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Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
CONOLOG CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 52-0853566
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification
Number)
5 Columbia Road, Somerville, New Jersey 08876
(Address of Principal Executive Offices) (Zip Code)
1995/1996 Stock Option Plan
Certain Restricted Stock Awards
(Full Title of the Plans)
Arnold N. Bressler, Esq.
Milberg Weiss Bershad Hynes & Lerach LLP
One Pennsylvania Plaza
New York, New York 10119/0165
(Name and address of agent for service)
(212) 594-5300
(Telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the public:
As Soon As Practicable After Registration Statement Becomes
Effective.
Page 1 of 29 Pages
Exhibit Index Begins on Page 17
(Facing Page Continued on the Following Page)
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(Continuation of Facing Page)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Share Price Fee
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares, 468,000(1) $1.4063(2) $658,148.40 $182.97
par value
$1.00 105,000(3) 0.6875
per share 95,000(4) 1.4063(2) 205,786.00(5) 57.21
- -----------------------------------------------------------------------------------------------------------
Total 668,000 $863,934.40 $240.18
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Based upon the average of the high and low sales prices of the Common
Shares on the National Association of Securities Dealers Automated
Quotation Systems, Inc. on January 15, 1999 of $1.4063 per share.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(h)(i) and is the number of common shares as to
which options have been granted under to the 1995/1996 Stock Option
Plan.
(4) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and is the number of shares as to which options
may be granted under the 1995/1996 Stock Option Plan.
(5) Estimated solely for the purpose of calculating the registration fee
and is the product resulting from multiplying 105,000, the number of
common shares as to which options have been granted by $0.6875 per
share, the maximum exercise price of such options, and adding to such
sum the product resulting from multiplying 95,000, the number of common
shares registered by this Registration Statement as to which options
may be granted under the 1995/1996 Stock Option Plan by $1.4063, the
average of the high and low sales prices of the common shares on the
National Association of Securities Dealers Automated Quotation Systems,
Inc. on January 15, 1999.
Pursuant to Rule 416(c) under the Securities Act of 1933, as amended,
this Registration Statement also covers such additional indeterminate
number of shares as may become issuable pursuant to anti-dilution and
adjustment provisions of any options to purchase shares registered
hereby.
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EXPLANATORY NOTE
As provided in Instruction C to Form S-8, any prospectus that
is to be used for reoffers and resales of restricted securities must be filed as
a part of a Registration Statement on Form S-8. Accordingly, the Prospectus that
is to be used for reoffers and resales of shares of Common Stock acquired prior
to the effective date of this Registration Statement pursuant to the grant of
certain restricted stock awards has been filed as a part of this Registration
Statement.
PROSPECTUS
668,000 Shares
Conolog Corporation
Common Stock
This prospectus relates to 668,000 shares (the "Shares") of
Common Stock, par value $1.00 per share (the "Common Stock"), of Conolog
Corporation (the "Company"), 200,000 of which may be issued upon the exercise of
stock options granted by the Company under its 1995/1996 Stock Option Plan and
468,000 of which may be offered for sale for the account of certain shareholders
of the Company as stated herein under the heading "Selling Shareholders."
The Selling Shareholders have advised the Company that sales
of the Shares offered hereunder by them, or by their pledges, donees,
transferees or other successors in interest, may be made from time to time in
the over-the-counter market, through negotiated transactions or otherwise, at
market prices prevailing at the time of the sale or at negotiated prices. The
Shares may be sold by one or more of the following methods: (a) a block trade in
which the broker or dealer so engaged will attempt to sell the Shares as agent
but may position and resell a portion of the block as principal to facilitate
the transaction; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this Prospectus; and (c)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers. Sales may be made pursuant to this Prospectus to or through
broker-dealers who may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders or the purchasers of
Common Stock for whom such broker-dealer may act as agent or to whom they may
sell as principal, or both (which compensation as to a particular broker-dealer
may be in excess of customary commissions). One or more supplemental
prospectuses will be filed pursuant to Rule 424 under the Securities Act of
1933, as amended (the "Securities Act"), to describe any material arrangements
for the sale of the Shares offered hereunder when such arrangements are entered
into by any of the Selling Shareholders and any other broker-dealers that
participate in the sale of the Shares.
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The Selling Shareholders and any broker-dealers or other
persons acting on their behalf in connection with the sale of Common Stock
hereunder may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by them and any profit realized by
them on their sale of Common Stock as principals may be deemed to be
underwriting commissions under the Securities Act. As of the date hereof, there
are no special selling arrangements between any broker-dealer or other person
and any Selling Shareholder.
No period of time has been fixed within which the Shares may
be offered or sold. None of the proceeds from the sale of the Shares will be
received by the Company. The Company will pay all expenses with respect to this
offering, except for brokerage fees and commissions and transfer taxes for the
Selling Shareholders, which will be borne by the Selling Shareholders.
The shares of Common Stock offered hereby involve certain
risks. See "Risk Factors" beginning on page 17 of this Prospectus.
The Company's Common Stock is traded on the Nasdaq Smallcap
Market under the Symbol "CNLG." On January 20, 1999, the last sale price of the
Common Stock on the Nasdaq Market was $1.375 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is January 22, 1999.
No person has been authorized to give any information or to
make any representations not contained or incorporated by reference in this
Prospectus in connection with the offer described in this Prospectus and, if
given or made, such information and representations must not be relied upon as
having been authorized by the Company or the Selling Shareholders. Neither the
delivery of this Prospectus nor any sale made under this Prospectus shall under
any circumstances create any implication that there has been no change in the
affairs of the Company since the date hereof or since the date of any documents
incorporated herein by reference. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any securities other than the
securities to which it relates, or an offer or solicitation in any state or any
person to whom it is unlawful to make such offer in such state.
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THE COMPANY
General
Conolog Corporation, a Delaware Corporation (the "Company" or "Conolog") is
engaged in the design, manufacture (directly or through subcontractors) and
distribution of small electronic and electromagnetic components and
subassemblies for use in telephone, radio and microwave transmission and
reception and other communication areas that are used in both military and
commercial applications. The Company's products are used for transceiving
various quantities, data and protective relaying functions in industrial,
utility and other markets.
History
The Company was organized in 1968 and was engaged primarily in the design
and manufacture of electronic components and systems for military applications.
The Company, in July 1971, merged with DSI Systems, Inc., then engaged in the
development and manufacture of terminal viewers for digital retrieval of
microfilm. Later that year, the name was changed from DSI Systems, Inc. to
Conolog Corporation. By 1980 it became apparent that the military segment of the
business was growing while the terminal viewer segment was a drain on cash and
other resources. By the year end the terminal viewer business was discontinued,
allowing the Company to concentrate on its military business. In 1981 the
Company acquired one of its customers, INIVEN Corporation ("INIVEN"). At that
time, the Company was manufacturing, on behalf of INIVEN, a line of transmitters
and receivers used for controlling and transceiving the measurement of the flow
of gases and liquids, by gas and water utilities, for controlling the flow of
waste water and sewage and measuring and controlling traffic.
Since the 1980's, Conolog has been a supplier of
electromagnetic wave filters for major military programs such as the Patriot
Missile, Hawk Missile and Sea Sparrow Missile. In addition to these programs,
Conolog components are currently used by the military in tanks, Apache
helicopters and MK-50 torpedoes.
During 1987, the Company made the strategic decision to
redirect the Company's focus from military to commercial markets. Since that
time, the Company has refocused on manufacturing and marketing its products for
the commercial marketplace rather than depend on the military and
defense-related markets. The effort has included the introduction of new
products, the redesign of existing products and increased advertising and
marketing efforts, as permitted by its limited financial resources. The
percentage of revenues attributable to products manufactured for use in
commercial applications increased from approximately 4% of sales in 1981
($171,000) to approximately 82% of sales in 1998 ($616,752). The decision to
embark on this program entailed a major design effort,
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including the coordination of outside engineering consultants to develop a
complete line of products aimed at the Company's target markets. The primary
emphasis was on products for electric utilities, cogeneration of power, gas and
water companies, traffic control for departments of transport (DOT) and airports
utilizing DSP (Digital Signal Processing) technology.
Testing of the Company's first commercial product group, the
Teleprotection Series PTR-1000, commenced in the latter part of 1992 by
Bonneville Power Administration. This detailed test permitted the Company to
"fine tune" the product for power transmission applications. In March 1994, the
PTR-1000 was approved for use by such utility and thereafter by other utilities
and municipalities. To date, the Company has sold and delivered over 550
PTR-1000 sets to 14 utilities and 3 municipalities, most of which are installed
and in service.
Following the PTR-1000, in 1993, the Company introduced its
"98 Series" Tone Products for water, gas, telephone and oil companies, waste
water, traffic control and airports. In 1994 the Company unveiled the Power
Supply Series (allowing the various utilities to power-up the equipment from any
power source), the "40 Series" for transmission of analog variable data (water
levels, gas pressures and temperature) and the Multiplexer Series, which permits
the transmission of up to 900 separate data points, again using a telephone
line, microwave link, or satellite. In 1994 the Company also introduced the "68
Series" tone products. This series is the "98 Series" repackaged mechanically
specifically for customers with older systems wanting to upgrade to DSP
technology without the expense of a complete mechanical installation. The "68
Series" offers the entire line offered by the "98 Series". In 1995, the Company
introduced a stand alone "98 Series" transmitter and receiver for field
installations and a wide range fiber optic interface for the INIVEN products.
The fiber optic interface is also available as a stand alone coupling device.
The Company launched its industrial grade 1200 Baud Modem for data
transmission/communication, and completed the PTR-1000 Systems options.
Throughout 1997 and 1998, the Company designed and is in the process of
completing and building the PTR-1500 Quad System, Protection Equipment,
exclusively for the General Electric Company ("GE"), to be labeled GE-NS50
Series, for worldwide sales as detailed in the agreement between GE and Conolog
dated April 1, 1997.
Due to the end of the cold war and the downsizing of the
American military, the Company experienced unexpected sharp reductions of
military contracts in fiscal 1993 (the Company's fiscal year ends on July 31)
resulting in a 50% decline in the Company's sales for that year, down to
$1,486,298 from $2,997,308 in fiscal 1992. The sales of new products could not
replace the decrease in military sales. The Company, however, continued to
pursue sales as aggressively as its available resources would permit. Sales for
the fiscal year ended July
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31, 1996 were $1,924,466 as compared to $2,090,933 for the fiscal year ended
July 31, 1995. Sales for the fiscal year ended July 31, 1997 totaled $1,123,390,
a 42% decrease from $1,924,466 for the same period in 1996, and sales for the
fiscal year ended July 31, 1998 were $746,420, a 33.5% decrease for the same
period of 1997.
Revenues from the Company's military product sales represented
approximately 23%, 14% and 5.6% of sales of the Company in fiscal 1996, 1997 and
1998, respectively, reflecting the Company's emphasis on commercial sales and
markets.
Products
The Company is engaged in the design and manufacture of (i)
transducers, which are electro-magnetic devices which convert electrical energy
into mechanical and other forms of physical energy, or conversely convert
mechanical and other forms of physical energy into electrical energy; (ii)
digital signal processing (DSP) systems and electromagnetic wave filters for
differentiation among discreet audio and radio frequencies; (iii) audio
transmitters and modulators, for the transmission over telephone lines,
microwave circuits, or satellite, of electrical signals obtained from
transducers, data generated in electronic code form or by computers or other
similar equipment (not manufactured by the Company); (iv) audio receivers and
demodulators which are small systems which receive and decode the signals from
the audio transmitters and convert them into digital codes for input into
computers, teletypes or other similar equipment (not manufactured by the
Company) or convert such signals into mechanical or other form of energy, such
as opening or closing valves, or starting or stopping a motor; (v) magnetic
"networks" which are devices that permit the matching or coupling of different
types of communication equipment together or many identical or similar equipment
together or onto telephone or other transmission lines so as not to cause
interference; and (vi) analog transmitters and receivers, which permit the
coding/transmission and receiving/decoding of constantly variable data, such as
the water level in a tank, pressure in a pipe, or temperature, by actually
displaying the exact information at the receiving end in digital form for
storing in a computer or other devices, or by physically displaying the
information in a visual fashion such as a numerical readout or meter, and (vii)
multiplexer supervisory controls, which enable callers with high volumes of
supervisory data to transmit on fewer phone lines.
Such products are used in radio and other transmissions,
telephones and telephone exchanges, air and traffic control, automatic
transmission of data for utilities, teleprinting of transmitted data such as
news and stock market information and for use by electric utilities in
monitoring power transmission lines for faults and/or failures. The Company's
products may be used independently or in combination
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with other products to form a system type configuration, whereby the Company's
equipment is pre-assembled in a large cabinet with other equipment in a
configuration that would provide the end user with protection as well as
operational status displays.
Present Status/Business Product Description
The Company is presently engaged in four basic market
segments:
(A) Commercial Sales (Under the trade-name "INIVEN"
(a Division of Conolog))
- Direct sales to end users
- Sales to system assemblers
- Sales to contractors/installers
(B) Military Sales
- Direct contract sales to the military
- As subcontractor to systems producers
- Foreign governments
(C) Commercial Sales
- As manufacturing subcontractor to systems
producers.
(D) Other Ventures
- Short and long term qualified engineering and technical
services as well as human resource consulting (Under the trade
name "Atlas Design")
(A) Military Sales
Since 1992 the Company's engineering staff is dedicated to
"INIVEN" commercial designs and does not engage in any new designs for military
applications. The Company actively participates in bids only for parts the
Company has designed since inception in 1968. Presently there are approximately
400 designs that are applicable to these military sales.
Military sales are primarily for the Company's electromagnetic
wave filters used in military radios, vehicles (cars, trucks or tanks), portable
(backpack), special signaling equipment and exchanges (as in field command
posts), weapon/missile guidance and control (Patriot missile, Tomahawk,
Pave-Paws), torpedo active signal recognition and differentiation mounted in the
nose cone of the torpedo (MK-30, Captor, MK-50
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torpedoes), ship to ship teletype signaling filters used in deployment of ships
(UCC-1 and UCC-4 systems) as well as many other signaling applications where
accurate electromagnetic frequency control is required.
The Company markets the above military sales directly and
through independent manufacturing sales representatives on a commission basis.
(B) Commercial "INIVEN" Sales and Products
"INIVEN" equipment is designed around four (4) core
product groups:
(1) PTR Teleprotection Series
(Protective Tone Relaying Communications Terminal, which includes
the PTR-1000 and the PTR-1500, under development and designed
exclusively for GE to market.
(2) Audio Tone & Telemetry Equipment (Audio Tone Control,
Telemetering and Data Transmission Systems), which includes
Series "98", "68", "40" and "GEN-1".
(3) Multiplex Supervisory Control System
(4) Communication Link Multihead Fiber Optic Couplers and Industrial
Grade 1200 Baud Modems.
(1) PTR-1000 Teleprotection Series
This product is designed for use exclusively by electric power
generators (electric utilities and cogenerators) in order to protect their
transmission and distribution lines. The PTR-1000, by monitoring the output
signal of the transmission equipment in less than one hundred of a second,
protects the transmission and distribution lines.
The PTR-1000 are installed in pairs, one unit at each end of
the line. Each unit is connected and in constant communication with the other,
as they continuously monitor the line for faults. In the event of a fault
occurring (such as a downed line or a short circuit) at either end and when
confirmed by the receiving PTR-1000 unit, the line is immediately isolated for
shut down, averting costly damage and downtime.
The PTR-1000 system is composed of a transmitter, dual
receivers, a logic card (brain center and controller of the system), relay
module, line interface module and power supply module. The transmitters at each
end are independent and transmit (continuously) the status (information being
monitored) at their end of the line.
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In the event of a fault, the information is transmitted to the
PTR-1000 at the other end of the line and once confirmed by both its receivers
(this duality is designed such that both receivers must agree before any action
is taken), it will, when programmed to do so, isolate that end of the line.
Generation and distribution of electric power entails expensive equipment at
both ends of the line. Faults causing interruption of transmission can cause
costly replacement of failed equipment and loss of revenue caused by downtime
for repairs.
The PTR-1500, designed exclusively for GE in accordance with a seven
year agreement, is a quad system and performs as 2 duals or 4 singles with many
unique features such as multiple line operation, event recording with date stamp
with optional analog or digital transmission modes including optic fiber
interface.
The PTR Teleprotection Series is designed for global use by
electric utilities and any entity generating power for its own consumption with
resale of surplus power to an electric utility, such as cities, municipalities,
cooperatives and large corporations that find it more economical to generate
their own electricity.
The PTR-1000 target market is worldwide, as follows:
New installations; i.e., new transmission lines, new
distribution segments, for utilities and cogenerators.
Existing installations not properly protected, improving
efficiency and down time.
Existing installations for upgrading to PTR-1000 technology,
again improving efficiency and down time.
Sales efforts for the PTR-1000 are presently being conducted
by the Company's marketing executives, through independent manufacturers'
representatives and through distributors. Sales are targeted primarily to the
largest utilities and co-generators.
According to McGraw-Hill, Inc. Electrical World (Electric
Utilities of the United States), in the United States alone, there are over 500
large entities generating electricity.
They are:
- Investor-owned
- Municipal Systems
- Cooperative Systems
- Federal, State and District systems.
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To date, the Company has sold and delivered over 550 PTR-1000 sets to 14
utilities and 3 municipalities, most of which are installed and in service.
(2) Audio Tone and Telemetry Equipment
For many years there has been a need for a modularly
independent system that would permit a user, from a distance, to control
functions such as opening a valve, starting a motor, shutting down a compressor,
changing a traffic signal, control landing lights at an airport, activate a
hazard warning on a highway, and in return allow the user to receive
information, such as the liquid level in a tank, the pressure in a pipe, the
rate of flow out of a compressor, the flow of traffic, the status of a traffic
light, airport lights, or confirmation that a command was performed. Such
information is transmitted and received and the control functions are performed
from a distance utilizing telephone lines, microwave link or direct wire.
These applications, by their nature, can be accomplished with
slow speed signaling systems composed of a transmitter on one end and a receiver
on the other to carry out the necessary instructions provided by the
transmitter. Each set (transmitter/receiver combination) is called a channel.
Because of the slow speed, up to 30 channels could be made to transmit and
receive signals, in either direction on a single telephone line, microwave link
or direct wired line at the same time. This parallel transmission permits each
transmitter/receiver pair to be independent of all the others.
This product segment includes the first generation equipment,
known as GEN-1, followed by later generations which include technological
improvements and programmable capabilities to include:
GEN-1 Series - First generation with electromagnetic modules
and first generation programmable modules without electromagnetic modules.
"98" and "68" Series - The latest generation applies DSP and
microprocessor technology with full programmability, in the field or at the
factory.
"40" Series - Designed to function with the "98" or "68"
series; transmits and receives variable analog data.
GEN-1 and GEN-1 Programmable Series
The diversity of applications for this equipment makes it
available for a wide range of users who are not restricted to a single industry.
Typical industrial uses include: the measurement of water and gas, waste water,
gasoline, oil, traffic, and electricity. Typical users include: utilities,
co-generators, airports, navy yards, telephone companies, paper and pulp
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processors and wherever remote control and data acquisition is
required.
Because of the ease of use and installation, there is much
GEN-1 type equipment installed and used in the United States by a wide spectrum
of diverse users. Since the Company's line has a distinct mechanical
configuration, the Company designed its GEN-1 Programmable units and other
improvements as replacements for existing units. These account for approximately
18% of the Company's commercial sales. The Company's line of GEN-1 equipment is
extensive and provides the user with the ability to perform multiple control
functions, status monitoring as well as continuous variable data monitoring,
such as a level in a tank or pressure gauge.
Sales for this line are primarily for the replacement of
existing installations and for expansion of these installations where it would
not be economical to install the latest technology, which would not be
mechanically compatible.
Sales to this market are made in the same manner as the
PTR-1000 market except that manufacturers' representatives specialize in selling
to this diverse market.
"98," "68" and "40" Series
These series represent the Company's latest designs in the
audio tone equipment utilizing the more advanced DSP technology, which provides
high accuracy and long term stability. These features have allowed the Company
to greatly improve the scope, density and number of functions that can be
performed on a single phone line, microwave link or direct line.
Given this technology and the high-reliability and quality
standards of the Company's products, the Company began in the first quarter of
1994 to offer a 12 year warranty for all of its commercial products. This
warranty has been favorably received by customers. Based upon its past
experience, the Company does not believe that its extended warranty will result
in any material repair or replacement expenses.
Sales of these products are made by the same agents who sell
the Company's GEN-1 products, but are also directed to encompass more
sophisticated users with larger amounts of data and control points. The
mechanical configuration of the "98" series is more compact, permitting more
equipment in a given space, while performing many more functions when it is
connected to the "40" Series. The "68" Series is the "98" Series repackaged
mechanically specifically for customers with older systems permitting them to
upgrade their systems to DSP technology. The "40" Series, when connected to the
"98" or "68" in the same chassis, permits the continuous monitoring of variable
data. Typical applications for these products include transmission of the
variable data (such as volume, temperature, pressure and moisture) for water,
gas, industrial gases, oil, gasoline,
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transportation equipment and telephone exchanges, and for use at airports,
tunnels and bridges and for security and electricity systems.
(3) Multiplex Supervisory (IM) Control System
This product is a response to the cost and scarcity of
dedicated phone lines (connections whereby the phone link is dedicated to one
subscriber), and enables customers with high volumes of supervisory data (where
many functions are monitored from a single site) to transmit data on fewer phone
lines (i.e., with more data per channel, up to a maximum of 30 channels per
line).
Using the "98" DSP Series as its communications link, the
Company designed the Multiplexer Supervisory Control System to handle 8 times
the normal capacity per channel. The microprocessor based system allows a single
telephone line to handle up to 900 data inputs.
This product line, because of its data density capability, may
be utilized for a very broad range of applications. This product has only
recently been introduced and the Company's sales efforts for it are being
conducted through its existing independent manufacturers sales representatives.
(4) Fiber Optic Link and Data Modem
The expansion of fiber lines by the Company's customers and
their need to switch equipment from phone lines to fiber prompted the Company to
design and introduce a fiber-optic-coupler line to interface with the many
different fiber heads. In addition to complete data interface couplers the
Company launched a series of 1200 Baud Modems (Industrial Grade) for operation
under the same environmental specifications in line with the Company's products.
(C) Commercial Subcontract Manufacturing to Systems Producers
Since the downsizing of the American military, the Company has
actively sought manufacturing subcontract orders to fill the production void
created by the severe drop in military-related production. In June 1996 the
Company negotiated and entered into a renewable annual agreement with the
General Electric Company, GE Electrical Distribution and Control and its
participating affiliated companies for the manufacture of sub-systems, board
assemblies and magnetic filters and other products consistent with the Company's
expertise. The success of this agreement has prompted the Company to pursue
subcontracting agreements with other system producers to more fully utilize the
Company's manufacturing capacity.
On April 1, 1997, the Company signed an exclusive distribution
with the General Electric Company to develop and manufacture an advanced tone
protection series product, the PTR
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1500. Under the terms of the agreement, General Electric plans to market the
product world wide beginning in 1998. ( SEE: Recent Developments).
Recent Developments
The Company delivered the first production PTR 1500 series
tone protection products to General Electric for evaluation in May 1998. These
units were part of the 7 year exclusive and renewable OEM Purchase Agreement
with GE Power Management a subsidiary of General Electric Corporation (GE). The
PTR-1500 will be marketed as the GE Model NS50 and will have many advanced
features including quad channels and optional addressable status and event
recorders. The design of the prototypes for the PTR 1500 series were essentially
completed during fiscal 1997 and production boards were included in inventory at
July 31, 1997. Upon acceptance by GE, the Company intends to commence shipping
production units for delivery during fiscal 1999.
The Company's new INIVEN Multiplexer was tested for 2 way
radio operation to provide 8 analog and 16 status functions bi-directionally at
a single site. The Company introduced this radio link product line in the second
half of 1998.
In September 1998, the Company completed the sale of its
building resulting in $717,000 net proceeds to the Company. The transaction also
provides for a three year rent-free lease to the Company of approximately 38% of
the total space.
Also in September 1998, the Company completed the acquisition
of the assets of Atlas Design, Inc. for $145,000 in cash. Atlas Design provides
short and long term qualified engineering and technical staff to the country's
leading companies as well as human resource consulting. The integration Atlas
Design with Conolog will provide a pool of project engineering leaders and
software designers in support of Conolog's longer term contracts including the
GE PTR-1500 series.
Both the sale of the building and the acquisition of Atlas
Design, Inc. is in line with Conolog's expansion plan through acquisitions,
mergers and GE software support.
Public Offering, August 16, 1995
On August 16, 1995, the Company offered 235,750 Units (the
"Units") at a price of $10.00 per Unit. Each Unit consisted of two (2) shares of
Common Stock, par value $1.00 per share ("Common Stock"), and one (1) Redeemable
Class A Warrant for Common Stock ("Class A Warrant"). The Common Stock and Class
A Warrants were immediately detachable and separately tradable. Each Class A
Warrant entitled the holder to purchase one share of the Company's Common Stock,
at an exercise price of $6.00, subject to adjustment, from August 17, 1996
through August 16, 2002 (extended from August 6, 1998). The Class A Warrants are
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subject to redemption by the Company at anytime after August 17, 1996 on not
less than 30 days notice at $.05 per warrant, provided the average closing price
of the Common Stock for 20 consecutive trading days ending within 15 days prior
to the notice exceeds $7.20 per share.
The costs of the offering were deducted from the proceeds from
the sale of stock.
On August 16, 1995, the Company effected a 1-for-100 reverse
stock split of its Common Stock on all shares of Common Stock outstanding.
On August 16, 1995, holders of 19,360 shares of the Company's
Series B Preferred Stock (including Robert Benou and Arpad J. Havasy, officers
and directors of the Company) converted their shares of Series B Preferred Stock
into 387,200 (3,872 post-split) shares of Common Stock.
On August 16, 1995, $381,533 of the $420,179 of accrued
dividends on the Series B Preferred Stock at December 31, 1994 were converted
into 76,307 shares of Common Stock (represents a $5.00 per share assigned value
of Common Stock) and the remaining dividends due to such holders (including
Messrs. Benou and Havasy) were waived.
On August 16, 1995, accrued salaries through April 28, 1995 of
$309,109 owed by the Company to Mr. Benou were converted into 61,822 shares of
Common Stock (represents a $5.00 per share assigned value of Common Stock).
On August 16, 1995, in connection with the August 1995
Offering, the Bank exchanged their existing loan agreement for the following:
(a) $250,000 cash
(b) $1,025,000 five-year term loan
(c) 375,000 common shares of the Company
The debt forgiveness of $1,232,728 on restructuring of the
obligation less the tax benefit thereon is accounted for as an extraordinary
gain to the Company.
Public Offering January 21, 1998
On January 21, 1998 the Company offered to the public 700,000
units (the Units) at a price of $5.00 per unit. Each unit consisted of one (1)
share of Common Stock, par value $1.00 per share (Common Stock), and four (4)
Redeemable Class A Warrants for Common Stock (Class A Warrants). The Common
Stock and Class A Warrants are detachable and trade separately.
15
<PAGE> 16
Each Class A Warrant entitles the holder to purchase one (1)
share of the Company's Common Stock, at a exercise price of $6.00, subject to
adjustment, from January 22, 1998 through August 30, 2002. The Class A Warrants
are subject to redemption by the Company commencing the earlier of (i) 24 months
from the date of the offering or (ii) 12 months from the date of the offering,
with the consent of the underwriter, on not less than thirty (30) days notice at
$.05 per Warrant, provided the average closing price of the Common Stock exceeds
$7.20 per share for twenty (20) consecutive trading days ending within fifteen
(15) days prior to the notice.
On March 6, 1998, the Company raised an additional $110,055,
net of expenses, from the sale of an over-allotment of 25,300 shares of the
Company's common stock.
The offering raised $2,788,642 cash, net of offering costs.
STRATEGY
The Company's strategy is to exploit new commercial markets by
continuing to develop new products and enhance existing products to improve both
its market share and competitive position. Growth in commercial sales is
expected to come through internal growth of existing products, new product
introductions and the expansion of regional markets to meet the growing needs of
its customers for more sophisticated and comprehensive products and services.
The Company introduced a fiber optic digitizer during fiscal 1996. The Company
believes the largest growth opportunity remains with the electric utility
market, although it intends to reach other industrial and utility markets such
as railroad and waste water, respectively. The Company began an advertisement
program during 1996 and devoted substantial resources as available for
promotion. The Company intends to participate in various trade shows, such as
the Utilities Communications Council and IEEE/PES during the forthcoming year.
The Company will continue to seek out and broaden its base of
manufacturer reps and other marketing strategies to strengthen its market
presence.
The Company will also continue its expansion plan through
acquisitions, mergers and outsourcing.
The Company's executive offices are located at 5 Columbia
Road, Somerville, New Jersey 08876, telephone (908) 722-8081.
16
<PAGE> 17
RISK FACTORS
In making comparisons with other investments or in considering
the success of other investments, one should bear in mind that the success of
any investment depends upon many factors including opportunity, general economic
conditions, experience and competence of management. There is no representation
that the same positive factors are present in this Company which have been
present in like ventures that have been successful.
Any person who is considering the purchase of the Securities
offered herein should carefully consider the adverse factors described below.
Any one or more of these factors could have a negative effect on us of such
impact as to cause the value of our securities to be greatly diminished.
1. Working Capital; Stockholders' Equity; Prior Periods'
Losses and Profits. At October 31, 1998, we had working capital of $4,636,344
and stockholders' equity of $4,892,837. Our continued existence is dependent
upon us successfully expanding our business and attaining profitable operations.
We reported income of $281,826, losses of $1,123,391, $3,810,736, and income of
$291,754 for the quarter ended October 31, 1998, and the years ended July 31,
1998, 1997 and 1996, respectively. The profit for the quarter ended October 31,
1998 was primarily attributable to the sale of our building which resulted in
extraordinary income of $413,489. The profit in 1996 was only due to the debt
extinguishment of $1,232,728, which after the deferred tax asset of $492,352
resulted in extraordinary income of $740,376. The profits (losses) reported
included inventory write-offs of $410,759, $28,101, and $50,281, for years 1998,
1997 and 1996, respectively. In addition, reported interest expense for October
31, 1998 was $0, and $22,447, $81,025, and $131,854 for the years 1998, 1997 and
1996, respectively.
2. Working Capital; Cash Flow; Backlog. At October 31, 1998,
we had working capital of $4,636,344. At July 31, 1998, we had working capital
of $4,192,541. For the periods ended October 31, 1998 and July 31, 1998 cash
flow used in operations amounted to $494,023 and $1,128,338. We have no material
cash commitments for the current period other than those consistent with
supporting existing orders, new orders and contracts. Funds to support these
commitments will be provided for from cash on hand, new receivables and, if
necessary, borrowings. As of July 31, 1998 we had a backlog of $1,400,000. The
backlog of orders for our PTR-1000 series of products are subject to the terms
of the blanket-contracts with certain of our largest customers. See "Risk
Factors-Dependence on Large Customers." The terms of such contracts are not
binding and only represent potential purchases, whereby we set certain prices
for our products for the duration of the contract.
3. Risks Attendant to Expansion. Like any business enterprise
operating in a specialized and competitive market, we are is subject to many
business risks which include, but are not
17
<PAGE> 18
limited to, unforeseen marketing and promotional expenses, unforeseen negative
publicity and competition. Many of the risks inherent in our business may be
unforeseeable or beyond the control of our management. There can be no assurance
that we will successfully market our products or develop new products in a
timely or effective manner, which would materially adversely affect our
operating results.
4. Risks Associated with Potential Acquisitions and Mergers.
We are seeking to expand into new commercial markets and may do so by acquiring
complementary businesses. Our strategy is subject to the following risks. We may
not be able to identify suitable acquisition candidates. If the purchase price
includes cash, we may need to use all or a portion of our available cash. Even
if we do identify such suitable candidates, we cannot assure you that we will be
able to make such acquisitions on commercially reasonable terms. We may not be
able to consummate any acquisition or successfully integrate the acquired
services, products and personnel of any acquisition into our operations.
Acquisitions may cause a disruption in our ongoing business, distract our
management and other resources and make it difficult to maintain our standards,
controls and procedures. We may not be able to retain key employees of the
acquired companies or maintain good relations with its customers or suppliers.
We may be required to incur additional debt. We may be required to issue equity
securities, which may be dilute to existing shareholders, to pay for
acquisitions.
5. Minimal Sales Staff. We employ only 2 marketing executives.
In 1995, the Company elected a Vice President of Marketing and Sales who
introduced a comprehensive advertising campaign for the major product lines in
water/waste water and utility publications appearing monthly. In addition, the
Company has signed up to attend the major shows pertaining to water, waste water
and power utilities. Although the response to these efforts have shown promise,
the success of the Company's future marketing efforts will depend on the market
environment and the needs of the economy.
6. Reliance on Component Manufacturers. We are dependent on
outside suppliers for all of the subcomponent parts and raw materials necessary
to manufacture our products. A shortage, delay in delivery, or lack of
availability of a given part could lead to manufacturing delays, which could
reduce sales until the problem is remedied. All electrical components of our
products are standard stock items for which a replacement vendor can be readily
obtained. We are not dependent upon any single supplier. We purchase some custom
parts, primarily printed circuit boards. The failure of a vendor of one of these
customized components could cause a lengthy delay in production, resulting in a
loss of revenues.
7. Dependence on Present Management. Our success is dependent
upon the services of our current management, particularly Robert S. Benou, our
President, and our key
18
<PAGE> 19
engineers. Mr. Benou has entered into an employment agreement with us pursuant
to which Mr. Benou will be employed by us through May 31, 2002, however, if the
employment of Mr. Benou by us terminates, or he is unable to perform his duties,
we may be materially and adversely affected. We intend to obtain key man
insurance on the life of Mr. Benou in the amount of $1,000,000, to be payable to
us. If we were to lose the services of any of our other key employees, there is
no assurance that we would be able to locate and retain a qualified replacement.
The prolonged lack of availability of any current member of senior management,
whether as a result of death, disability or otherwise, could have an adverse
effect upon our business.
8. Competition: Rapid Technological Change. The market for our
products is very competitive. There are several companies engaged in the
manufacture of products of the type we produce, most of which are substantially
larger and have substantially greater name recognition and greater financial
resources and personnel. The principal elements of competition in our markets
include product quality and reliability, price, service and delivery.
Competition is expected to continue and intensify. The market is also
characterized by rapid technological changes and advances. We are an
insignificant factor in the industry. There can be no assurance that we will be
able to develop or acquire new products to keep us competitive or allow us to
stay competitive in general. Lack of market acceptance for our existing or new
products, our failure to introduce new products in a timely or cost effective
manner or our failure to increase functionability of existing products or remain
price competitive, would materially adversely affect our operating results.
There can be no assurance that we will be successful in its product development
efforts.
9. Dependence on Large Customers. Sales to our major customer
in fiscal 1998 (Bonneville Power Administration) totaled $424,849 (20% of net
sales). Sales to our two major customers during fiscal 1997 (General Electric
and Bonneville Power Administration) totalled $255,500 and $200,000,
respectively (22% and 18%, respectively of all sales). Sales to our major
customer in fiscal 1996 (B.C. Hydro-Canada) totaled $401,000 (20% of all sales).
None of such customers has or had any material relationship other than business
with us.
Our dependence on major customers subjects us to significant
financial risks in the operation of our business should a major customer
terminate, for any reason, its business relationship with us. In such event our
financial condition may be adversely affected and we may be required to obtain
additional financing, of which there can be no assurance. We have taken into
account the decreasing military budget of the United States. Currently less than
6% of the Company's revenues are derived from the military and are expected to
diminish as a percentage of sales.
19
<PAGE> 20
10. Defense Industry Downsizing - Historical Dependence on
Government Contracts. Recent world events have resulted in a decreased demand
for defense related products causing a general downsizing of the American
defense industry. These factors, along with federal budget constraints, have
caused us to realize order cancellations in the amount of $650,000 since 1990
and for another $600,000 placed on a production hold pending specific releases.
Our ability to continue to attract and retain orders from defense contractors,
which as a group accounted for approximately $41,800 in fiscal 1998 or 5.6% of
our total revenue of $746,420 has been affected. While we have changed our
strategy for growth by a conversion to primarily commercial business, there can
be no assurance that we will be completely successful in this objective.
11. Year 2000 Compliance. The Year 2000 issue is a result of
computer programs being written using two digits rather than four to define the
applicable year. In other words, date sensitive software may recognize the date
using "00" as the year 1900 rather than the year 2000. This could result in
systems failures or miscalculations causing disruptions of normal business
activities.
We have contracted with a Year 2000 solution provider to
review our mainframe computer system for Year 2000 compliance and to upgrade the
computer system to be Year 2000 compliant. We anticipate that the upgrade will
be completed by fiscal year end July 31, 1999 and estimate the cost of our Year
2000 compliance program will be $5,000. However, we cannot assure you that such
review and upgrade can be completed on schedule or within estimated costs or
will successfully address our Year 2000 compliance issues.
We are also in the process of contacting all of our major
suppliers to request representations that their systems are or will be Year 2000
compliant. We are in the process of determining the impact, if any, that third
parties who are not Year 2000 compliant may have on our operations.
If our present efforts to address Year 2000 compliance issues
are not successful, or if suppliers and other third parties do not successfully
address such issues, our business, financial condition and results of operations
could be materially and adversely affected.
12. Lack of Price Stability. Our sales to defense-related
contractors and manufacturers have historically occurred in a relatively stable
price environment. Pressure in defense spending may adversely affect prices and
profit margins in that market. While we believe that our planned expansion in
the commercial market will help us to better manage such a change in the defense
market, there can be no assurance that we will be completely successful in this
objective.
20
<PAGE> 21
13. Investigations Involving VTR Capital, Inc.
SEC Investigation. We have been advised by VTR Capital Inc.,
("VTR") one of the underwriters of the 1998 Offering that the Securities and
Exchange Commission ("SEC") has issued an order directing a private
investigation by the staff of the SEC. Such order empowers the SEC staff to
investigate whether, from June 1995 to the present, VTR and certain other
persons and/or entities may have engaged in fraudulent acts or practices in
connection with the purchase or sale of securities of certain companies in
violation of Sections 10(b) and 15(c)(1) of the Securities Act of 1934, as
amended (the "Exchange Act") and Section 17(a) of the Securities Act of 1933, as
amended. These acts or practices include whether VTR and certain other brokers
or dealers effected transactions or induced transactions by making untrue
statements of material fact and whether VTR and certain others have engaged in
manipulative, deceptive or other fraudulent devices. The formal order also
concerns whether VTR and certain others who have agreed to participate in a
distribution have violated Rule 10b-6 of the Exchange Act by having bid for or
purchased securities for accounts in which it had a beneficial interest or which
is the subject of such distribution. As of January 7, 1998, VTR understands that
the SEC investigation is ongoing and that there are presently no allegations of
wrongdoing and no actual findings. We have been advised that VTR has in the past
made a market in our Common Stock and Class A Warrants and intends to continue
to do so subject to compliance with Regulation M of the Exchange Act. An
unfavorable resolution of the SEC investigation concerning the sales and trading
activities and practices of VTR could have the effect of limiting VTR's ability
to make a market in our securities in which case the market for and liquidity of
our securities may be adversely affected.
NASD Investigation. We have also been advised by VTR that
during 1996 and 1997, the staff of the NASD conducted an inquiry into the
trading and sales practices of securities of another company in and around April
1995. In connection with the inquiry, the NASD staff obtained documents from VTR
and conducted on-the-record interviews of, among others, VTR's Chief Executive
Officer, Head Trader and Chief Financial Officer. In late 1997, the NASD staff
advised VTR's counsel that it had completed its investigation and that it
intended to recommend that a formal disciplinary proceeding be instituted
against VTR, its Chief Executive Officer and Head Trader, as well as certain
other individuals not affiliated with VTR for fraudulent market manipulation in
connection with a purported unregistered distribution as well as for violation
of VTR's restriction agreement. As of January 7, 1998, to VTR's knowledge, no
complaint has been issued in this matter. An unfavorable resolution of the NASD
investigation could have the effect of limiting VTR's ability to make a market
in our securities in which case the market for and liquidity of our securities
may be adversely affected.
21
<PAGE> 22
14. Redemption of Redeemable Warrants. Our Class A Warrants
are subject to redemption commencing the earlier of (i) January 21, 2000 or (ii)
January 21, 1999, with the consent of IAR Securities Corp., the lead underwriter
of our 1998 Offering ("Representative"), at a price of $.05 per Warrant if the
closing bid price for the Common Stock equals or exceeds $7.20 per share for any
20 trading days ending no earlier than the fifteenth trading day prior to the
date of the notice of redemption. In the event that the Warrants are called for
redemption by us, Warrantholders will have thirty (30) days during which they
may exercise their rights to purchase shares of Common Stock. If holders of the
Warrants elect not to exercise them upon notice of redemption thereof, and the
Warrants are subsequently redeemed prior to exercise, the holders thereof would
lose the benefit of the difference between the market price of the underlying
Common Stock as of such date and the exercise price of such Warrants, as well as
any possible future price appreciation in the Common Stock. As a result of an
exercise of the Warrants, existing Stockholders may be diluted and the market
price of the Common Stock may be adversely affected.
15. Restrictions on Marketmaking Activities During Warrant
Solicitation. To the extent that the Representative solicits the exercise of
Class A Warrants, the Representative may be prohibited pursuant to the
requirements of Regulation M under the Exchange Act from engaging in
marketmaking activities during such solicitation and for a period of up to five
days preceding such solicitation. As a result, the Representative may be unable
to continue to provide a market for our securities during certain periods while
the Class A Warrants are exercisable. The Representative is not obligated to act
as a marketmaker.
16. Nasdaq Listing and Continued Listing Requirements. Our
Common Stock and Class A Warrants are currently listed on the Nasdaq SmallCap
Market, Inc. ("Nasdaq"). For continued listing on Nasdaq, a company, among other
things, must have $2,000,000 in net tangible assets, 500,000 shares in the
public float, $1,000,000 in market value of public float and a minimum bid price
of $1.00 per share. If we are is unable to satisfy the requirements for
continued quotation on Nasdaq, trading, if any, in the Common Stock and Warrants
would be conducted in the over-the-counter market in what are commonly referred
to as the "pink sheets" or on the NASD OTC Electronic Bulletin Board. As a
result, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the price of, the securities offered hereby. The
above-described rules may materially adversely affect the liquidity of the
market for our securities.
17. "Penny Stock" Regulations; Risk of Low-Priced Securities.
The Securities and Exchange Commission (the "Commission") has adopted
regulations which generally define "penny stock" to be an equity security that
has a market price (as defined in the regulations) of less than $5.00 per share,
subject to certain exceptions. If the Securities offered hereby are removed from
Nasdaq, our securities may become subject to rules
22
<PAGE> 23
that impose additional sales practice requirements on broker-dealers. In most
instances, unless the purchaser is either (i) an institutional accredited
investor, (ii) the issuer, (iii) a director, officer, general partner or
beneficial owner of more than 5% of any class of equity security of the issuer
of the penny stock that is the subject of the transaction, or (iv) an
established customer of the broker-dealer, the broker-dealer must make a special
suitability determination for the purchaser of such securities and have received
the purchaser's prior written consent to the transaction. Additionally, for any
transaction involving a penny stock, unless exempt, the rules require the
delivery, prior to the transaction, of a disclosure schedule prepared by the
Commission relating to the penny stock market. The broker-dealer also must
disclose the commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and, if the broker-dealer
is the sole market-maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market. Finally, monthly statements
must be sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks. Consequently, the
"penny stock" rules may restrict the ability of broker-dealers to sell our
securities and may affect the ability of purchasers in the offering to sell our
securities in the secondary market.
18. Restricted Shares of Common Stock Eligible for Future
Sale. Certain of the Company's issued and outstanding shares of Common Stock are
"restricted securities," which may be sold only in compliance with Rule 144
under the Securities Act of 1933, as amended. Rule 144 provides, in essence,
that a person holding restricted securities for a period of one year after
payment therefor may sell, in brokers' transactions or to market makers, an
amount not exceeding 1% of the outstanding class of securities being sold, or
the average weekly reported volume of trading of the class of securities being
sold over a four-week period, whichever is greater, during any three-month
period. (Persons who are not affiliates of ours and who have held their
restricted securities for at least two years are not subject to the volume or
transaction limitations.) Any such sales could have a material adverse effect on
the market price for the Common Stock, should a trading market develop.
19. No Common Stock Dividends. We have not paid any dividends
on our Common Stock and do not anticipate paying dividends on our Common Stock
in the foreseeable future. The future payment of dividends is directly dependent
upon our future earnings, our financial requirements and other factors to be
determined by our Board of Directors. For the foreseeable future, it is
anticipated that any earnings which may be generated from our operations will be
used to finance the our growth even if our operations are profitable.
20. Governmental Regulation. Our manufacturing facilities, in
common with those of the industry generally, are subject to numerous existing
and proposed Federal and state
23
<PAGE> 24
regulations designed to protect the environment, establish occupational safety
and health standards and many other matters. We believe that our operations are
in compliance with existing regulations and do not believe that such compliance
has had or will have any material effect upon our capital expenditures, earnings
or competitive position.
21. Dependence on Qualified Personnel. Because of the
technological nature of our business, we are dependent upon our ability to
attract and retain technologically qualified personnel. There is significant
competition for technologically qualified personnel and we may not be successful
in recruiting such qualified personnel.
22. Additional Authorized Shares Available for Issuance May
Adversely Affect the Market. We are authorized to issue 20,000,000 shares of our
Common Stock, $1.00 par value. As of the date hereof there are a total of
4,248,960 shares of Common Stock issued and outstanding (not including treasury
stock). However, the total number of shares of Common Stock issued and
outstanding does not include the exercise of up to 1,135,750 Class A Warrants to
purchase up to 1,135,750 shares of our Common Stock issued in 1995, the 1995
Public Offering Underwriter's option to purchase up to 41,000 shares of Common
Stock and 20,500 Class A Warrants to purchase 20,500 shares of Common Stock, the
exercise of up to 2,800,000 Class A Warrants included in the 1998 Units offered
to investors in the 1998 Offering to purchase 2,800,000 shares of Common Stock,
the Representative's option to purchase up to 70,000 shares of Common Stock and
280,000 Class A Warrants to purchase 280,000 shares of Common Stock, the
Representative's Over- Allotment Option of 105,000 Units consisting of 105,000
shares of Common Stock and 420,000 Class A Warrants to purchase 420,000 shares
of Common Stock. After reserving a total of 4,872,250 shares of Common Stock for
issuance upon the exercise of all the warrants to purchase Common Stock, we will
have at least 10,878,790 shares of authorized but unissued capital stock
available for issuance without further shareholder approval (of which 155,239
has been reserved for conversion of all of our Series A and Series B Preferred
Stock outstanding). In addition, we are authorized to issue 2,000,000 shares of
Preferred Stock (of which 156,197 is outstanding. Our officers, directors, and
principal stockholders have agreed not to sell any of their shares of capital
stock until June 21, 1999 without the prior written consent of the
Representative. Also, we have agreed not to issue any additional securities
until January 21, 2000 without the prior written consent of the Representative
other than in certain circumstances. The sale of a significant number of these
shares in the public market may adversely affect prevailing market prices of our
securities following this offering.
23. Lack of Patent Protection or Proprietary Rights. Other
than as set forth below, we currently do not have any patent or trademark
applications pending. However, we may file patent or trademark applications
relating to certain of our products. If patents or trademarks were to issue,
there can be no assurance as
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<PAGE> 25
to the extent of the protection that will be granted to us as a result of having
such patents or trademarks or that we will be able to afford the expenses of any
complex litigation which may be necessary to enforce their proprietary rights.
Except as may be required by the filing of patent or trademark applications, we
will attempt to keep all other proprietary information secret and to take such
actions as may be necessary to insure the results of its development activities
are not disclosed and are protected under the common law concerning trade
secrets. Such steps will include the execution of nondisclosure agreements by
key personnel and may also include the imposition of restrictive agreements on
purchasers of our products and services. There is no assurance that the
execution of such agreements will be effective to protect us, that we will be
able to enforce the provisions of such nondisclosure agreements or that
technology and other information acquired by us pursuant to our development
activities will be deemed to constitute trade secrets by any court of competent
jurisdiction.
We use the trademark INIVEN for our commercial products. We
believe that our prospects are dependent primarily upon our ability to offer our
customers high quality, reliable products at competitive prices rather than on
our ability to obtain and defend patents and trademarks. We do not believe that
our INIVEN trademark is of material importance to our business.
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<PAGE> 26
SELLING SHAREHOLDERS
This Prospectus relates in part to the offering of 468,000
shares of Common Stock of the Company by the Selling Shareholders named below.
The shares being offered by the Selling Shareholders hereunder were acquired
pursuant to the grant of certain restricted stock awards to employees and
directors of Conolog. The following table sets forth certain information, as of
December 31, 1998, and as adjusted to reflect the sale of the shares offered
hereby, with respect to the beneficial ownership of the Common Stock by the
Selling Shareholders. Unless otherwise noted below, each Selling Shareholder
possess sole voting and investment power with respect to the shares shown
opposite such Selling Shareholder's name.
<TABLE>
<CAPTION>
===============================================================================================================================
Beneficial Ownership
of Common Stock
After
Offering (1)(2)(3)
- -------------------------------------------------------------------------------------------------------------------------------
Name Shares of Number of Number of Percent
Common Shares to Shares of Class
Stock be Sold (4)
Beneficial-
ly Owned
Before
Offering
(1)(2)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert S. 270,039 250,000 20,039 *
Benou
- -------------------------------------------------------------------------------------------------------------------------------
Arpad J. 55,126 50,000 5,126 *
Havasy
- -------------------------------------------------------------------------------------------------------------------------------
Marc R. Benou 70,345 50,000 20,345 *
- -------------------------------------------------------------------------------------------------------------------------------
Thomas Fogg 27,500 25,000 2,500 *
- -------------------------------------------------------------------------------------------------------------------------------
Louis S. 15,000 10,000 5,000 *
Massad
- -------------------------------------------------------------------------------------------------------------------------------
Edward J. 10,500 10,000 500 *
Rielly
- -------------------------------------------------------------------------------------------------------------------------------
Dina 10,000 10,000 0 *
Stellwagen
- -------------------------------------------------------------------------------------------------------------------------------
Mary Ann 10,000 10,000 0 *
Edwards
- -------------------------------------------------------------------------------------------------------------------------------
Barbara 10,000 10,000 0 *
Serridge
- -------------------------------------------------------------------------------------------------------------------------------
John 10,000 10,000 0 *
Engelhardt
- -------------------------------------------------------------------------------------------------------------------------------
Frank Brueckl 10,000 10,000 0 *
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 27
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Herman Grampp 10,000 10,000 0 *
- -------------------------------------------------------------------------------------------------------------------------------
Albert S. 10,000 10,000 0 *
Lenhardt
- -------------------------------------------------------------------------------------------------------------------------------
Gus Karolis 2,000 2,000 0 *
- -------------------------------------------------------------------------------------------------------------------------------
Cindy Parducci 1,000 1,000 0 *
- -------------------------------------------------------------------------------------------------------------------------------
Total 521,510 468,000 53,510 1.3%
===============================================================================================================================
</TABLE>
* Less than one percent (1%).
(1) Based upon questionnaires received from each selling shareholder, or a
representative of the selling shareholder, in connection with the
preparation of the Registration Statement on Form S-8, on which this
Prospectus is a part.
(2) Shares not outstanding but deemed beneficially owned by virtue of the
right of a person or member of a group to acquire them within 60 days
are treated as outstanding only when determining the amount and
percentage owned by such person or group.
(3) This assumes all shares being offered and registered hereunder are
sold, although no Selling Shareholder is obligated to sell any shares.
(4) Based upon 4,248,960 shares of Common Stock outstanding as of December
31, 1998.
VALIDITY OF COMMON STOCK
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Milberg Weiss Bershad Hynes & Lerach LLP.
EXPERTS
The financial statements of the Company for each of the three years in
the period ended July 31, 1998, incorporated by reference in this Prospectus,
have been audited and reported upon by Rosenberg Rich Baker Berman & Company,
independent accountants. Such financial statements have been incorporated by
reference in this Prospectus in reliance upon the report of Rosenberg Rich Baker
Berman & Company, incorporated by reference herein, and upon the authority of
such firm as experts in accounting and auditing. To the extent that Rosenberg
Rich Baker Berman & Company audits and reports on the financial statements of
the Company issued at future dates and consents to the use of their report
thereon, such financial statements also will be incorporated by reference in
this Prospectus in reliance upon their report and said authority.
27
<PAGE> 28
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company pursuant to the Exchange
Act may be inspected and copied at the public reference facilities maintained by
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
also be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also maintains a Website at http://www.sec.gov that
contains reports, proxy and information statements, registration statements and
other information that has been or will be filed by the Company.
The Company has filed with the Commission a Registration Statement on
Form S-8 under the Securities Act. This Prospectus does not contain all of the
information, exhibits and undertakings set forth in the Registration Statement,
certain portions of which are omitted as permitted by the Rules and Regulations
of the Commission. Copies of the Registration Statement and the exhibits are on
file with the Commission and may be obtained, upon payment of the fee prescribed
by the Commission, or may be examined, without charge, at the offices of the
Commission set forth above. For further information, reference is made to the
Registration Statement and its exhibits.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File
No. 0-8174) are incorporated by reference in this Prospectus: (1) the Company's
Annual Report on Form 10-K for the year ended July 31, 1998; (2) the Company's
Quarterly Report on Form 10-Q for the quarter ended October 31, 1998; (3) all
other reports filed by the Company pursuant to Sections 13 or 15(d) of the
Exchange Act since July 31, 1998; and (4) the description of the Company's
Common Stock contained in its Registration Statement on Form S-1 (No.
333-35489), including any amendments or reports filed for the purpose of
updating such description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering hereunder shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained herein or in a document all or any
portion of which is incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes
28
<PAGE> 29
of this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded
to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the foregoing documents (other than exhibits to such documents unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Requests should be directed to Conolog
Corporation, 5 Columbia Road, Somerville, New Jersey 08876, telephone (908)
722-8081.
29
<PAGE> 30
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 3. Incorporation of Documents by Reference.
The following documents filed with the Commission (File No.
0-8174) pursuant to the Securities Exchange Act of 1934 are incorporated by
reference into this Registration Statement.
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
July 31, 1998.
(2) The Company's quarterly report on Form 10-Q for the quarter ended
October 31, 1998.
(3) The description of the Company's Common Stock contained in its
Registration Statement on Form S-1 (Registration No. 333-35489).
All documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934,
prior to the filing of a post-effective amendment which indicates that all the
securities offered have been sold or which deregisters all the securities then
remaining unsold, shall be deemed to be incorporated by reference in the
Registration Statement and to be part thereof from the date of filing of such
documents.
Item 4. Description of Securities.
Incorporated by reference into this Registration Statement as
described in Item 3 above.
Item 5. Interest of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Officers and Directors.
The Company's Certificate of Incorporation requires the
Company to indemnify its officers, directors and employees to the fullest extent
permitted by law, including full or partial indemnification for any judgment,
settlement or related expense. In addition, advances of expenses to officers and
directors are permitted upon an undertaking by the person to be indemnified to
repay all such expenses if he or she is ultimately found not to be entitled to
indemnification. The indemnification provision in the Company's Certificate of
Incorporation applies to all actions and proceedings including those brought by
or in the right of the Company. Directors and officers remain liable for acts
and omissions not in good faith or which involve intentional
II-1
<PAGE> 31
misconduct and transactions from which such officer or director derives improper
personal benefit.
Item 7. Exemption from Registration Claimed.
The shares to be reoffered or resold pursuant to this
Registration Statement were issued without registration under the Securities Act
in reliance on Section 4(2) of the Securities Act, which provides an exemption
for transactions not involving a public offering. In determining that such
exemption was available, the Company relied on the fact that, as an offering
only to employees and directors of the Company, the shares were being issued
through direct communication only to a limited number of investors having both
knowledge of and access to the most relevant information regarding the Company
and that the certificates evidencing such shares bear a legend restricting
transfer in non-registered transactions.
Item 8. Exhibits.
Exhibit
Number Description
5 Opinion of Milberg Weiss Bershad Hynes & Lerach LLP
10 Conolog Corporation 1995/1996 Stock Option Plan*
23 Consent of Rosenberg Rich Baker Berman & Company
* Incorporated by reference to the Company's Registration Statement on Form S-1
(File No. 33-92424) filed with the Commission on May 17, 1995.
Item 9. Undertakings.
(1) The undersigned Registrant hereby undertakes:
(a) to file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933; (ii) to reflect in the prospectus any facts
or events arising after the effective date of the Registration
Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration Statement;
and (iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement; provided, however, that paragraphs (a)(1)(i)
and (a)(i)(ii) do not apply to information required to be included in
a post-effective amendment by those paragraphs
II-2
<PAGE> 32
which are contained in periodic reports filed by the undersigned
Registrant pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in this Registration
Statement;
(b) that, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof;
(c) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(2) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
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<PAGE> 33
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-8 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Somerville, State of New Jersey, on
this 22nd day of January, 1999.
CONOLOG CORPORATION
By /s/ Robert S. Benou
----------------------------------------
Robert S. Benou
President and Director
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Date: January 22, 1999 /s/ Robert S. Benou
--------------------------------
Robert S. Benou
President and Director
Date: January 22, 1999 /s/ Arpad J. Havasy
--------------------------------
Arpad J. Havasy,
Executive Vice President,
Secretary, Treasurer and
Director
Date: January 22, 1999 /s/ Marc R. Benou
-------------------------------
Marc R. Benou
Vice President, Assistant
Secretary and Director
Date: January 22, 1999 /s/ Louis S. Massad
--------------------------------
Louis S. Massad,
Director
Date: January 22, 1999 /s/ Edward J. Rielly
--------------------------------
Edward J. Rielly,
Director
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<PAGE> 34
EXHIBIT INDEX
Exhibit
Number Description
5 Opinion of Milberg Weiss Bershad Hynes & Lerach LLP
10 Conolog Corporation 1995/1996 Stock Option Plan*
23 Consent of Rosenberg Rich Baker Berman & Company
* Incorporated by reference to the Company's Registration Statement on Form S-1
(File No. 33-92424) filed with the Commission on May 17, 1995.
II-5
<PAGE> 1
EXHIBIT 5
MILBERG WEISS BERSHAD HYNES & LERACH LLP
January 22, 1999
Conolog Corporation
5 Columbia Road
Somerville, New Jersey 08876
Re: Conolog Corporation
Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as counsel for Conolog Corporation, a Delaware
corporation (the "Company"), in connection with the preparation and filing by
the Company of a registration statement (the "Registration Statement") on Form
S-8, under the Securities Act of 1933, relating to the sale of 468,000 shares of
the Company's Common Stock, par value $1.00 per share (the "Common Stock") by
certain shareholders of the Company.
We have examined the Certificate of Incorporation and the
By-Laws of the Company, the minutes of the various meetings and consents of the
Board of Directors of the Company, forms of certificates evidencing the Common
Stock, originals or copies of such records of the Company, agreements,
certificates of public officials, certificates of officers and representatives
of the Company and others, and such other documents, certificates, records,
authorizations, proceedings, statutes and judicial decisions as we have deemed
necessary to form the basis of the opinion expressed below. In such examination,
we have assumed the genuiness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity to originals of all
documents submitted to us as copies thereof.
As to various questions of fact material to this opinion, we
have relied upon statements and certificates of officers and representatives of
the Company and others.
<PAGE> 2
Conolog Corporation
January 22, 1999
Page 2
Based on the foregoing, we are of the opinion that the 468,000
shares of Common Stock will, upon sale thereof in the manner contemplated by the
Registration Statement, be legally issued, fully paid and nonassessable.
We hereby consent to be named in the Registration Statement
and the Prospectus as attorneys who have passed upon legal matters in connection
with the offering of the securities offered thereby under the caption "Legal
Matters."
We further consent to your filing a copy of this opinion as an
Exhibit to the Registration Statement.
Very truly yours,
/S/MILBERG WEISS BERSHAD
HYNES & LERACH LLP
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Conolog Corporation on Form S-8 of our report dated October 9, 1998, appearing
in the Annual Report on Form 10-K of Conolog Corporation for the year ended July
31, 1998.
Rosenberg Rich Baker
Berman & Company
January 21, 1999
