absorption.  Accordingly, Boralyn can produce the same neutron-absorbing results
as competing materials,  but with less Boralyn,  thereby reducing the weight and
cost of the structure. The initial opportunity in this market is for containment
material to use in  conjunction  with  current and new designs of spent fuel dry
storage casks and "wet storage" in the cooling pools.  Because of the structural
properties of Boralyn,  the Company  believes  Boralyn could also be used in the
future  to  provide  more of the  actual  structural  containers  as well as the
internal  absorption  material.  The potential market for nuclear containment is
substantial  and is  expected to  increase  due to the  growing  volume of spent
nuclear fuel requiring storage.

        The Company  received its first prototype order for neutron  containment
for spent  fuel  cask  components  in April  1998  from  Transnuclear,  the U.S.
subsidiary  of a  France-based  leader in this field.  The  prototype  order was
shipped in June 1998. The initial  production  order for $1 million was received
in December  1998.  Production  shipments  are scheduled to begin in March 1999.
Advanced  discussions are underway with other companies for prototype  orders of
Boralyn for use in both wet and dry spent fuel storage applications.

        Aerospace/Defense.  Product areas that offer near-term opportunities for
Boralyn include  structural  support for overhead luggage  compartments,  galley
components and flooring,  housings,  high wear resistant components,  components
requiring vibration  dampening and other parts not related to  safety-of-flight.
Areas of future  opportunity  for Boralyn are believed by the Company to include
aircraft structural members,  nacelle components,  low vibration rotating parts,
actuators,  bearings  and  armor  for the  military.  Because  of the  Company's
production  capacity for both large and small  components,  it is targeting both
prime and  sub-contractors to the industry for production orders of "hard-alloy"
(aluminum)  components,  in addition to Boralyn.  By producing these  hard-alloy
components,  the  Company may be able to leverage  its  available  manufacturing
capacity  to  generate  revenue  and  margin  contributions.  Importantly,  this
strategy  also  serves as a vehicle  for the  introduction  of the Company as an
already approved supplier to the industry.

        The Company has been  qualified as an approved  vendor by several  major
prime  contractors to the industry and has received five  production  orders for
"hard-alloy" aluminum components. Applications produced include gantry rails for
missiles on F-16 fighters,  "U" channels for housing  hydraulic  systems in wing
assemblies,  helicopter  seat ejection rails and forged  hydraulic valve bodies.
The Company has begun customer  discussions to convert single product  customers
to multiple  product  customers.  Broad  manufacturing  acceptance  requires the
aerospace  equivalent  of ISO 9002  qualification,  which the  Company  plans to
complete in the third quarter of 1999.

        Automotive.  The automotive  (including trucks) market is a large market
where the  properties  of Boralyn and the  Company's  proprietary  manufacturing
processes  can be  used  to  deliver  value-added  benefits  in  many  component
applications.  The automotive  industry is particularly  focused on fuel economy
(weight and  design),  performance  (weight,  strength and  stiffness)  and cost
savings (manufacturing  processes).  The truck market is also heavily focused on
durability, due to the long useful lives required of truck fleets.

        In October  1997,  the Company  received a  production  order for engine
cradles for  General  Motors'  EV-1  electric  vehicle,  which  represented  the
Company's first order from the automotive industry.  Initial production began in
July 1998, but has been significantly limited due to the replacement of the EV-1
by the NGV (Next Generation Vehicle). In November 1998, the Company received the
initial  prototype  order for 12  different  suspension  components  of the NGV.
Shipments  of the  prototypes  will begin in the first  quarter  of 1999.  Other
components currently being quoted include clutch components,  transmission pumps
and engine  components such as cylinder liners,  pistons,  and camshafts.  Broad
acceptance by the new vehicle industry requires the automotive equivalent of ISO
9002 qualification,  which the Company plans to complete in the third quarter of
1999.

        Computer  Hard-disks.   The  worldwide  wholesale  market  for  personal
computer  hard-disk  drives is estimated by industry sources to be approximately
150 million  units in 1998.  Each drive,  on average,  has  approximately  three
disks,  yielding a total market for disk substrates of approximately 450 million
units in 1998.  The Company  believes that disks for  high-speed,  high-capacity
drives,  which the Company is targeting in its product development and marketing
efforts,  represent  between  5% and  10% of the  total  market  currently.  New
technologies  in the  industry  typically  migrate from the high-end to the mass
market within two years.  Boralyn disks exhibit  minimal  vibration over a broad
range of rotational speeds  experienced by current and planned hard-disk drives.
The lower  vibration and resonance  allows for closer  head-to-disk  distance at
higher  rotational  speeds,  characteristics  that  allow  for  greater  storage
capabilities and faster data transfer rates.

        The Company has been working since 1996 to develop hard-disk  substrates
using  Boralyn.  The Company has produced  prototype  disks which meet  industry
standards  for "sputter  ready disks" and has  delivered  them to several of the
major  producers of  hard-disk  drives for  evaluation  and feedback as to their
specific  product  requirements.  We know a  stiffer  disk will be  required  to
achieve  very fast  (e.g.  10K rpm)  performance,  and we are  developing  these
prototypes  now. These disks  demonstrate  the viability of the material in this
application.  It is the  Company's  objective to gain  sufficient  acceptance of
Boralyn  by one or  more  potential  customers  so  that  joint  development  is
undertaken to produce disks that meet their specific  application needs, leading
to production orders.

        Consumer,  Industrial  and Other.  The  Company's  capability  to tailor
Boralyn's  properties  to meet  specialized  product  design  requirements,  the
breadth of its  manufacturing  capabilities,  and the marketing  opportunity for
customers to market their  products using the Boralyn name provide the basis for
the Company's  marketing efforts in this general product  category.  The Company
believes that the areas of specific opportunity include those where weight, high
strength-to-weight  ratios and wear or impact  resistance are important  product
requirements.

        There can be no assurance  with respect to whether or when the Company's
products  will  achieve  meaningful  market  acceptance  or  whether or when the
Company will obtain material revenues or become profitable, if at all.

Marketing and Customer Support

        The Company  intends to achieve market  penetration in selected  markets
through a multi-step  process with targeted customers usually consisting of: (i)
initial discussions of the product application and prospective customer's needs,
highlighting  the  advantages  of  Boralyn  to  address  those  needs;  (ii)  an
engineering  and  marketing  evaluation  by the  prospective  customer of sample
material and demonstration products;  (iii) Alyn's technical personnel team with
the customer's design and production staffs to design or modify designs to fully
utilize the Company's MMCs and manufacturing capabilities;  (iv) negotiation and
receipt of a purchase  order for the  prototype  program,  including  production
pricing; (v) evaluation of the prototypes by the customer;  and (vi) development
of a production program, including provisions for tooling, equipment and quality
control  tests  necessary to fulfill the  customer's  requirements.  The Company
intends to sell primarily to OEM customers,  with  distribution from the Company
manufacturing sites to customer facilities.  The Company's policy is to have its
customers absorb a significant portion of design and development-related  direct
costs and pay for the development and fabrication of production tooling.

        The  Company's  sales and marketing  activities  are expected to include
development of appropriate  sales  materials (such as  specification  sheets and
corporate brochures) and promotion through participation at selected trade shows
and selective  advertising  in journals and the trade press.  These  activities,
even if successful,  may not result in proportional or any revenue  increases in
the same period in which those activities occur.

        The Company's  marketing  initially focused on prospective  customers in
the United States,  with  international  sales  activities  being conducted on a
narrowly focused basis primarily in the sports and neutron containment  markets.
However,  due to  apparent  demand for  Boralyn as  indicated  by  requests  for
distribution rights, the Company accelerated its international  expansion plans.
In December 1998, the Company granted sales and distribution  rights to Van Roon
Partners  for Eastern and Western  Europe.  Subject to meeting  certain  minimum
sales requirements, Van Roon Partners will have exclusive rights to sales within
their territory for all products excluding nuclear containment. In January 1999,
the Company granted sales and  distribution  rights to Pechiney Japon for Japan.
Subject to meeting certain minimum sales requirements,  Pechiney Japon will have
exclusive  rights  to  sales  within  several  product   categories,   including
automotive,  sports,  electronics and industrial  products.  Pechiney Japon is a
wholly owned  subsidiary of Paris,  France based  Pechiney,  the fourth  largest
producer of aluminum in the world.  Pechiney is the  Company's  first  strategic
partnership with a major manufacturer of aluminum products, whereby Pechiney can
broaden its product line to include higher margin, value added products.

Competition

        The  materials   industry  in  which  the  Company  operates  is  highly
competitive.  The Company  competes in its chosen markets against several larger
domestic and  multi-national  companies,  all of which are well  established  in
those markets and have substantially  greater financial and other resources than
those of the Company.  Competitive  market conditions could adversely affect the
Company's  results of operations if it were required to reduce product prices to
remain competitive or were unable to achieve significant sales of its products.

        The Company  competes at two levels.  First,  the Company  competes with
material producers, i.e. companies that produce and market a choice of materials
for  specific  applications.  In this  area,  the  Company  competes  with:  (i)
titanium,   supplied  by  companies  such  as  RMI  Titanium  Company,   Tremont
Industries,  Inc.,  and Titanium  Metals  Corporation of America  (Timet);  (ii)
aluminum  alloys,  supplied by  companies  such as the Aluminum  Corporation  of
America (Alcoa), Reynolds Metals Co., and Oregon Metallurgical Corporation;  and
(iii) other metal matrix composites, such as those supplied by Duralcan Inc. For
nuclear containment,  current storage containers typically use Boral(R), a boron
carbide and aluminum material supplied by AAR Brook & Perkins.

        At the second level, the Company competes with product  fabricators.  In
the golf club market,  companies  fabricating  clubs from titanium metal include
Coastcast Corp. and Sturm,  Ruger & Co., Inc. In the computer disk drive market,
the aluminum disks are being made by companies  such as Kobe Steel  Company.  In
the automotive industry, companies such as Teledyne Cast Products,  Kelsey-Hayes
Co., Die Cast Products, Inc. and many others are competitors.

Manufacturing and Supply

        The Company has developed what it believes to be superior  manufacturing
processes  that  leverage the  characteristics  of Boralyn.  Boralyn is produced
primarily by two methods. The first utilizes powder technology.  By this method,
the various  powdered  elements  are blended  dry and mixed  uniformly  to avoid
stratification  and settling.  After the particulates have  sufficiently  mixed,
they are directed into a die and compressed at elevated temperatures in a vacuum
environment  to remove  unwanted gases and to compress the material into a solid
billet. These Boralyn billets are used to extrude forms such as plate,  finished
shapes, rods and tubes for use in various consumer and other end uses.

        The second method of  manufacturing  utilizes a molten  process by which
boron  carbide  powder is added into the molten  base alloy and then  formed and
cooled to create ingots for casting.  These ingots are subsequently remelted and
cast under high pressure  into  finished  shapes.  This  proprietary  process is
called  Precision  Pressure  Casting  because  of the  fine  detail  that can be
achieved by this process and because of the high pressure required to inject the
material into the dies. The Company also uses a proprietary  process for forming
complex,  hollow  chambers and  passages,  often  within a one-piece  structure,
thereby  eliminating  the need for welding  together of separate  components  or
other  secondary  manufacturing  processes.  This  process  is called  AlynCore.
Applications include golf, automotive and various consumer products.

        As of March 26,  1998 the Company  had a backlog of  approximately  $4.0
million in customer  orders  scheduled for production and shipment  primarily in
the second and third quarters of 1999.

        The  Company   occupies  an  84,000  square  foot  facility  in  Irvine,
California,  which  is  dedicated  to  extrusion  and the  forging  of  extruded
material,  where  required.  This  facility  houses the  Company's new 4,000-ton
extrusion press and previously  installed 725-ton extrusion press. The Company's
principal  executive  office  building  houses the  Precision  Pressure  Casting
operations.  This 48,000  square foot facility has  approximately  16,000 square
feet  dedicated to casting,  with  approximately  10,000  square feet  remaining
available  for near term  expansion.  Included in this facility is the Company's
recently  installed  900-ton pressure  casting machine,  which is used for large
parts.

        The  Company  maintains  a strict  internal  quality  control  system to
monitor the quality of  production at its  facilities.  Alyn's  quality  control
laboratory is capable of  conducting  both  physical and chemical  testing.  The
Company is in the process of preparing for ISO 9002 certification. Certification
is planned for the third quarter of 1999.  The Company also monitors the quality
of processes  that are completed by  subcontractors  through  frequent tests and
material  certification.  The Company maintains  product liability  insurance at
levels it believes to be adequate.

        Raw materials used by Alyn are  principally  aluminum and boron carbide.
The Company is not  dependent on the  availability  of supplies  from any single
source.  The Company presently  purchases boron carbide from a limited number of
suppliers,  including  one  supplier  who  provides  approximately  50%  of  the
Company's current requirements. Although the Company believes that boron carbide
is available  from other  suppliers,  it projects that to take full advantage of
the potential  opportunity,  the Company must develop  additional  boron carbide
supplies. There can be no assurance that the Company will be able to continue to
obtain  desired  quantities  of boron carbide on a timely basis or at prices and
terms deemed  reasonable  by the Company.  Alyn's other  principal raw material,
aluminum, is available from numerous domestic and international suppliers.

        The Company intends to maintain a sufficient  inventory of raw materials
and  Boralyn  billets  and ingots on site to meet its  production  requirements;
however,  no  assurances  can be made that such raw  materials  will be  readily
available or that the Company  will have the  resources to purchase and maintain
an  adequate  inventory  of raw  materials.  Finished  goods are  expected to be
shipped at the time of  production  to the  Company's  customers  by  commercial
carriers and not remain at the  Company's  plant for any  significant  period of
time.

Technology Development

        The Company  continuously engages in the development of new products and
improvements to its existing  formulations and maintains  laboratory  facilities
for these purposes in Irvine,  California,  as well as uses a network of outside
independent  test  laboratories.  The  Company  also has a facility  in Fremont,
California,  for the purpose of technology  development  efforts in the computer
hard-disk market. The technology  development  department employed eleven people
on December 31, 1998,  including  six  employees  at the Fremont  facility.  The
Company's  technology  development  efforts focus on producing  MMCs for various
cast,  forged and extruded  Boralyn  applications  and on tooling and methods of
production.

        It is expected  that  formulations  and  techniques  will continue to be
developed  and  refined by the Company  through  empirical  tests and  prototype
development.  The Company  expects that it will  continue to devote  substantial
available resources to technology development efforts.

Patents

        The Company  believes that protection of its proprietary  technology and
"know-how" is important to the development of its business.  It seeks to protect
its interests  through a combination of patent  protection  and  confidentiality
agreements  with all  employees,  as well as by  limiting  the  availability  of
certain critical information to a small number of key employees.

        The Company intends to pursue a vigorous patent  application  program in
the United  States and abroad.  The Company has been issued eight United  States
patents to date. The Company believes the initial patent issued,  (United States
Patent No.  5,486,223,  originally  issued to Robin A.  Carden in January  1996,
expiring in January  2014),  provides  protection  for its  proprietary  Boralyn
technology and contains  claims that cover the use of Boralyn in a wide range of
markets targeted by the Company.
    

        The  following  table  summarizes  the patents  issued to the Company to
date:

                       Patents Issued to Alyn Corporation

    Title                        Patent No.  Issue Date   Description
1.  Metal Matrix Composite and   5,486,223     1/23/96    Methods and processes 
    Method of Manufacture thereof                         for making Boralyn
2.  Improved Metal Matrix        5,613,189     3/18/97    Divisional (extension
    Compositions and Method of                            of 5,486,223
    Manufacture Thereof
3.  Metal Matrix Composites      5,669,059     9/16/97    Divisional (extension)
    and Methods of Manufacture                            of 5,486,223
    Thereof
4.  Metal Matrix  Compositions   5,700,962     12/23/97   Use of boron carbide
    for Nuclear Shielding                                 metal matrix 
    Applications                                          composites for neutron
                                                          shielding
5.  Metal Matrix Composition     5,712,014     1/27/98    Use of boron carbide 
    for Substrates Used to make                           metal matrix 
    Magnetic Disks for Hard                               composites for hard-
    Drives                                                disk substrates
6.  Fabrication Methods for      5,722,033     2/24/98    Extrusion and casting 
    Metal                                                 composite techniques
                                                          for boron carbide
                                                          metal matrix 
                                                          composites
7.  Soluble Core Method of       5,803,151     9/8/98     Soluble core casting; 
    Manufacturing Metal and/or                            homogenize mix of salt
    Metal Matrix Composites                               and ceramic
8.  Process and Apparatus for    5,865,238     9/8/98     "Lock and Load" Al
    Die Casting of Metal Matrix                           alloy with variety of
    Composite Materials from a                            ceramics
    Self-Supporting Billet  

        The Company has filed other patent applications,  which are pending. The
Company is not aware of any reason why its  pending  applications  should not be
granted with claims that will provide  adequate  coverage and protection for its
anticipated  business  activities,  although  there can be no  assurance in that
regard.

Government Regulations

        The Company's  manufacturing  operations  are subject to a wide range of
federal,  state and local  regulations,  including those covering the discharge,
handling  and  disposal  of  hazardous  waste   regulations   contained  in  the
environmental   laws.  Plant  and  laboratory  safety  requirements  of  various
occupational  safety and health laws are also  applicable  to all the  Company's
facilities and operations.

        The Company believes it complies in all material respects with regard to
governmental  regulations  applicable to it. To date, those regulations have not
materially restricted or impeded the Company's operations.

Management Information Systems

        The Company has  completed a survey of all computer  systems and related
hardware  and all  operating  equipment  utilized  by the  Company for Year 2000
compliance.  It has also  undertaken a survey of important  outside  vendors and
suppliers for  compliance,  which is  approximately  50%  complete.  The Company
believes  its current  management  information  systems are or will be Year 2000
compliant prior to December 31, 1999. All future systems purchased will likewise
include requirements for compliance.

Personnel

        The Company employed 62 persons as of December 31, 1998, including three
Company  executive  officers,   eleven  technology  development  personnel,   23
manufacturing  personnel  and  seven  persons  engaged  in sales  and  marketing
activities. In April 1998, the Company hired a new president and chief executive
officer.  The Company's Founder and former president and chief executive officer
remains with the Company focusing primarily on sales and technology development.
None of the Company's employees is a member of a labor union.

RISK FACTORS

         An investment in our common stock  involves a high degree of risk.  You
should  carefully  consider the risks  described below when making an investment
decision.  The risks  and  uncertainties  described  below are not the only ones
facing our company.  If any of the following risks actually occur, our business,
financial  condition or results of operations would likely suffer. In such case,
the trading  price of our common  stock could  decline,  and you may lose all or
part of your investment.

We have a limited operating history, limited revenues and prior losses

         We commenced our materials development  activities in 1990. However, we
only  completed our  manufacturing  facilities in 1998 and therefore have a very
limited  operating  history.  Our  limited  operating  history  has  resulted in
extremely  limited revenues through 1998, with total revenues of $1.3 million in
1998,  $364,000 in 1997 and $194,000 in 1996. Due to these limited  revenues and
our extensive materials and facilities development activities, we had net losses
of $12.1 million, $7.3 million and $2.3 million for the years ended December 31,
1998,  1997 and 1996,  respectively.  We are also  expecting  to incur losses in
fiscal  year 1999 and may  continue  to incur  losses  thereafter.  We may never
generate  sufficient  revenues to achieve  profitability.  Even if we do achieve
profitability,  we may not sustain or increase  profitability  on a quarterly or
annual basis in the future.

Our future operating results will fluctuate significantly

         We have experienced, and will likely continue to experience, long sales
cycle times,  lengthy customer design  processes for new product  introductions,
and market trends that may significantly limit management's  ability to forecast
accurately  time-to-market  schedules or short-term  results of  operations.  We
cannot predict our operating results due to the uncertainty of these factors and
our limited operating history. Our operating results may vary significantly from
quarter to quarter,  in part because of the costs associated with changes in our
products and personnel and the size and actual  delivery dates of orders for our
products.  As a result,  our operating results for any particular quarter should
not  be  considered  indicative  of  any  future  results  and  period-to-period
comparisons  of our  operating  results  will  not  necessarily  be  meaningful.
Fluctuations  caused by variations in quarterly operating results or our failure
to meet market  analysts'  projections  or public  expectations  could cause the
market price of our common stock to decline and perhaps decline significantly.

We must  achieve  significant  product  sales to  offset  substantial  lease and
capital commitments we made to establish production capability

         We have entered into long-term leases for our two facilities located in
Irvine,  California.  For our main  facility,  we have entered into a lease that
expires in 2008 with a five-year  option. We also have a ten-year lease expiring
in 2008 for our second Irvine facility. We have committed substantial capital to
provide both facilities with significant production capability. Unless and until
we achieve a significant level of sales of our Boralyn- based products,  we will
have substantial  production  over-capacity and under-absorbed  costs that would
cause us to incur substantial operating losses.

We have limited manufacturing history and significant manufacturing risks

          Our limited  operating  history has resulted in limited  experience in
manufacturing  our  products  in  commercial  quantities.  While  we  have  made
substantial   lease  and  capital   commitments  to  support  our  manufacturing
capabilities,  we cannot be sure that we will fully utilize our capacity or that
our facilities will be adequate for all of our future fabrication  requirements.
In addition, the manufacture of our products presents several potential hazards.
For example,  the  manufacturing  processes for Boralyn utilize high temperature
and  high  pressure  and may be  subject  to  volatile  chemical  reactions.  In
addition,   a  mechanical  or  human  failure  or  natural   disasters  such  as
earthquakes, characteristic of Southern California, could result in interruption
of our  manufacturing  activities  or  significantly  impact  our  manufacturing
capacity.  Moreover,  our  manufacturing  operations will use certain  equipment
that, if damaged,  inoperable or  unavailable,  could disrupt our  manufacturing
operations.  To address  these risks,  we have  obtained  business  interruption
insurance with coverage for lost profits and out-of-pocket  expenses of up to $8
million per  occurrence.  In addition,  we maintain  other property and casualty
coverage.  Despite our efforts to minimize and insure against our  manufacturing
risks, any extended  interruption of our  manufacturing  operations would have a
material  adverse  effect  on our  business,  operating  results  and  financial
condition.

Our products have not yet gained market acceptance in commercial quantities

          Market  acceptance  of our products in commercial  quantities  depends
upon pricing of products and our ability to manufacture and deliver  products on
a timely basis. In addition, our ability to achieve commercial acceptance of our
products is dependent upon our ability to demonstrate  the advantages of Boralyn
products  over  competing  material  methodologies  and  products.  We also have
experienced,  and will likely  continue  to  experience,  long sales  cycles and
lengthy  customer  product  design  times prior to  production  orders.  We must
address  each  of  these  factors  effectively  in  order  to  achieve  customer
acceptance  in  commercial  quantities of Boralyn or our other current or future
products.  The costs of our marketing  efforts will be  substantial  and will be
recorded as expenses as they are incurred, notwithstanding that the benefits, if
any,  from  those  marketing  efforts  (in  the  form  of  revenues)  may not be
reflected, if at all, until subsequent periods.

We may be unable to obtain the additional capital required to grow our business

          Our ability to grow our business is highly  dependent upon our ability
to  generate  capital  from our  operations  and to raise  needed debt or equity
financing.  If we are able to achieve our  operating  plan for 1999,  we believe
that our cash on hand  (including debt and equity  investment  capital raised in
the first quarter of 1999), capital generated from our internal operations,  and
planned  equipment  and  accounts   receivable   financing  should  satisfy  our
anticipated  capital needs for the next 12 months.  However, if we fail to reach
our planned revenue objectives, we may have inadequate working capital. Also, if
we fail to complete our planned equipment and accounts receivable financing,  we
may have  inadequate  capital to finance our  operations.  Our ability to obtain
future  working  capital debt financing will be dependent in part on the quality
and amount of our trade receivables,  inventory and unsecured capital equipment.
If we are  unable  to  receive  adequate  debt  financing,  we may  have to seek
additional equity financing which may not be available on favorable terms, if at
all. Our ability to achieve future  liquidity and capital  funding  requirements
through our operations will depend on numerous factors, including:

         * results of  marketing  our metal  matrix  composite  capabilities;  
         * market  acceptance of our products;  
         * the timing of production orders and our ability to make delivery 
           of products;  
         * our costs of sales and timing of growth in sales; and 
         * our ability to effectively  manage our marketing and manufacturing 
           activities.

We depend on our key personnel and management team

         Our future success and  profitability is  substantially  dependent upon
the  performance  of our  executives,  Arne Van Roon  (our  President  and Chief
Executive Officer), Robin A. Carden (our Founder),  Richard L. Little (our Chief
Financial  Officer  and  Secretary)  and Jon A.  Knartzer  (our Vice  President,
Operations).  We seek to retain our key personnel with competitive  compensation
and each of our senior executives has a substantial potential equity interest in
the form of stock options.  However,  a departure by any of these individuals or
any other key employees  could  significantly  diminish our level of management,
technical, marketing and sales expertise and we would have the difficult task of
finding and hiring  replacements who have these skills. We do maintain a key-man
life insurance policy of $2.5 million on the life of Mr. Carden;  however, we do
not maintain key-man life insurance  policies on either Messrs. Van Roon, Little
or Knartzer.

         Our future  growth  will be  dependent  upon our ability to attract and
retain additional qualified management,  technical,  scientific,  administrative
and other personnel. Due to our location in Irvine, California and the nature of
our  business,  we  believe  we  will  experience  significant  competition  for
qualified management, supervisory, engineering and other personnel.

We face rapid technological change in our industry which may necessitate 
development of new products

         We operate in a rapidly  evolving field - advanced  materials - that is
likely to be  affected  by future  technological  developments.  Our  ability to
anticipate changes in technologies,  markets and industry trends, and to develop
and  introduce  new and  enhanced  products  on a timely  basis will be critical
factors in our ability to grow and remain competitive. We cannot be sure that we
will be able to develop new  products or that any new  products  can be marketed
successfully.  In addition,  development  schedules for new or improved products
are  inherently  difficult  to predict  and are subject to change as a result of
shifting priorities in response to customers'  requirements and competitors' new
product  introductions.  If we fail to timely develop and introduce new products
or to  enhance  our  current  products,  our  business,  operating  results  and
financial condition could be materially adversely affected.  Moreover, we expect
to  devote  substantial   resources  to  technology   development  efforts.  For
accounting purposes,  the costs of those efforts will be recorded as expenses as
they  are  incurred,  notwithstanding  that  the  benefits,  if  any,  from  our
technology  development  efforts (in the form of increased revenues or decreased
product costs) may not be reflected,  if at all, until subsequent  periods. As a
result, our  period-to-period  operating results could be adversely impacted and
difficult to predict.

We currently depend on a limited number of customers

         Due to the early stage nature of our business, we currently have only a
limited  number of  customers,  several of whom may be material to our near-term
results of operations.  Even after we mature, however,  certain customers may be
material to our business,  operations  and future  prospects.  We cannot be sure
that one or more  principal  customers  will not suffer  business  or  financial
setbacks  resulting in reduction or  cancellation of product orders or our being
unable to obtain  payment from such  customers at any time or from time to time.
The  loss of sales  to one or more  significant  customers,  or our  failure  to
successfully market our products to new customers, could have a material adverse
effect on our business, operating results and financial condition.

We currently depend on a limited number of suppliers

         We  presently  purchase  our  principal  ceramic  raw  material,  boron
carbide,  from a limited  number  of  suppliers,  including  one  supplier  that
provides  approximately 50% of our present  requirements.  Our business would be
materially and adversely affected if we are unable to continue to purchase boron
carbide at prices and on terms comparable to those presently  available from our
principal  suppliers.  Although we believe that boron carbide is available  from
other  suppliers,  we  project  that to take  full  advantage  of the  potential
opportunity,  we must develop additional boron carbide supplies. There can be no
assurance that we will be able to continue to obtain desired quantities of boron
carbide on a timely basis or at prices and terms we consider reasonable.

We depend on the protection of our patents

         We have been granted one United States patent that contains claims that
cover the use of Boralyn.  We believe this patent  provides  protection  for our
proprietary  Boralyn  technology.  We  have  been  granted  additional  patents,
including divisional (extension) patents and  continuation-in-part  patents that
stem from our original patent  application.  We have also applied for additional
patents.  We cannot be sure that our existing patents, or any other patents that
may be  granted,  will be valid and  enforceable  or provide us with  meaningful
protection from competitors.  Further, we cannot be sure that any pending patent
application  will issue or that any claim under pending  patents will provide us
protection  against  infringement.  If our present or future  patent  rights are
ineffective  in protecting us against  infringement,  our marketing  efforts and
future  revenues  could be materially  and adversely  affected.  Moreover,  if a
competitor  were to infringe  any of our  patents,  the costs of  enforcing  our
patent rights may be substantial or even prohibitive. We cannot be sure that our
future  products  will not infringe the patent  rights of others or that we will
not be forced to expend substantial funds to defend against  infringement claims
of, or to obtain  licenses from,  third parties.  We currently have only limited
patent  protection for our technology  outside the United States,  and we may be
unable to obtain even  limited  protection  for our  proprietary  technology  in
certain foreign countries.

We depend on our trademarks for current and future markets

         The market for our  products is and will remain  dependent in part upon
the goodwill engendered by our trademarks and trade names.  Trademark protection
is  therefore  material  to  our  business.  Although  Boralyn  is a  registered
trademark in the United  States,  we cannot be certain that we can  successfully
assert trademark or trade name protection for our significant marks and names in
the  United  States or other  markets,  and the costs of such  efforts  could be
substantial.

Our industry is very competitive

         The materials industry is highly competitive.  We compete in our chosen
markets  against several larger domestic and  multi-national  companies,  all of
which are well  established in their respective  markets and have  substantially
greater financial and other resources than us. There are also several competing,
small  advanced  materials  companies,   similar  to  Alyn.  Competitive  market
conditions  could  adversely  affect our  results of  operations  and  financial
condition if we were required to reduce  product  prices to remain  competitive,
were  unable  to  achieve  significant  sales  of  our  products  or  unable  to
successfully develop and sell new or enhanced products.

We face product liability risks

         As a  participant  in the  materials  industry,  we  face  an  inherent
business risk of exposure to product  liability  claims in the event that any of
our products are alleged to be defective or cause harmful  effects.  The cost of
defending or settling product liability claims may be substantial.  We currently
maintain,  and intend to  continue  to  maintain,  product  liability  insurance
coverage.  However,  we  cannot  be sure  that we  will be able to  obtain  such
insurance  on  acceptable  terms  in the  future  or that  such  insurance  will
adequately cover any claims.

Our  stock  price  could be  adversely  affected  by the sale of shares
issuable to holders of our recently issued preferred stock and Exchangeable Note

         During  the first  quarter  of 1999,  we raised  an  aggregate  of $6.0
million ($5.65  million,  net of expenses) in financing  through the issuance of
Series  A  Preferred  Stock,  Exchangeable  Preferred  Stock  and  a  6%  Senior
Exchangeable  Promissory  Note  ("Exchangeable  Note") due March 10,  2002.  The
Series A Preferred Stock is  exchangeable  for common stock beginning in January
2000, while the Series B Exchangeable  Preferred Stock and the Exchangeable Note
are  currently  exchangeable  for common stock at set prices of $3.57 and $3.645
("Set Prices"),  respectively.  Each of the holders of these securities received
registration  rights for the common stock underlying their securities and we are
required  to  file  a  registration  statement  for  the  holders  of  Series  B
Exchangeable   Preferred  Stock   ("Exchangeable   Preferred   Stock")  and  the
Exchangeable  Note in  April  1999.  Additionally,  each of  these  exchangeable
securities  has an exchange rate that is based on the lesser of the Set Price or
the market price at the time the  securities  are  exchanged.  The  Exchangeable
Preferred Stock and the Exchangeable Note are each exchangeable at up to as much
as a 15%  discount  to the  market  price  if the  market  price at the time the
securities are exchanged is less than the Set Price. At a minimum, the number of
shares of common stock  issuable  upon  exchange of all of these  securities  is
1,617,086.  In addition,  we will be required to issue 200,000  shares,  up to a
maximum of 320,000  shares,  of common  stock  pursuant to  warrants  granted in
connection with these  financings.  Any decrease in the price of our stock could
result in the issuance of a substantial number of additional common stock shares
that would be  immediately  available  for  resale on the public  market for the
Exchangeable  Preferred  Stock and the  Exchangeable  Note.  Depending  upon the
trading  volume  of our  stock,  any  significant  block  sales of these  shares
issuable in exchange  for these newly  issued  securities  could have an adverse
effect on the market price of our stock.  Additionally,  any  perception  by the
public that these shares might be resold  immediately  and are not to be held as
long term investments could materially and adversely affect our stock price. Any
adverse  impact  on  our  stock  price  resulting  from  these  recently  issued
exchangeable  securities would cause these securities to become exchangeable for
even more shares of common stock.  Also, any negative  impact to our stock price
caused by these  exchangeable  securities  could  impair  our  ability  to raise
additional equity capital.

We may be required to issue significant numbers of common stock upon a market
price decline

         We do not know the exact  number of shares of our common  stock that we
will issue upon conversion of our newly issued  exchangeable  securities because
they  potentially  have floating  conversion  prices based on the average market
prices of the common  stock for a number of trading  days  immediately  prior to
conversion.  The floating  conversion price feature of the Exchangeable Note due
March 10,  2002 and the  Exchangeable  Preferred  Stock  begin in  August  1999.
Generally, decreases in the market price of the common stock below their initial
conversion  prices would result in more shares of common stock being issued upon
their  conversion.  See  "Description  of  Certain  Provisions  of Our 6% Senior
Exchangeable  Promissory  Note Due March 10, 2002" and  "Description  of Certain
Provisions of Our Series B Exchangeable Preferred Stock".

The ownership limitations of our preferred stock and Exchangeable Note may not 
protect against dilution

         We may not issue shares of our common stock to holders of our preferred
stock if such  issuance  would result in such holders  beneficially  owning more
than 9.9% of our outstanding  common stock.  The 9.9% ownership  limitation does
not prevent the holders from  converting into common stock and then selling such
common stock to stay below the  limitation,  and the limitation may be waived by
each holder of the Exchangeable Preferred Stock with 75 days prior notice to us.

         Also,  under  the  rules  of the  National  Association  of  Securities
Dealers,  Inc., the holders of our Series A Preferred  Stock,  our  Exchangeable
Preferred Stock and our Exchangeable  Note may not exchange their securities for
common stock if such  exchange  would lead to the issuance of more than 19.9% of
our  outstanding   common  stock  as  of  the  respective  issue  dates  of  the
exchangeable securities. However, the 19.9% limitation will cease to exist if we
receive  stockholder  approval for issuances in excess of 19.9%.  We are seeking
such  stockholder  approval in accordance with NASD Rule 4460 at our 1999 Annual
Meeting.

We may be required to make cash payments to holders of our preferred stock and
Exchangeable Note

         We may be  required to make cash  payments to holders of our  preferred
stock and  Exchangeable  Note if we do not  timely  deliver  common  stock  upon
exchange  of the  securities  or if we  fail to  keep a  registration  statement
effective for the  underlying  shares of common stock.  Such cash payments would
adversely  affect our financial  condition and ability to implement our business
plans. In addition, if we do not obtain stockholder approval to remove the 19.9%
limit,  we would be required  to make cash  payments in the event the holders of
the exchangeable  securities attempted to convert over the 19.9% limit. The cash
payments  would be equal to the  number of shares of common  stock that we could
not issue because of the 19.9% limit  multiplied by the market price at the time
of the  attempted  conversion.  In such an event,  we will be  required to raise
funds  elsewhere,  which could be  difficult.  If we do not receive  stockholder
approval as we are required,  there can be no assurance that we would be able to
obtain adequate sources of additional capital.

Our stock price could be  adversely  affected  by the  perception  that
certain  stockholders  could  require  us to sell  their  shares of our stock by
exercising their registration rights

         Future  sales of our common stock by existing  stockholders  under Rule
144 could have an adverse effect on the price of our stock. In addition, certain
of our stockholders of common stock have  contractual  registration  rights.  No
prediction  can be made as to the effect that future sales of common  stock,  or
the  availability  of shares of common stock for future sales,  will have on the
market price of our stock  prevailing  from time to time.  Sales of  substantial
amounts of common stock,  or the perception  that such sales could occur,  could
adversely affect prevailing market prices for our stock.

We are subject to risks associated with year 2000 compliance

         We are in the process of  upgrading  or replacing  our  accounting  and
management  information systems to be Year 2000 compliant and believe we will be
Year 2000  compliant on a timely  basis.  We will use both internal and external
resources to reprogram  and/or  replace any  deficiencies.  We are not currently
aware of any other  incompatibility  and believe  that no material  expenditures
will be  required.  We do not  believe  that the Year 2000  issue  will have any
material  effect on our operations and we have  determined  there is no exposure
related to our products.  Formal  communications  have been  initiated  with all
significant  suppliers  and large  customers to determine the extent to which we
are  vulnerable to such parties'  failure to address their own Year 2000 issues.
We expect  to have  analyzed  and  accessed  the  possible  risk of  significant
business  interruptions  as a result of any such party's  noncompliance  by June
1999. At that time, any necessary contingency plans will be developed to address
any  material  consequences  that we could suffer if such party is not Year 2000
compliant. Despite our efforts to assess Year 2000 compliance, we cannot be sure
that the failure of other  companies to  adequately  address the Year 2000 issue
will not have a material  adverse effect on our business,  operating  results or
financial  condition.  Overall,  we expect to complete our Year 2000  compliance
efforts in 1999.  The total  estimated  project  cost,  which is not  considered
material,  includes the estimated  costs and time  associated with the impact of
third party compliance.  However, there can be no guarantee that these estimates
will be achieved and actual results could differ materially from those plans.

Certain of our stockholders retain substantial influence

         Certain  of our  present  holders  of common  stock  own a  substantial
majority  of  the  outstanding  shares  of  common  stock.  Consequently,  those
stockholders  have the ability to elect all of our  directors and to control the
outcome of all other issues submitted to our stockholders.  Additionally,  those
stockholders  would be able to influence  significantly a proposed  amendment to
our  charter,  a merger  proposal,  a  proposed  sale of assets  or other  major
corporate  transaction or a non-negotiated  takeover attempt. Such concentration
of ownership may discourage a potential acquirer from making an offer to buy our
company,  which, in turn,  could adversely affect the market price of our common
stock.

         In  addition,  under the terms of our  recently  completed  financings,
certain holders of the newly issued exchangeable securities must approve certain
actions,  including future  financings or issuance of senior  securities.  These
restrictions  could  affect  our  ability  to raise  capital  or effect  certain
corporate  changes  which  could  adversely  affect  our  business,  results  of
operations and financial condition.

         Certain  provisions  of our  Exchangeable  Note could  discourage  some
potential  purchasers by making an  acquisition  of our Company or an asset sale
more difficult and expensive, including:

         *        adjustments  to the exchange  price of the  Exchangeable  Note
                  upon merger or consolidation  events,  reflecting  adjustments
                  made to the underlying common stock;
         *        requirement that upon a change of control, we make an offer to
                  buy  the  Exchangeable  Note  at the  greater  of  150% of the
                  principal  plus accrued and unpaid  interest and  penalties or
                  the  product  of the  number  of  shares  of into  which  such
                  Exchangeable Note can be exchanged and the market price on the
                  applicable date; and
         *        prohibition   against   selling   or   transferring   all   or
                  substantially all of our assets to any subsidiary or affiliate
                  except for cash or cash equivalent consideration.

         We have also  agreed to grant the  holders of the  Exchangeable  Note a
right of first  refusal  with  respect  to certain  issuances  of equity or debt
securities,  and we are prohibited from obtaining additional senior indebtedness
for borrowed money without  written  consent of the holders of the  Exchangeable
Note  unless such  indebtedness  is not on par with or senior or superior to the
Exchangeable  Note or that such  borrowed  money is for  equipment  financing or
customary working capital lines of credit.

         Moreover,  the terms of our  Exchangeable  Preferred Stock prohibit any
merger or consolidation  unless the resulting entity assumes  obligations to the
holders of the Exchangeable Preferred Stock.


Certain of our charter  provisions could adversely affect the rights of
common stock and we are subject to Delaware anti-takeover provisions

         Under our charter,  the Board of Directors  has the  authority to issue
shares of preferred  stock and to determine the price,  rights,  preferences and
privileges  of those  shares  without  any  further  vote of, or action  by, our
stockholders.  The rights of holders of common stock will be subject to, and may
be adversely  affected by, the rights of holders of any preferred stock that has
been issued or may be issued in the future.  Issuance of preferred stock,  while
potentially   providing  desirable   flexibility  in  connection  with  possible
acquisitions  and other  corporate  purposes,  could have an effect of making it
more difficult for a third party to acquire a majority of our outstanding voting
stock.  Certain  provisions of Delaware law applicable to us may also discourage
third-party attempts to acquire control.

Our stock price may be volatile

         Trading volume and prices for our common stock could be subject to wide
fluctuations in response to quarterly  variations in our operations and results,
announcements  with  respect  to sales and  earnings,  as well as  technological
innovations,  and new product  developments  and other events or factors,  which
cannot be  foreseen  or  predicted  by us.  These  factors  include  the sale or
attempted  sale of a large  amount  of  securities  in the  public  market,  the
registration  for  resale of any shares of common  stock,  and the effect on our
earnings on existing or future  equity-based  compensation awards to management.
The market price of our common stock could also be influenced by developments or
matters not related to us.

ITEM 2.       PROPERTIES

        The Company leases its principal  executive  office  facility in Irvine,
California,  under a lease  entered  into in June 1996 and ending on January 31,
2008  (co-terminus  with the  Company's Von Karman  facility),  with a five-year
renewal option.  The current monthly lease cost is approximately  $25,000,  with
periodic escalations to a maximum of approximately $27,000 per month. The 48,000
square foot, primarily single-story facility, is located on a three-acre site at
16761 Hale Avenue in Irvine in an industrial park with close proximity to truck,
rail and air (John Wayne  Airport,  a major  regional  airport in Orange County)
connections and a highly trained labor pool.

        The Company leases an additional  84,000 square foot building located at
17021 Von Karman Avenue, Irvine,  California,  under a ten-year lease commencing
on February 1, 1998, with a five-year renewal option. The monthly lease cost for
this facility is approximately  $49,000 with annual  escalations  based upon the
consumer  price  index,  subject to a 3% minimum.  This  additional  facility is
located  approximately  one half mile from the  Company's  main  facility and is
dedicated to extrusion and forging.

        These  facilities are designed for expansion of capacity to match future
needs over the next several years, with additional warehousing to be leased at a
nearby  location,  if required.  There can be no assurance that these facilities
will be adequate for the Company's  entire future  fabrication  requirement  or,
alternatively,  that the Company  will be able to fully  utilize the capacity of
its facilities. The Company believes its current and additional facility will be
adequate for its contemplated needs.

        A research and  development  facility  dedicated to the  development  of
computer disk  substrates  used in hard-disk  drives was established in February
1997 at 4576 Enterprise  Street,  Fremont,  California,  approximately 400 miles
from the Company's Irvine facilities. The three-year lease commenced on February
1, 1997 and will expire on January 31, 2000.  The facility  originally  occupied
3,900 square feet of  industrial  space and was expanded to 7,800 square feet in
October 1997.

<PAGE>
 
ITEM 3.      LEGAL PROCEEDINGS

        There are no material  legal  proceedings  pending or, to the  Company's
best knowledge, presently threatened against the Company.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

        No matter was  submitted to the vote of security  holders of the Company
during the fourth quarter of the year ended December 31, 1998.
    



<PAGE>


   
                                     PART II

ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS.

        The  Company's  common  stock is listed for  quotation  under the symbol
"ALYN" on the National  Market of the NASDAQ Stock  Market,  Inc. The  following
table sets forth the high and low per share bid prices for the Company's  common
stock for each quarterly  period since the Company's  Initial Public Offering on
October 22, 1996.

                                                         Common Stock
                      Calendar Year                       High    Low

                      1996
                      Fourth Quarter                      16     10

                      1997
                      First Quarter                       13.50  8.25
                      Second Quarter                      12.62  8.38
                      Third Quarter                       17.62  6.88
                      Fourth Quarter                      16.62  9.50

                      1998
                      First Quarter                       10.50  7.00
                      Second Quarter                       8.88  5.88
                      Third Quarter                        5.88  4.63
                      Fourth Quarter                       6.00  3.63


        As of February 2, 1999, there were approximately 45 holders of record of
the Company's common stock. The Company  estimates that there are  approximately
2,500 beneficial owners of the Company's common stock.

        The Company does not anticipate paying any dividends on its common stock
in the foreseeable future. The Company presently intends to retain its earnings,
if any, to finance the development of its business. The payment of any dividends
in the future will depend on the evaluation by the Company's  Board of Directors
of such  factors,  as it deems  relevant  at the time.  Currently,  the Board of
Directors  believes  that  all of the  Company's  earnings,  if any,  should  be
retained for the development of the Company's business.
    


<PAGE>


ITEM 6.     SELECTED FINANCIAL DATA
            (In thousands except per share data)

                                   Alyn                     Old Alyn 
                         -------------------------   ---------------------------
                                            Period   Period 
                                            from      from
                                           May 2,   January 1,
                                            1996      1996 
                          Year ended         to        to         Year ended
                          December 31,     Dec 31,    May 1,     December 31,
                         1998      1997     1996      1996       1995     1994

Statements of 
Operations Data:

Total revenue ......   $ 1,266   $   364   $    90   $   104   $   319   $  309
                       -------   -------   -------   -------   -------   -------

Costs and expenses:
  Cost of goods sold     5,402       323        80        34       203       92
  Establishment of
   manufacturing
   facilities               --      1,809      262       --        --        --
  General and 
    administrative
    expenses             3,216      2,633    1,257        53       219      352
  Selling and marketing  1,230      1,371      587        23        52      143
  Technology developmen  2,968      2,338      283         7        79      180
                       -------    -------   ------    -------   -------  -------

  Total costs 
   and expenses         12,816      8,474    2,469       117       553      767
                       -------    -------   ------    ------    ------    ------

  Operating loss ...   (11,550)    (8,110)  (2,379)      (13)     (234)    (458)

Other income 
(expense), net            (518)       806      141        (2)      (10)     (11)
                       -------    -------   -------    -------  -------  -------

Loss before provision
 for income taxes      (12,068)    (7,304)  (2,238)      (15)     (244)    (469)

Provision for income
 taxes                       1         12        1          1        1        1
                       -------    -------   -------    -------  -------  -------
Net loss ...........  ($12,069)   ($7,316) ($2,239)   ($   16)  ($ 245)  ($ 470)
                       =======    =======   =======    =======  =======  =======

Per Share Data:

Basic and diluted net
 loss per share       ($ 1.11)   ($ 0.68)   ($ 0.25)
                       =======    =======    =======

Common shares used 
  in computing net
  loss per share       10,869     10,750      8,800
                       =======    =======    =======


                                        Alyn                       Old Alyn     
                               ----------------------------    ----------------
                                               December 31,                    
                               ------------------------------------------------
Balance Sheet Data:             1998       1997       1996     1995       1994
                               ------     ------     ------     -----     -----

Working capital (deficit)     $ 1,439   $11,717     $23,494     ($382)    ($133)
Total assets                   26,961    31,127      32,203       128       193
Long-term obligations           7,316     5,501          --       128       128
Total stockholders' equity 
   (deficit)                   16,184    23,750      31,066     ( 490)    ( 245)



<PAGE>


   
ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATION

        The  following  discussion  contains  forward-looking   statements  that
involve risks and uncertainties. Our actual results could differ materially from
those  discussed  in the  forward-looking  statements  as a  result  of  certain
factors, including those set forth under "Risk Factors" under Part I, Item 1 and
elsewhere  in this Annual  Report on Form 10-K.  The  following  discussion  and
analysis should be read in conjunction with Item 6 (Selected Financial Data) and
our Financial  Statements and Notes thereto  appearing  elsewhere in this Annual
Report on Form 10-K.

Overview

        Since its  inception in 1990,  the Company has been engaged in research,
development,  and testing of its  advanced  metal  matrix  composite  materials.
Following its initial public offering in October 1996, the Company first focused
on establishing its manufacturing  facilities  followed by prototype  production
and  completed  its first  production  order in the third  quarter of 1998.  The
Company began  shipping  engine  cradles to General Motors for its EV-1 electric
vehicle in the third  quarter of 1998.  Production  under this  program has been
significantly  curtailed since General Motors has undertaken a successor program
called the NGV (Next  Generation  Vehicle).  The Company was selected to provide
twelve parts for the new NGV. These parts include  suspension,  cross-member and
control  arm  components  scheduled  for  delivery  in early  1999.  In the golf
industry,  San Diego-based  Carbite Golf placed an initial  production order for
its new Polar  Balanced(R)  Boralyn putters with the first deliveries  scheduled
for the second quarter of 1999. The MacGregor Golf Company  debuted its new line
of Tourney(R) Boralyn putters in January 1999.  Shipments are scheduled to begin
in the second  quarter of 1999.  Development  continues  with  Taylor  Made Golf
Company and True Temper Sports.  The Company received a $1,000,000 initial order
from Transnuclear,  Inc. for spent fuel storage casks, with shipments  scheduled
to begin in the first  quarter  of 1999.  Shipments  have  begun  for  aerospace
applications  utilizing both Boralyn and hard-alloy aluminum. The Company's disk
substrate  program has developed  several  prototype  disk products with varying
characteristics   and  has  provided  these  to  disk  drive  manufacturers  for
evaluation.  While the Company has achieved sales of Boralyn -based  products in
1998, there can be no assurance that any significant sales will be achieved. The
Company anticipates  incurring operating losses for the current fiscal year, and
may continue to incur  losses  thereafter.  There can be no  assurance  that the
Company will ever achieve profitability or maintain profitability,  if achieved,
on a  consistent  basis.  Moreover,  the  Company  has two  facilities  totaling
approximately  132,000  square  feet in Irvine,  California,  and has  committed
substantial  capital  to  equip  both  facilities  with  significant  production
capability.  Unless and until the Company achieves a significant level of sales,
the  Company  will  continue to have  substantial  production  overcapacity  and
underabsorbed costs that would cause the Company to incur substantial additional
operating losses.

Results of Operations

        For purposes of discussion, the results of operations for the year ended
 December  31,  1998 are  compared to the year ended  December  31, 1997 and the
 results of operations  for the year ended December 31, 1997 are compared to the
 year ended December 31, 1996.

     Total  revenues  for the year ended  December  31, 1998  increased  248% to
$1,266,000  from $364,000 in the year ended  December 31, 1997.  Production  and
prototype  orders for 1998  contributed  52% of total revenue as compared to 20%
for 1997.  The  Company,  which began  shipping  production  orders in the third
quarter of 1998, increased shipments in the fourth quarter.  Shipments were made
to  various  firms  in the  aerospace,  automotive  and golf  industries.  Total
revenues for 1997  increased 88% to $364,000 from $194,000 in 1996. The increase
was the result of  additional  prototype  sales of  Boralyn-based  products  and
revenue on custom-built tooling.

        Cost of goods sold for the year ended December 31, 1998 increased 1,572%
to $5,402,000  from $323,000 in the year ended  December 31, 1997. In 1998,  the
Company charged all excess  manufacturing  capacity costs to cost of goods sold.
In 1997, prior to completion of the Company's first manufacturing facility, only
labor,  material and overhead associated with actual sales went to cost of goods
sold with the remainder  charged to establishment  of manufacturing  facilities.
cost of goods sold increased 183% to $323,000 in 1997 from $114,000 in 1996. The
increase was primarily attributable to the lower margin on sales of custom-built
tooling and prototype sales.

     There were no expenses for the  Establishment of  manufacturing  facilities
during  1998 in that the  Company  had  completed  the  pre-operating  stage for
Boralyn at December 31, 1997.  Expenses for the Establishment of a manufacturing
facilities  in 1997  increased  591% to $1,809,000  from  $262,000 in 1996.  The
expenses were incurred for the additional  manufacturing  management and related
pre-operating  costs as the  Company  built  the  infrastructure  and  installed
machinery  and equipment to produce its Boralyn  products.  The increase in 1997
was the result of occupying the building for the entire year as compared to only
the fourth quarter in 1996.

        General and administrative expenses for the year ended December 31, 1998
increased 22% to $3,216,000 from $2,633,000 in the year ended December 31, 1997.
The increase was attributed to search fees and relocation costs of obtaining two
senior  executives,  including  a  new  chief  executive  officer.  General  and
administrative expenses for 1997 increased 101% to $2,633,000 from $1,310,000 in
1996.  The increase was primarily the result of doubling the Company's  staff in
preparation  for production,  including  recruiting,  professional  services and
other administrative costs.

        Selling and  marketing  expenses  for the year ended  December  31, 1998
decreased 10% to $1,230,000 from $1,371,000 in the year ended December 31, 1997.
The  decrease  was a result of  partnering  with OEMs and  sharing  the costs of
marketing programs.  Selling and marketing expenses are expected to rise in 1999
as the  Company's  sales  increase.  Selling  and  marketing  expenses  in  1997
increased 125% to $1,371,000  from $610,000 in 1996. The increase was the result
of an increase in marketing expenses incurred in the expanding marketing efforts
for Boralyn products

        Technology  development  expenses  for the year ended  December 31, 1998
increased 27% to $2,968,000 from $2,338,000 in the year ended December 31, 1997.
The increase was a direct  result of  development  efforts  associated  with the
Company's computer hard-disk drive program.  Technology  development expenses in
1997  increased  706% to  $2,338,000  from  $290,000 in 1996.  This increase was
attributable  to  an  increase  in  ongoing  development   programs,   including
establishment of the research facility in Fremont,  California, which is focused
solely on the computer  hard-disk market.  Technology  development  expenses are
expected  to increase as the Company  continues  to support the  development  of
Boralyn-based products.

Liquidity and Capital Resources

        At December 31, 1998, the Company had unrestricted  cash of $1.2 million
and working  capital of $1.4  million as  compared  to $11.7  million in working
capital at December  31,  1997.  The Company has funded its  operations  through
proceeds from its initial public offering in October 1996 of $33.3 million,  net
of expenses,  and through debt financing of $10.5 million, of which $6.5 million
was  completed  in December  1997 and $4.0  million was  completed in the second
quarter of 1998. The Company  received $4.5 million,  net of expenses,  from the
Common Stock Rights  Offering  completed in August 1998.  In January  1999,  the
Company completed an equity offering of $1.45 million, net of expenses. In March
1999, the Company completed an equity offering of $1.4 million, net of expenses,
and an  exchangeable  debt  offering  of $2.8  million,  net of  expenses.  Cash
balances  in  excess  of those  required  to fund  operations  are  invested  in
interest-bearing  high quality short-term  investment grade corporate securities
and government  securities in accordance with investment  guidelines approved by
the Company's Board of Directors.

        The Company's  future  liquidity and capital funding  requirements  will
depend on numerous  factors,  including  results of  marketing  its metal matrix
composite  materials,  their acceptance in the market,  the timing of production
orders and their delivery and the costs and timing of growth in sales, marketing
and manufacturing  activities.  The Company's working capital needs will rise as
the Company  increases  production.  The Company  intends to use additional debt
financing  for some of its  existing  and  future  working  capital  needs.  The
Company's  ability to obtain  future  working  capital  debt  financing  will be
dependent in part on the quality and amount of the Company's trade  receivables,
inventory and unsecured capital equipment. If the Company achieves its operating
plan for 1999, it believes that internally  generated funds,  cash on hand, debt
and equity investment capital raised by the Company in the first quarter of 1999
and planned  equipment  and accounts  receivable  financing  should  satisfy the
Company's  anticipated  capital  needs for the next 12 months.  However,  if the
Company  fails  to  complete  its  planned  equipment  and  accounts  receivable
financing,  inadequate  capital to finance  operations may result.  Also, if the
Company fails to reach its planned  revenue  levels,  additional  capital may be
required.  There can be so assurance the company will ever achieve a significant
level of sales or profitability.

Year 2000 Compliance.

        The Company is in the process of upgrading or replacing  its  accounting
and  management  information  systems to be Year 2000  compliant and believes it
will beYear 2000 compliant on a timely basis. The Company will use both internal
and external resources to reprogram and/or replace any deficiencies. The Company
is not  currently  aware  of any  other  incompatibility  and  believes  that no
material  expenditures  will be  required  and there  would not be any  material
effect on operations.  The Company believes its management  information  systems
are or will be Year 2000  compliant  prior to December 31, 1999. The Company has
determined  it has no exposure  related to its products.  Formal  communications
have been  initiated  with all  significant  suppliers  and large  customers  to
determine the extent to which the Company is vulnerable to such parties' failure
to address their own Year 2000 issue.  The Company  expects to have analyzed and
accessed the possible risk of significant business  interruptions as a result of
any such  party's  noncompliance  by June  1999.  At that  time,  any  necessary
contingency  plans will be developed to address any  material  consequences  the
Company could suffer if such party is not Year 2000  compliant.  However,  there
can be no guarantee  that the failure of other  companies to adequately  address
the Year 2000 issue will not have a material adverse effect on the Company.  The
Company expects to complete its Year 2000 compliance  efforts in 1999. The total
estimated project cost, which is not considered material, includes the estimated
costs and time  associated with the impact of third party  compliance.  However,
there can be no  guarantee  that these  estimates  will be  achieved  and actual
results could differ materially from those plans.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        See Item 14 for a list of the Alyn Corporation  Financial Statements and
Schedules and Supplementary Information filed as part of this report.

ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

        None
    

<PAGE>


                                    PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The  information  required  by  this  Item,  insofar  as it  relates  to
directors, is incorporated herein by reference to the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Stockholders scheduled
to be held on June 10, 1999.

Directors and Executive Officers of the Company

Name                 Age      Position

Arne van Roon        54       President, Chief Executive Officer and Director
Robin A. Carden      41       Founder and Director
Jon A. Knartzer      53       Vice President Operations
Richard L. Little    54       Vice President  Finance and Administration,
                              Chief Financial Officer and Secretary

Harry Edelson        62       Director
James L. Hesburgh    65       Director & Chairman of the Board
Michael Markbreiter  37       Director

        The business experience,  principal occupations and employment,  as well
as the periods of service,  of each of the directors  and executive  officers of
the Company during at least the last five years are set forth below.

         Arne van Roon, 54, has been President,  Chief  Executive  Officer and a
Director since April 15, 1999. Mr. Price is Chairman of the Company's  Executive
Committee and a member of the Compensation Committee.  From 1984 to 1999, he was
founder and President of Van Roon  Partners,  Ltd., a firm  specializing  in the
development and  implementation of growth strategies for emerging companies with
new  technologies.  From  1971  to  1984  he was  with  Philips  Electronics,  a
Netherlands-based  global electronics  company, in a variety of senior positions
in finance,  marketing and executive management in Holland, Germany, Italy, East
Africa and the Middle East. Mr. van Roon has a degree from Erasmus University in
Rotterdam, The Netherlands.

        Robin A. Carden, 41, is the founder of the Company and has been a 
Director since the Company's  formation in 1990.  Mr. Carden is a member of the 
Company's Executive Committee.  From the  Company's formation  until April 1998,
he was President and Chief Executive Officer. Prior to 1990, Mr. Carden was 
employed by Ceradyne Inc., a company  engaged in the development and production 
of advanced ceramics  products,  as Senior  Sales  Engineer, and was engaged in
developing civilian  applications for advanced ceramics products  originally  
developed for military use. Mr. Carden graduated from California State 
University,  Long Beach with a Bachelor of Science  degree.  A number of United 
States patents have been issued to Mr. Carden.

        Jon A.  Knartzer,  53, has been the Vice  President of Operations of the
Company since November 1998.  From 1996 to 1998 Mr.  Knartzer was Vice President
of Operations of Coastcast Corporation, a golf club head manufacturer.  In 1995,
he was Vice President of Operations of Enertech,  a  manufacturer/representative
of products for the nuclear power  industry.  From 1992 to 1995 Mr. Knartzer was
the  Director of  Operations  for  Accuride  International,  a  manufacturer  of
precision  ball bearing drawer  slides.  Mr.  Knartzer has a Bachelor of Science
degree in Industrial Technology from California State University, Long Beach and
a Master of Engineering degree from the University of California, Los Angeles.

        Richard  L.  Little,  54,  has  been  the Vice  President,  Finance  and
Administration and Chief Financial Officer of the Company since May 1997. He was
elected  Secretary in September 1998. Mr. Little was Executive Vice President of
d'Essence Designer Fragrances,  a marketer of fine perfumes and related products
from 1995 to 1997 and  President of d'Essence  International  from 1996 to 1997.
From 1994 to 1995, he was Chief Operating Officer and Chief Financial Officer of
Graphix  Zone,  a publicly  traded  producer of  CD-ROMS.  In 1989,  Mr.  Little
co-founded  Bainbridge  International  Holdings, a merchant bank specializing in
acquiring  middle  market  companies.  From 1986 to 1989,  Mr.  Little was Chief
Financial Officer,  Vice President Finance,  Treasurer and Secretary of Teradata
Corporation,  a publicly traded  manufacturer and marketer of supercomputers for
managing very large data bases. Prior to joining Teradata,  Mr. Little was Chief
Financial  Officer of Quotron  Systems,  a publicly  traded  provider of on-line
financial information  services.  Mr. Little has a Bachelor of Science degree in
Engineering  and a  Masters  of  Business  Administration  in  Finance  from the
University of California, Los Angeles. He is also a CPA.

        Harry  Edelson,  62, has been a Director of the Company  since May 1996.
Mr.  Edelson is Chairman of the  Company's  Audit  Committee and a member of the
Compensation Committee. Since 1984, Mr. Edelson has been the Managing Partner of
Edelson  Technology  Partners,  a series of four venture  capital funds with ten
large corporations as the limited partners. The focus of the funds is to provide
the corporate partners with access to high technology products and services. One
of the funds, Edelson Technology Partners III, is a principal stockholder of the
Company. Edelson Technology Partners, through its related funds, has invested in
approximately 80 companies  involved in a wide range of technologies,  including
telecommunications,     computers,    semiconductors,    specialty    chemicals,
environmental and publishing. Prior to founding Edelson Technology Partners, Mr.
Edelson was a  transmission  engineer at AT&T,  a senior  computer  engineer for
UNISYS and a technology  analyst for three  leading  investment  banking  firms,
Merrill  Lynch,  Drexel  Burnham  Lambert and First  Boston.  Mr.  Edelson has a
Bachelor of Science  degree in Physics  from  Brooklyn  College and a Masters of
Business Administration from New York University.

         James  Hesburgh,  65, has been a Director of the Company since December
1998 and Chairman of the Board since April 1999. Mr. Hesburgh is a member of the
Company's  Executive,   audit  and  compensation  Committees.  He  is  currently
President and CEO of James L. Hesburgh  International Inc., an export management
and international  consulting firm. He has previously  served as chairman,  CEO,
and owner of Donegal  International  Machinery  Ltd. in  Ballyshannon,  Ireland;
chairman of Hiller Aviation Inc.;  president of Intercole  Automation  Inc.; and
vice president of international operations for The Wheelabrator Corporation. Mr.
Hesburgh currently serves on the boards of Battley USA, USCS International Inc.,
Fremont  Funding,  FirstFed  Corporation  and First Federal Bank of  California,
Sinto  America  and  Roberts  Sinto  Corporation,  Saint  John's  Health  Center
Foundation and Chief Executives Organization.

        Michael  Markbreiter,  37, has been a Director of the Company  since May
1996.  Mr.  Markbreiter  is a  member  of the  Company's  Executive,  Audit  and
Compensation Committees. Since August 1995, Mr. Markbreiter has been a portfolio
manager for private equity  investments for Kingdon Capital  Management Corp., a
manager of investment  funds. In April 1994, he co-founded Ram Investment Corp.,
a venture  capital  company.  From March 1993 to  January  1994,  he served as a
portfolio  manager for Kingdon Capital  Management Corp. Prior to February 1993,
he worked as an analyst at Alliance  Capital  Management  Corp.  Since  December
1997, Mr. Markbreiter has been a Director of Global Pharmaceutical  Corporation,
a publicly traded generic pharmaceutical  manufacturing company. Mr. Markbreiter
graduated from Cambridge University with a degree in Engineering.

<PAGE>
ITEM 11.      EXECUTIVE COMPENSATION

         The  following  table sets forth  information  for the years  indicated
concerning the compensation awarded to, earned by or paid to the Chief Executive
Officer of the Company and the two most highly paid  executive  officers,  other
than the Chief Executive Officer (collectively,  the "Named Executive Officers")
for services rendered in all capacities to the Company during such period.
<TABLE>

                                            Summary Compensation Table

                                                Annual Compensation                        Number of
                                                                                           Securities
Name and Principal Position                                           Other Annual     Underlying Options       All Other
                                 Year       Salary      Bonus(2)      Compensation                           Compensation(1)
<S>                             <C>        <C>         <C>           <C>              <C>                   <C>

Steven S. Price                  1998      $170,830     $41,670            --                  --                 $5,950
     President and Chief         1997         --           --              --                  --                   --
     Executive Officer           1996         --           --              --                  --                   --

Robin A. Carden                  1998      $162,521        --              --                  --                 $7,200
     Founder, Formerly           1997       156,667        --              --                  --                  6,900
     President and Chief         1996       100,000     $28,500            --                  --                310,985
     Executive Officer

Walter R. Menetrey               1998      $148,408        --              --                  --                   --
     Formerly, Executive Vice    1997       117,708     $27,500            --                50,000                 --
     President and Chief         1996        65,000        --              --                  --                   --
     Operating Officer

Richard L. Little                1998      $135,000     $50,000            --                  --                 $2,400
     Vice President, Finance     1997        84,375        --              --                60,000                1,500
     and Administration          1996         --           --              --                  --                   --
     and Chief Financial                                   --              --                  --                   --
     Officer                                          

Jon A. Knartzer                  1998       $50,833        --              --                35,000                $800
     Vice President of           1997         --           --              --                  --                   --
     Operations                  1996         --           --              --                  --                   --



(1)   For 1998,  represents car  allowances for Mr. Price of $5,950,  Mr. Carden
      $7,200, Mr. Knartzer $800 and Mr. Little of $2,400.  For 1997,  represents
      car  allowances  for Mr.  Carden of $6,900 and Mr.  Little of $1,500.  For
      1996,  represents Mr. Carden's $4,800 car allowance,  $283,100 in deferred
      compensation and $22,995 interest on his loan to the Company.

(2)   In 1998,  Mr.  Little  received a $50,000  bonus that was paid in 1999. In
      1997 Mr. Little received a $20,000 bonus that was paid in 1998.
</TABLE>




<PAGE>



ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

         The  following  table sets  forth the number of shares of Common  Stock
beneficially  owned, as of April 4, 1998, by (i) each  stockholder  known to the
Company to be a beneficial owner of more than 5% of the Common Stock,  (ii) each
director and nominee for director  and (iii) the  directors  and officers of the
Company as a group.  Unless  otherwise noted, all shares are owned directly with
sole voting and dispositive powers. 
<TABLE>

                                                                                Beneficial Ownership
Name(1)                                                               No. of Shares                % of Total
<S>                                                                  <C>                          <C>

Kingdon Capital Management Corp.(2)                                        3,235,455                    29.37%
Robin A. Carden                                                            2,544,500                    22.31%
Harry Edelson(3)                                                             633,667                     5.56%
Steven S. Price(4)                                                           160,000                     1.40%
Richard Little(5)                                                             40,000                         *
Walter R. Menetrey(6)                                                         33,317                         *
Michael Markbreiter(7)                                                        31,667                         *
All executive officers and directors of the Company as a                   2,841,151                    24.91%
     group (six persons)(8)
</TABLE>



*Less than 1%.
(1)      The  address  for each of the  persons  in the table  below is c/o Alyn
         Corporation, 16761 Hale Avenue, Irvine, California 92606.
(2)      Includes shares of Common Stock held by M. Kingdon Offshore NV, Kingdon
         Associates, L.P. and Kingdon Partners, L.P. Does not include the shares
         of Common Stock underlying immediately  exercisable options that appear
         in the table above opposite the name of Michael Markbreiter, a Director
         of the Company and an employee of Kingdon Capital  Management Corp. Mr.
         Mark Kingdon is the sole shareholder, director and executive officer of
         Kingdon Capital Management Corp.
(3)      Includes  options  immediately  exercisable for 31,667 shares of Common
         Stock held by Mr. Edelson. Also includes 602,000 shares of Common Stock
         held by Edelson Technology Partners III, with respect to which Mr.
         Edelson disclaims beneficial ownership.
(4)      Includes options immediately  exercisable for 160,000 shares of Common
         Stock
(5)      Includes options immediately  exercisable for 40,000 shares of Common
         Stock.
(6)      Includes options immediately  exercisable for 33,317 shares of Common
         Stock.
(7)      Includes options immediately exercisable for 31,667 shares of Common 
         Stock.
(8)      Includes options  immediately  exercisable for 296,651 shares of Common
         Stock.  Does not  include (i)  602,000  shares of Common  Stock held by
         Edelson  Technology  Partners III, with respect to which Mr. Edelson, a
         Director,  disclaims  beneficial  ownership  and (ii)  shares of Common
         Stock held by Kingdon Partners, L.P., Kingdon Associates, L.P. and M.
         Kingdon Offshore NV, with respect to which Mr. Markbreiter, a Director,
         disclaims beneficial ownership.



ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Andromeda Enterprises, Inc.

         Andromeda  Enterprises,  Inc.,  a Delaware  corporation  ("Andromeda"),
received  $40,000 from the Company in 1998 for sales,  marketing and  consulting
services  performed by Andromeda on behalf of the Company.  Mr. Udi Toledano,
formerly a Director, principal stockholder and Chairman of the Board of the 
Company, is the President of Andromeda.


<PAGE>


   
                                     PART IV

ITEM 14.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
                   ON FORM 8-K

(a)     Documents filed with this Report.

               The following documents are filed as part of this report.

1.      Financial Statements

               The financial  statements are listed in the accompanying  List of
               Financial   Statements   covered   by   Report   of   Independent
               Accountants.

2.      Financial Statement Schedules

                      None

3.      Exhibits

        Exhibit
        Number  Description

        3.1*    Restated Certificate of Incorporation.
        3.2*    By-Laws of the Registrant.
        4.1*    Specimen Copy of Stock Certificate for shares of Common Stock.
        4.2*    Stockholder  Agreement,  dated as of May 1, 1996,  by and among
                the Company and certain stockholders of the Registrant.
        10.1*   1996 Stock Incentive Plan of the Registrant.
        10.2*   Employment  Agreement between the Company and Robin A. Carden,
                dated as of April 1, 1996, as amended by Amendment Number One,
                dated as of April 30, 1996.
        10.3*   Form of Employment Agreement between the Company and certain 
                senior executives.
        10.4*   Lease, dated as of June 12, 1996, between the Registrant and
                Taylor-Longman,with respect to premises at 16761 Hale Avenue,
                Irvine, California.
        10.5*   Sale of Goods Agreement and Exclusive License, dated as of 
                September 10, 1996, by and between Taylor Made Golf Company, Inc
                and the Registrant (for which confidential treatment has been
                granted with respect to certain provisions).
        10.6**  Exclusive Customer  Agreement,  dated as of May 13,1997, by and 
                between True Temper Sports and the Registrant (for which 
                confidential  treatment has been granted with respect to certain
                provisions).
        10.7    Lease, dated as of July 1,1997, as amended by First Amendment to
                Lease, dated as of December 23, 1997, between the Registrant and
                the Irvine Company, with respect to premises at 17021 Von Karman
                Avenue,Irvine,California.
        23.1    Consent of Independent Accountants
        27.1    Financial  Data Schedule for the year ended December 31, 1998. 
        99.1*   U.S. Patent Number 5,496,223, dated January 23, 1996

    (b)         Reports on Form 8-K.

                 None          ______________

          *    Incorporated  by  reference  to  the  Registrant's   Registration
               Statement  of Form S-1 (File no.  333-09143)  and any  amendments
               thereto.
          **   Incorporated by reference to the Registrant's Current Report on
               Form 8-K, dated August 13, 1997.
    


<PAGE>

   
                                   SIGNATURES

        Pursuant to the  requirements  of Section 13 or 15(d) 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.


                                           ALYN CORPORATION



                                       By: _______________________________
                                           Arne van Roon
                                           President and Chief Executive Officer

        Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.

   Signature                       Title                             Date


/S/ ARNE VAN ROON
-----------------------
Arne van Roon               President, Chief Executive           April 29, 1999
                            Officer and Director
                            (principal executive officer)

/S/ RICHARD L. LITTLE
-----------------------
Richard L. Little           Vice President, Finance and          April 29, 1999
                            Administration and Chief
                            Financial Officer (principal
                            financial and accounting officer),
                            Secretary
/S/ JAMES L. HESBURGH
-----------------------  
James L. Hesburgh           Director and Chairman                April 29, 1999


/S/ ROBIN A. CARDEN
-----------------------
Robin A. Cardem             Director                             April 29, 1999


/S/ HARRY EDELSON
-----------------------
Harry Edelson               Director                             April 29, 1999
    

/S/ MICHAEL MARKBREITER
-----------------------
Michael Markbreiter         Director                             April 29, 1999




                                       S-1
                            FORM 10-K ITEM 14 (a)(1)

                                ALYN CORPORATION
                          LIST OF FINANCIAL STATEMENTS

The following financial statements of Alyn Corporation are included in Item 8:

Report of Independent Accountants                                           F-2
Balance Sheet                                                               F-3
Statement of Operations                                                     F-4
Statement of Stockholders' Equity                                           F-5
Statement of Cash Flows                                                     F-6
Notes to Financial Statements                                               F-7

Schedules for which provision is made in the applicable accounting regulation of
the  Securities  and  Exchange  Commission  are not  required  under the related
instructions or are inapplicable and, therefore, have been omitted.


<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of Alyn Corporation

We  have  audited  the  accompanying  balance  sheet  of Alyn  Corporation  (the
"Company")  at  December  31,  1998 and  1997,  and the  related  statements  of
operations,  stockholders'  equity  and of cash  flows for the two  years  ended
December 31, 1998 and for the period from May 2, 1996 through December 31, 1996.
We  have  also  audited  the  statements  of  operations,  stockholders'  equity
(deficit)  and of cash  flows of Old Alyn for the  period  from  January 1, 1996
through May 1, 1996. These financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  audited by us present fairly, in all
material  respects,  the financial  position of Alyn Corporation at December 31,
1998 and 1997,  and the results of operations  and cash flows of the Company and
Old Alyn for the periods  described in the first paragraph  above, in conformity
with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 9 to the
financial statements,  the Company has suffered recurring losses from operations
which raises substantial doubt about its ability to continue as a going concern.
Management's  plans in regard to these matters are also described in Note 9. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


PRICEWATERHOUSECOOPERS LLP

Costa Mesa, California
January 28, 1999, except as to 
Notes 9 and 10, which are as of  March 23, 1999





<PAGE>

                                Alyn Corporation
                                  Balance Sheet

                                                 December 31,      December 31,
                                                     1998             1997 
                                                 ------------      ------------
Assets

Current assets:

  Cash and cash equivalents                    $  1,232,000        $13,126,000
  Restricted cash (Note 4)                        2,062,000                --
  Accounts receivable, net of
    allowance for doubtful
    accounts of $85,000 in 1998 
    and $25,000 in 1997                             781,000             94,000
  Inventories                                       401,000            172,000
  Other current assets                              424,000            201,000
                                               ------------       ------------
      Total current assets                        4,900,000         13,593,000

  Equipment, furniture and fixtures, net         20,703,000         13,302,000
  Other assets, net                                 626,000          3,454,000
  Intangibles, net of accumulated amortization
    of $258,000 in 1998 and $152,000 in 1997        732,000            778,000
                                              -------------       ------------

                                                $26,961,000        $31,127,000
                                             ==============       ============
Liabilities and Stockholders' Equity

Current liabilities:
  Accounts payable                            $     663,000       $    551,000
  Current portion of long-term debt               1,842,000            999,000
  Accrued and other current liabilities             956,000            326,000
                                                   --------          ---------
      Total current liabilities                   3,461,000          1,876,000

Long-term debt                                    7,316,000          5,501,000

Commitments and contingencies (Note 8)

Stockholders' equity:
  Preferred stock, $0.01 par value;
    5,000,000 shares authorized;
    no shares issued and outstanding                    --                  --

  Common stock, $0.001 par value;
    20,000,000 shares authorized;
    11,108,000 and 10,750,000 shares
    issued and outstanding at December 31, 1998
    and 1997, respectively                           12,000             11,000

  Additional paid-in capital                     37,796,000         33,294,000
  Accumulated deficit                           (21,624,000)       ( 9,555,000)
                                                ------------       ------------
      Total stockholders' equity                 16,184,000         23,750,000
                                                 -----------        ----------

                                                $26,961,000        $31,127,000
                                                ===========        ===========
See accompanying notes to financial statements



                                                 
<PAGE>

                                Alyn Corporation
                             Statement of Operations


                                          Alyn                     Old Alyn 

                           ---------------------------------    ---------------
                                     Year             Period        Period
                                                       from           from
                                     Ended        May 2, 1996   January 1, 1996
                                                       to             to
                                December 31,      December 31,       May 1,
                             1998         1997         1996           1996   

Net sales                 $1,266,000   $ 305,000   $  25,000        $ 104,000
Contract revenue                  --      59,000      65,000               --
                          ----------    --------   ---------         --------
 Total revenue             1,266,000     364,000      90,000          104,000

Costs and expenses:
 Cost of goods sold        5,402,000     323,000      80,000           34,000
 Establishment of
  manufacturing facilities       --    1,809,000     262,000               --
 General and administrative
  expenses                 3,216,000   2,633,000   1,257,000           53,000
  Selling and marketing    1,230,000   1,371,000     587,000           23,000
  Technology development   2,968,000   2,338,000     283,000            7,000
                           ---------   ---------   ---------        ---------
  Total costs and 
     expenses             12,816,000   8,474,000   2,469,000          117,000
                          ----------   ---------   ---------        ---------

  Operating loss         (11,550,000) (8,110,000) (2,379,000)       (  13,000)

Other income 
   (expense)             (   518,000)    806,000     141,000        (   2,000)
                         -----------   ---------   ---------        ----------
Loss before provision 
  for income taxes       (12,068,000) (7,304,000) (2,238,000)       (  15,000)

Provision for 
  income taxes                 1,000      12,000       1,000            1,000
                         -----------  ----------   ----------        ---------
Net loss                ($12,069,000)($7,316,000) ($2,239,000)      ($ 16,000)
                        ============  ===========  ==========        =========

Basic and diluted
 net loss per share          ($1.11)      ($0.68)      ($0.25)
                             =======      =======      =======
Common shares used in
 computing net loss 
 per share                10,869,293   10,750,000    8,800,205
                          ==========   ==========    =========


See accompanying notes to financial statements

<PAGE>

                                Alyn Corporation
                        Statement of Stockholders' Equity



                      Common Stock        Common Stock
                        Class A             Class B          Accumulated
                    Shares    Amount     Shares   Amount        Deficit
                  ------------------   -----------------     -----------
Old Alyn 
(Notes 1 and 5)

Balance at
 Dec. 31, 1995    1,700,000   $1,000    300,000   $325,000    ($816,000)

Repurchase of 
  common stock                         (200,000)  (217,000)   (  43,000)
Net loss                                                      (  16,000)
                  ----------  ------   ---------   --------    ---------
Balance at
 May 1, 1996      1,700,000   $1,000    100,000    $108,000   ($875,000)
                  =========   ======    =======    =========  ==========
________________________________________________________________________________

                      Preferred                       Additional
                        Stock        Common Stock       Paid-in    Accumulated
                    Shares Amount  Shares    Amount     Capital        Deficit
                    ------------- -----------------    ---------   -------------
Alyn (Note 1)
 Issuance of 
  common stock                    4,240,000  $ 4,000   $    1,000

Common stock issued
 in exchange for 
 Old Alyn common stock            3,760,000    4,000   (    4,000)

Common stock issued in
 initial public offering,
 net of offering costs            2,750,000    3,000   33,297,000

Net loss                                                            ($2,239,000)
                    -----  ----- ----------   ------  -----------  -------------
Balance at 
 Dec. 31, 1996        --     --  10,750,000   11,000   33,294,000  (  2,239,000)

Net loss                                                           (  7,316,000)
                    -----  ----- ----------   ------ -----------   -------------
Balance at 
  Dec. 31, 1997       --     --  10,750,000   11,000   33,294,000  (  9,555,000)

Common stock 
  contributed                      (500,000)      --         --

Common stock issued                 858,000    1,000    4,502,000

Net loss                                                           ( 12,069,000)
                    ----- -----  ----------  -------  -----------  -------------
Balance at 
  Dec. 31, 1998        --    --  11,108,000  $12,000  $37,796,000  ($21,624,000)
                    ===== =====  ==========  =======  ===========  =============



See accompanying notes to financial statements

<PAGE>
                                Alyn Corporation
                             Statement of Cash Flows

                                       Alyn                            Old Alyn
                           ----------------------------------------  -----------
                                                          Period        Period  
                                                           from          from
                               Year Ended December 31,     May 2,        Jan 1,
                                                          1996 to       1996 to
                                                          Dec 31,        May 1,
                                  1998         1997        1996           1996
                            ------------- ------------- -----------  -----------

Cash flows used in
 operating activities:
Net loss                      ($12,069,000) ($7,316,000) ($2,239,000) ($ 16,000)

Adjustments to reconcile 
  net loss to net cash used 
  in operating activities:
 Depreciation and amortization   2,395,000      856,000      111,000      1,000
 Provision for allowance for
  doubtful accounts                 60,000       95,000        2,000      8,000
Changes in operating 
  assets and liabilities:
 Accounts receivable           (   747,000) (   158,000) (    22,000) (  30,000)
 Inventories                   (   229,000) (   131,000) (    32,000)     7,000
 Other current assets          (   223,000) (    54,000) (   122,000)        --
 Deferred offering costs                                              ( 128,000)
 Other assets                      150,000  ( 3,385,000) ( 1,624,000)        --
 Intangible assets             (    60,000) (    99,000) (    60,000) (   1,000)
 Accounts payable                  112,000  (   394,000)     884,000  (   4,000)
 Accrued and other 
  current liabilities              630,000      134,000  (   588,000)    94,000
                                -----------   ---------   -----------  ---------
   Net cash used in
operating activities          (  9,981,000) (10,452,000) ( 3,690,000) (  69,000)
                              ------------- ------------ ------------  ---------
Cash flows used in 
  investing activities:
 Capital expenditures         (  7,012,000) ( 7,333,000) ( 5,075,000) (   4,000)
 Increase in restricted cash  (  2,062,000)
 Net cash flows used          ------------- ------------ ------------ ----------
  in investing activities     (  9,074,000) ( 7,333,000) ( 5,075,000) (   4,000)
                              ------------- ------------ ------------ ----------
Cash flows from financing
  activities:
 Proceeds from initial 
  stock offering                        --            --  33,300,000
 Payment of stockholder 
  note payable                                              (128,000)
 Proceeds from stockholder
  credit facility                                          4,650,000
 Repayment of stockholder 
  credit facility                                        ( 4,650,000)
 Proceeds from long-term debt    2,658,000    6,500,000
 Proceeds from common
  stock issued                   4,503,000    
                                 ---------    ----------   ----------    -------
Net cash flows provided 
  by financing activities        7,161,000     6,500,000   33,172,000        --
                                 ---------     ---------   ----------    -------
Net(decrease)increase in cash  (11,894,000) ( 11,285,000)  24,407,000  ( 73,000)

Cash and cash equivalents 
  at beginning of period        13,126,000    24,411,000        4,000    77,000
                                ----------    ----------  -----------  ---------
Cash and cash equivalents
 at end of period              $ 1,232,000   $13,126,000  $24,411,000  $  4,000
                               ===========   ===========  ===========  =========


Supplemental cash flow information:
Cash paid during the 
period for income taxes             $1,000       $12,000       $1,000    $1,000
                                ==========   ===========   ==========  =========

Cash paid during the
 period for interest              $799,000        $3,000     $144,000
                                ==========   ===========  ===========

Noncash investing and financing activities:
  Liability recorded for repurchase of common
     stock from stockholder                                             $260,000
                                                                        ========
See accompanying notes to financial statements




<PAGE>


                                ALYN CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

1.      Description of business and summary of significant accounting policies

     Description  of  business  Alyn  Corporation  (Alyn  or  the  Company)  was
incorporated  in Delaware in April 1996. In May 1996, the Company  acquired Alyn
Corporation (Old Alyn), a California  corporation,  whereby all of the 1,800,000
outstanding  shares of common  stock of Old Alyn  were  exchanged  at a ratio of
2.1-to-one for 3,760,000  shares of common stock of the Company  (0.02611-to-one
for 47,000 shares pre-split discussed below). Subsequent to the acquisition, Old
Alyn stockholders  owned forty-seven  percent of Alyn. As a result of the change
in control of Old Alyn, the  acquisition  was accounted for as a purchase.  

     Alyn provides customized metal matrix composite (MMC) solutions to meet the
specific  product needs of its customers in consumer and  industrial  markets in
the form of MMC and hard-alloy products. Old Alyn had developed technology,  for
which it obtained a patent in January 1996, for the application of Boron Carbide
in combination  with aluminum in lightweight  metal matrix  composites under the
name Boralyn.

     In July 1996, the Company's  Board of Directors  amended its Certificate of
Incorporation  to increase the number of shares  authorized of common stock from
110,000 to 20,000,000 and to authorize  5,000,000  shares of preferred stock and
declared an 80-for-one  split of its common stock.  All share amounts  presented
have been adjusted to give retroactive effect for this split.

     In October  1996,  the Company  completed  its initial  public  offering of
2,750,000  shares of common  stock at a price of $13.50 per share.  The  Company
received  net  proceeds  of  approximately   $33.3  million  after  underwriting
discounts and offering expenses.  Subsequently,  in October 1996,  approximately
$4.7  million of net proceeds  from the initial  public  offering  were used for
repayment of  principal,  accrued  interest  thereon and all other amounts owing
with  respect to a credit  facility  provided  by  stockholders,  and the credit
facility was terminated.

     In August 1998, the Company completed a common stock rights offering to its
existing  stockholders.  The Company  received net proceeds of $4.5 million from
the sale of  858,000  new  shares of common  stock.  Mr.  Robin A.  Carden,  the
Company's  founder,  transferred to the Company,  for no consideration,  500,000
shares of common stock  effectively  reducing  the net  increase of  outstanding
shares to 358,000.

Summary of accounting policies

Cash and cash equivalents
        Cash and cash  equivalents  consist  of cash on hand and held in  banks,
money market funds,  commercial paper and other  short-term  investments with an
original maturity of three months or less when purchased.

Inventories
        Inventories  are  stated  at the  lower of cost or  market,  cost  being
determined on a first-in, first-out basis.

 Equipment, furniture and fixtures
        Equipment,  furniture and  fixtures,  including  tooling,  are stated at
cost. Depreciation is computed using the straight-line method over the estimated
useful  lives of  individual  assets,  which  range  from 18 months to 20 years.
Amortization  of  leasehold  improvements  is recorded  using the  straight-line
method  over  the  shorter  of the  life of the  improvement  or the term of the
related lease.

Intangible assets
        Intangible assets  consisting of patents for the Boralyn  technology and
goodwill are amortized on a straight-line basis over the estimated economic life
of 10 years.  Intangible  assets are  periodically  reviewed for  impairment  to
ensure that they are fairly stated.  The Company reviews the  recoverability  of
intangible  assets by comparing cash flows on an  undiscounted  basis to the net
book value of the assets. In the event the projected undiscounted cash flows are
less than the net book value of the  assets,  the  carrying  value of the assets
will be written-down to their fair value, less cost to sell.

Revenue
     The Company  recognizes sales of product at the time of shipment.  Contract
revenue of $59,000 in 1997 was recognized as the related technology  development
costs  of  $59,000  were  incurred.  Contract  revenue  of  $65,000  in 1996 was
recognized as the related technology development costs of $39,000 were incurred.
Amounts  received prior to performance  are classified as customer  advances and
recognized as earned.  The Company  performs  on-going  credit  evaluations  and
maintains reserves for potential credit losses.

        In  1998,   three   customers   accounted  for  49%  of  total  revenue,
individually  22%, 15% and 12%. In 1997,  three  customers  accounted for 74% of
total revenue,  individually 48%, 14% and 12%. In 1996, two customers  accounted
for 38% of total revenue, individually 19% and 19%.

Technology development 

     Expenditures for technology development are research
and development costs and are charged to expense as incurred.

    Net loss per share
        Effective in the fourth quarter of fiscal year 1997, the Company adopted
Statement of Financial  Accounting Standards No. 128, "Earnings per Share" ("FAS
128") and the related  interpretations.  FAS 128 requires dual  presentation  of
Basic Earnings per Share ("Basic EPS") and Diluted Earnings per Share ("Diluted
EPS"). Basic EPS excludes dilution and is computed by dividing net income by the
weighted average number of common shares outstanding during the reported period.
Diluted EPS reflects the  potential  dilution  that could occur if stock options
were exercised. For all periods presented, stock options have been excluded from
the calculation as they produce an anti-dilutive  effect.  Basic and diluted net
loss per share for the  Company is based  upon the  weighted  average  number of
common stock shares outstanding during the year.

    Use of estimates in the preparation of financial statements
        The  preparation  of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period.

    Concentrations of credit risk
        The Company sells its products and services to various  companies across
several  industries,   and  therefore   management  believes  that  no  material
concentrations of credit risk exist.

    Fair value of financial instruments
        The Company's  financial  instruments consist primarily of cash and cash
equivalents, restricted cash, accounts receivable, accounts payable, accrued and
other current liabilities,  and long-term debt. These financial  instruments are
stated at current value, which approximates fair value.

    Stock-based compensation
        As permitted  by Statement of Financial  Accounting Standards  No. 123,
"Accounting for Stock-Based  Compensation"  (SFAS No. 123),  effective for 1996,
the Company continues to account for stock compensation costs in accordance with
the provisions of Accounting  Principles  Board Opinion No. 25,  "Accounting for
Stock Issued to Employees".

2.      Balance sheet components

                                                      December 31,  
                                                  1998             1997
                                                ---------        --------
Inventories:
   Raw materials                                $ 237,000        $157,000
   Work in process                                133,000              --
   Finished goods                                  31,000          15,000
                                                 --------        --------
                                                 $401,000        $172,000
                                                 ========        ========

    Equipment, furniture and fixtures:
      Machinery, equipment and tooling         $15,078,000    $ 9,262,000
      Furniture and office equipment             1,483,000      1,239,000
      Leasehold improvements                     7,259,000      3,353,000
      Construction in progress                           -        276,000 
                                                ----------    -----------
                                                23,820,000     14,130,000
      Less:  accumulated depreciation and
                amortization                   ( 3,117,000)   (   828,000)
                                                -----------    -----------
                                                $20,703,000    $13,302,000
                                                ===========    ===========

    Other assets
      Deposits on machinery and equipment        $  461,000      $3,139,000
      Other                                         165,000         315,000 
                                                 ----------      ----------
                                                 $  626,000      $3,454,000
                                                 ==========      ==========

Accrued and other current liabilities:
     Accrued compensation                        $  204,000       $  81,000
     Accrued professional fees                       66,000         138,000
     Accrued relocation costs                       561,000               -
     Other                                          125,000         107,000
                                                   --------        ---------
                                                 $  956,000       $  326,000
                                                 ==========       ==========

3.      Income taxes

     The  Company  accounts  for  income  taxes  under  the  liability   method.
Accordingly, deferred tax assets and liabilities are measured each year based on
the difference  between the financial  statement and tax bases of all assets and
liabilities at the current  expected income tax rates.  The provision for income
taxes for the three years ended December 31, 1998 is comprised  primarily of the
annual minimum California franchise tax.

    The components of deferred tax assets and liabilities were:

                                                         December 31,
                                                    ---------------------
                                                     1998          1997
    Deferred tax assets:
      Net operating loss carryforwards             9,767,000     4,465,000
      Accrued liabilities                            331,000        36,000
      Other                                           37,000        11,000
                                                  ----------     ---------
                                                  10,135,000     4,512,000
                                                  ----------     ---------
    Deferred tax liabilities:
      Equipment, furniture and fixtures             (807,000)     (360,000)
                                                  -----------   -----------
                                                    (807,000)     (360,000)
                                                  -----------   ----------- 
    Valuation allowance                           (9,328,000)   (4,152,000)
                                                  -----------   -----------
    Net deferred taxes                            $        --   $       --
                                                  ===========   ===========

4.      Long-term debt
                                                               December 31,
                                                           1998          1997
                                                        ----------   -----------
A $2,500,000, 42-month term loan 
   with a commercial bank.                              $2,002,000   $2,500,000

An $8,000,000, 72 month term facility with
   a major non-bank financial institution.               7,156,000    4,000,000
                                                         ---------    ---------
                                                         9,158,000    6,500,000
Less current portion of long-term debt                  (1,842,000)  (  999,000)
                                                         ----------  -----------
                                                        $7,316,000   $5,501,000
                                                        ==========   ==========

The aggregate maturities of long-term debt are as follows:

        Fiscal Year

           1999                     $1,842,000
           2000                      1,951,000
           2001                      1,929,000
           2002                      1,487,000
           2003                      1,630,000
          Thereafter                   319,000
                                    ----------
                                    $9,158,000
                                    ==========

     In December  1997,  the Company  established  a term loan with a commercial
bank.  Payments were interest only from January 31, 1998 to April 30, 1998. From
May 1, 1998 to October 31, 2001,  monthly payments are principal of $60,000 plus
interest  equal to the prime rate plus 1%. The current  prime rate is 7 3/4%.
     In December 1997, the Company also  established an $8,000,000 term facility
with a major non-bank financial institution. The Company has received 3 advances
to date totaling  $8,000,000:  (i)  $4,000,000  drawn December 31, 1997 at 9.29%
payable in monthly  installments  of $73,000  including  principal  and interest
beginning  February 1, 1998 to January 1, 2004,  (ii)  $2,000,000  drawn June 1,
1998 at 9.19% payable in monthly installments of $36,000 including principal and
interest  beginning June 1, 1998 to May 1, 2004, and (iii) $2,000,000 drawn July
11, 1998 at 9.17% payable in monthly installments of $36,000 including principal
and interest  beginning  July 11, 1998 to July 11, 2004.  The interest rates are
set at 3.5% over like-term U.S. Treasuries. At such time as the Company achieves
a specified level of profitability for two consecutive quarters,  the previously
fixed rate will  decrease by 1.0% for the remaining  term of that  advance.  The
facility is secured by  specific  manufacturing  equipment  owned by the Company
based upon a 75% advance rate.
 
     The  provisions  of the credit  facilities  require the Company to maintain
certain covenants including minimum cash and equivalents balances of $5,000,000.
The commercial bank has removed all covenants,  providing the Company  maintains
restricted  cash  balancesequal  to the principal  balance of the term loan. The
Company has  restricted  an amount  equal to the  principal  balance of the term
loan. The major financial  institution  amended the minimum cash and equivalents
balances  of  $5,000,000,  such  that if the  Company's  cash  balance  is below
$5,000,000 the major financial  institution may raise the interest rate .5%. The
major financial institution has removed all other covenants.

5.      Stock transactions - Old Alyn

        In April 1996,  Old Alyn  executed an  agreement to  repurchase  200,000
shares of the Series B common stock for  $260,000 in cash.  The cash was paid to
the stockholder in May 1996.

6.       Related party transactions

        The Company paid  $50,000 in 1998,  $60,000 in 1997 and $100,000 in 1996
to a firm managed by the former  Chairman of the Board for sales,  marketing and
consulting services.

7.      Stock options

     In July 1996, the Company  established a stock  incentive plan (the "Plan")
for key employees, non-employee directors and consultants to the Company who are
expected to  contribute to the  Company's  future growth and success.  Under the
Plan,  the  Company may grant  options  with  respect to a maximum of  1,000,000
shares of common stock. The options will be granted at not less than fair market
value and vest ratably over three or four-year periods with the exception of the
President and Chief Operating Officer and certain non-employee director options.
The options of the President  vested 80,000  shares at his  employment  date and
will vest 80,000 at his first  anniversary  of employment  and 40,000 shares for
each  additional  six  months  of  service  for a total  period  of four  years.
Non-employee  director options will be fully vested at the date of grant or vest
over a two-year  period.  No award may be granted  under the plan after June 30,
2006.
     Had compensation  cost been determined based on the fair value at the grant
dates for awards under the Company's  incentive  stock plan in  accordance  with
SFAS No. 123, net loss would have been increased by $1,577,000 ($0.15 per share)
in 1998, $773,000 ($0.07 per share) in 1997 and by $167,000 ($0.02 per share) in
1996.  As  required  by SFAS No.  123,  the fair value of each  option  grant is
estimated on the date of grant using the Black-Scholes option pricing model with
the  following  assumptions  for 1998:  historical  dividend  yield of 0.0%;  an
expected  life of five years;  historical  volatility  of 56.31% and a risk-free
rate of  return  of  5.50%,  for 1997:  historical  dividend  yield of 0.0%;  an
expected  life of five years;  historical  volatility  of 56.92% and a risk-free
rate of  return  of  6.28%,  for 1996:  historical  dividend  yield of 0.0%;  an
expected  life of five years;  historical  volatility  of 58.09% and a risk-free
rate of return of 6.34%.

The  following  table  summarizes  the  Company's  fixed stock option plan as of
December 31, 1998, 1997 and 1996.

                             1998              1997               1996   
                      ----------------   ----------------   -----------------

Fixed Options         Shares  Weighted-  Shares  Weighted-   Shares Weighted-
                       (000)   Average     (000)  Average     (000)  Average
                              Exercise           Exercise           Exercise
                                Price              Price              Price
                      ----------------   ----------------   ---------------- 

Outstanding at
  beginning of year     525    $11.72       383    $13.50
Granted                 544      7.47       261      9.41       383   $13.50
Forfeited              (140)    10.95      (119)    13.16              
                       -----                        -----       ---
Outstanding at
  end of year           929    $ 9.35       525    $11.72       383   $13.50
                        ===                 ===                 ===

Options exercisable
  at year end           319                 139                  25
                        ===                 ===                  ==
Weighted-average
  fair value of options
  granted during the year      $ 4.02               $ 5.44             $ 7.62


<PAGE>

The following table summarizes  information  about stock options  outstanding at
December 31, 1998:

                   Options Outstanding                    Options Exercisable 
              -----------------------------------      ------------------------
                            Weighted-              
   Range                     Average     Weighted-  
     of         Number      Remaining     Average         Number     Weighted-
  Exercise    Outstanding  Contractual   Exercise       Exercisable    Average
   Prices     at 12/31/98      Life       Price         at 12/31/98     Price
- ----------    -----------  -----------   ---------      -----------  --------

$4 to 6          52,000       9.86           5.07            7,000     $ 5.38
 7 to 8         400,000       9.25           7.62           80,000       7.62
 8 to 9         177,000       9.09           8.42           37,000       8.46
 9 to 10         30,000       8.44           9.69            9,000       9.66
11 to 13         31,000       8.54          11.75           18,000      11.28
13 to 14        239,000       7.82          13.47          168,000      13.50
               --------                                    -------     
$4 to 14        929,000       8.92         $ 9.10          319,000     $ 8.50
                =======                                    =======


8.      Commitments and contingencies

    Commitments and leases
        Future minimum lease payments  required under  non-cancelable  operating
leases are as  follows:  $897,000 in 1999,  $852,000 in 2000,  $872,000 in 2001,
$899,000 in 2002, $921,000 in 2003 and $4,020,000 thereafter.

     Rent expense  totaled  $825,000 in 1998,  $336,000 in 1997,  and $84,000 in
1996.  The Company  leases its principal  executive  office  facility in Irvine,
California,  under a lease  entered  into in June 1996 and ending on January 31,
2008, with a five-year renewal option.  The Company's second location is under a
ten-year lease commencing on February 1, 1998, with a five-year renewal option.


    Litigation and claims

        In the ordinary course of business,  the Company is generally subject to
claims,  complaints,  and legal actions.  The  litigation  process is inherently
uncertain  and it is possible  that the  resolution of such matters might have a
material adverse effect upon the financial position of the Company.  However, in
the opinion of  management,  such  matters  are not  expected to have a material
adverse effect on the financial position of the Company.

9.      Going concern

     The Company has incurred  losses from  operations  for the past three years
which  raises  substantial  doubt about the  Company's  ability to continue as a
going concern.  These losses were incurred as a result of its planned transition
from  a  ceramics  dealer  (Old  Alyn)  to  a  Boralyn  production  and  product
manufacturing  company (Alyn)  following its initial public  offering in October
1996. The Company began its first  deliveries of production  orders in the third
quarter of 1998,  achieving  revenues of $1.3 million for the year.  The Company
had  total  revenues  of less  than $1  million  for  the two  preceding  years,
consisting  primarily of prototype and tooling orders.  The Company  anticipates
additional growth in sales of its Boralyn products, although no assurance can be
given that the Company will achieve such increased  sales.  The Company recently
completed the funding of $5.65 million, net of expenses,  for additional working
capital (Note 10). Additional cash may be required to finance its operations and
growth going forward, although no assurance can be given that such financing, if
required,  would be  available.  The  financial  statements  do not  include any
adjustments that might result from the outcome of this  uncertainty.  Management
believes  that actions  presently  being taken provide the  opportunity  for the
Company to continue as a going concern.

10.     Subsequent  events

     During the first quarter of 1999, in a series of transactions,  the Company
raised an aggregate of $5.65 million, net of expenses,  in financing through the
issuance of 375,000 shares of Series A Preferred Stock, 1,500 shares of Series B
Preferred  Stock and a Senior  Exchangeable  Promissory  Note (the "Note").  The
Series A Preferred  Stock is convertible  into common stock beginning in January
2000 for a set price of $4.00 ("Set Price"),  while the Series B Preferred Stock
and the Note are currently  convertible into common stock at Set Prices of $3.57
and $3.65, respectively.  The Note, which is subordinated to other Company debt,
has a stated  rate of interest of 6%,  maturing on March 10,  2002.  Each of the
holders of these securities  received  registration  rights for the common stock
underlying  their  securities.  The Company is  required to register  the common
stock  underlying  the Series A Preferred  Stock within one year of issuance and
the  common  stock  underlying  the  Series B  Preferred  Stock  and the Note is
required to be registered in June 1999. Additionally,  each of these convertible
securities has a conversion rate that is based on the lesser of the Set Price or
a price based upon the market price at the time the  securities  are  converted.
The Series B Preferred  Stock and the Note are each  convertible at as much as a
15% discount to the market price if the market price at the time the  securities
are converted is less than the Set Price. At a minimum,  the number of shares of
common stock issuable upon  conversion of all of these  securities is 1,617,086.
In  addition,  the  holders of Series A  Preferred  Stock  received  warrants to
purchase  up to 120,000  shares of common  stock at a price  equal to the market
price of the common  stock at the  anniversary  date of issuance of the Series A
Preferred  Stock  ("Anniversary  Price").  The  actual  number of  warrants  are
determined by formula  based upon the  Anniversary  Price,  subject to a 120,000
share  limitation.  The holders of Series B Preferred Stock received warrants to
purchase  65,000  shares of common stock at a price of $3.82 and the Note holder
received  warrants  to  purchase  135,000  shares of common  stock at a price of
$3.04.







































<PAGE>
                               
                                                                   Exhibit 23.1


                       CONSENT OF INDEPENDENT ACCOUNTANTS


We  hereby  consent  to the  incorporation  by  reference  in  the  Registration
Statement on Form S-8 (No.  333-38821) of Alyn  Corporation  of our report dated
January 28,  1999,  except as to Notes 9 and 10, which are as of March 23, 1999,
appearing on Page F-2 of this Form 10-K.

PRICEWATERHOUSECOOPERS LLP


Costa Mesa, California 
April 26, 1999







<TABLE>

<S>                             <C>
PERIOD-TYPE>                   12-Mos
FISCAL-YEAR-END>                           DEC-31-1998
PERIOD-END>                                DEC-31-1998
CASH>                                          1232000
SECURITIES>                                          0
RECEIVABLES>                                    781000
ALLOWANCES>                                      85000
INVENTORY>                                      401000
CURRENT-ASSETS>                                4900000
PP&E>                                         20703000
DEPRECIATION>                                  3117000
TOTAL-ASSETS>                                 26961000
CURRENT-LIABILITIES>                           3461000
BONDS>                                               0
PREFERRED-MANDATORY>                                 0
PREFERRED>                                           0
COMMON>                                          12000
OTHER-SE>                                     16172000
TOTAL-LIABILITY-AND-EQUITY>                   26961000
SALES>                                         1266000
TOTAL-REVENUES>                                1266000
CGS>                                           5402000
TOTAL-COSTS>                                   5402000
OTHER-EXPENSES>                                7414000
LOSS-PROVISION>                                 101000
INTEREST-EXPENSE>                               518000
INCOME-PRETAX>                              (12068000)
INCOME-TAX>                                       1000
INCOME-CONTINUING>                          (12069000)
DISCONTINUED>                                        0
EXTRAORDINARY>                                       0
CHANGES>                                             0
NET-INCOME>                                 (12069000)
EPS-PRIMARY                                    (1.11)
EPS-DILUTED                                    (1.11)
        
</TABLE>