<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____ to _____
Commission File No. 0-10696
LogiMetrics, Inc.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 11-2171701
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
121-03 Dupont Street, Plainview, New York 11803
------------------------------------------------
(Address of principal executive offices)
Issuer's telephone number:(516) 349-1700
--------------
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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 ____
State the number of shares outstanding of each of the issuer's classes of
common equity as of November 12, 1996.
Class of Common Stock Outstanding at November 12, 1996
--------------------- --------------------------------
Common Stock, par value 2,954,954 shares
$.01 per share
Transitional Small Business Disclosure Format (check one):
Yes _______ No ___X___
<PAGE>
LOGIMETRICS, INC.
-----------------
INDEX
PART I -FINANCIAL INFORMATION PAGE
----
Item 1. Consolidated Financial Statements (Unaudited)
Balance Sheet - September 30, 1996...........................3
Statements of Operations -
Three months ended September 30, 1996 and 1995...............4
Statements of Cash Flows -
Three months ended September 30, 1996 and 1995...............5
Notes to Consolidated Financial Statements -
September 30, 1996...........................................6
Item 2. Management's Discussion and Analysis or Plan of Operation....15
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities..............................22
Item 6. Exhibits and Reports on Form 8-K.............................22
SIGNATURES...........................................................23
2
<PAGE>
LOGIMETRICS, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
CURRENT ASSETS:
Cash $ 171,536
Accounts receivable, less allowance
for doubtful accounts of $75,000 733,567
Costs and estimated earnings in excess of
billings on uncompleted contracts (Note 2) 1,332,746
Inventories 2,238,593
Prepaid expenses and other current assets 121,404
---------
Total current assets 4,597,846
Equipment and fixtures (Net) (Note 3) 480,152
Deferred financing costs 254,405
Other assets 20,725
---------
TOTAL ASSETS $5,353,128
=========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES:
Accounts payable and other accrued expenses $2,722,107
Accrued professional fees 300,700
Accrued warranty expense 150,000
Current portion of long-term debt (Note 4) 3,744,489
---------
Total current liabilities 6,917,296
LONG-TERM DEBT (Note 4) 79,712
---------
TOTAL LIABILITIES 6,997,008
---------
COMMITMENTS
STOCKHOLDERS' DEFICIENCY (Note 5)
Preferred Stock:
Series A, stated value $50,000 per share;
authorized, 200 shares; issued and
outstanding, 30 shares 990,564
Warrants 1,023,234
Common Stock:
Par Value $.01; authorized,
35,000,000 shares; issued and
outstanding, 2,954,954 shares 29,549
Additional paid-in capital 1,836,061
Accumulated deficit (5,359,088)
Stock subscriptions receivable (164,200)
---------
TOTAL STOCKHOLDERS' DEFICIENCY (1,643,880)
---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $5,353,128
=========
</TABLE>
See Notes to Consolidated Financial Statements
3<PAGE>
LOGIMETRICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1996 1995
---- ----
<S> <C> <C>
Net Revenues $1,893,862 $2,302,804
Cost and expenses:
Cost of revenues (Note 2) 1,818,061 1,742,303
Selling, general and
administrative expenses 614,302 403,784
--------- ---------
(Loss) income from operations (538,501) 156,717
Interest expense 171,454 82,362
--------- ---------
(Loss) income before income taxes (709,955) 74,355
(Benefit) provision for income taxes - 25,000
--------- ---------
Net (loss) income (709,955) 49,355
Preferred stock dividends 54,461 -
--------- ---------
Net (loss) income available
to common shareholders $ (764,416) $ 49,355
========= =========
(Loss) income per common
share (Note 6) $ (.26) $ .02
(Loss) income per fully diluted
share (Note 6) $ (.26) $ .02
Weighted average number of common
shares and equivalents outstanding 2,954,954 2,860,614
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
LOGIMETRICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income available to
common shareholders $(764,416) $ 49,355
------- -------
Adjustments to reconcile net (loss) income to
net cash used in operating activities:
Depreciation and amortization 98,364 22,745
Preferred stock dividends payable 54,461 -
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 449,546 752,018
Cost and estimated earnings
in excess of billings on
uncompleted contracts (330,983) (876,472)
Inventories 32,860 11,367
Prepaid expenses and other current assets 67,082 (44,721)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 370,068 28,998
Income taxes payable - current - 25,000
------- -------
Total adjustments 741,398 (81,065)
------- -------
Net cash used in operating activities (23,018) (31,710)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (13,822) (15,364)
------- -------
Net cash used in investing activities (13,822) (15,364)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of debt and warrant issuance - net - 342,000
Repayment of debt (35,895) (330,729)
------- -------
Net cash provided by financing activities (35,895) 11,271
------- -------
NET INCREASE (DECREASE) IN CASH (72,735) (35,803)
CASH and CASH EQUIVALENTS, beginning of year 244,271 40,858
------- -------
CASH and CASH EQUIVALENTS, end of year $ 171,536 $ 5,055
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Statements
--------------------
The accompanying consolidated financial statements include the accounts of
LogiMetrics, Inc. and its wholly owned subsidiary (collectively, the
"Company"). All intercompany balances and transactions have been
eliminated.
The balance sheet as of September 30, 1996, the statements of operations
for the three-month periods ended September 30, 1996 and 1995, and the
statements of cash flows for the three-month periods then ended, have been
prepared by the Company without audit. Such accompanying unaudited
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial reporting
and with the instructions to Form 10-QSB. Accordingly, they do not
include all of the information and disclosures required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments, consisting of normal occurring
accruals considered necessary for a fair presentation, have been included.
Results for the three months ended September 30, 1996 are not necessarily
indicative of the results that may be achieved for the year ending June
30, 1997. These statements should be read in conjunction with the
financial statements and related notes included in the Company's annual
report on Form 10-KSB for the year ended June 30, 1996.
2. Costs and Estimated Earnings in Excess of Billings on Uncompleted
Contracts
-----------------------------------------------------------------
Costs and estimated earnings in excess of billings on uncompleted
contracts consist of the following at September 30, 1996:
Cost and estimated earnings $1,597,370
Less: Estimated loss upon completion (68,751)
Progress billings (195,873)
---------
$1,332,746
=========
3. Equipment and Fixtures
----------------------
Equipment and fixtures, at cost, are summarized as follows at
September 30, 1996:
Machinery and equipment $2,141,942
Furniture and fixtures 131,129
Leasehold improvements 149,198
---------
2,422,269
Less: accumulated depreciation and amortization (1,942,117)
---------
$ 480,152
=========
6
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Long-Term Debt
--------------
Long-term debt consists of the following at September 30, 1996:
Notes payable to North Fork Bank $2,258,376
Senior Subordinated Debentures 1,500,000
Less: Discount at issuance (457,628)
Plus: Amortization of discount 85,806
Subordinated Debentures 300,000
Capital lease obligations 137,647
--------
3,824,201
Less: current portion 3,744,489
---------
$ 79,712
=========
Subordinated Debentures and Series A and Series B Warrants
----------------------------------------------------------
On July 14, 1995, the Company completed a private offering of 15 units of
its securities at a price of $20,800 per unit. Each unit consists of one
$20,000 12% Convertible Subordinated Debenture and one Common Stock
Purchase Warrant, Series A. For managing the financing, Common Stock
Purchase Warrants, Series B, to purchase 1,500,000 shares of Common Stock
$.01 par value per share ("Common Stock"), were sold to SFM Group, Ltd.
("SFM") at a price of $.02 per share.
Subsequently, on March 7, 1996, in connection with the recapitalization
and change in control of the Company, all of the holders of the 12%
Convertible Subordinated Debentures and Common Stock Purchase Warrants,
Series A, and Common Stock Purchase Warrants, Series B, exchanged such
debentures and warrants for the Amended and Restated 12% Convertible
Subordinated Debentures (the "Subordinated Debentures") and Amended and
Restated Series A and Series B Warrants of like tenor (the "Series A
Warrants" and "Series B Warrants," respectively).
The Subordinated Debentures are convertible into an aggregate of 1,200,000
shares of Common Stock at $.25 per share, subject to adjustment in certain
circumstances. As of November 12, 1996, the Company was in default with
respect to the payment of interest under the Subordinated Debentures;
accrued and unpaid interest totaled $49,110. Therefore, the Company has
reclassified these Debentures as current liabilities. Interest accrues at
the rate of 15% per annum on unpaid interest and 12% per annum on the
outstanding principal. The principal is payable in one balloon payment on
July 14, 1997. The Subordinated Debentures are subordinated in right of
payment to the 12% Convertible Senior Subordinated Debentures (the "Senior
Debentures"), the Fifth Restated and Amended Revolving Credit Note (the
7
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
"Revolver") and the Further Restated Increased and Amended Term Loan Note
(the "Term Loan") with the Company's senior lender, North Fork Bank (the
"Bank"), and capital lease obligations.
The Series A Warrants may be exercised at a price of $.25 per share,
subject to adjustment in certain circumstances, for an aggregate of
600,000 shares of Common Stock. The Series B Warrants may be exercised at
a price of $.25 per share, subject to adjustment in certain
circumstances, for an aggregate of 1,500,000 shares of Common Stock. Both
Series A and Series B Warrants may be exercised at any time until July 15,
2002. As of November 12, 1996, the Company has not filed in a timely
manner the registration statement effecting the Series A and Series B
Warrant holders' registration rights.
Senior Debentures and Series C Warrants
---------------------------------------
On March 7, 1996, the Company completed a private offering with respect to
an additional 30 units of its securities. Pursuant to a Unit Purchase
Agreement between the Company and Cerberus Partners, L.P. ("Cerberus"),
Cerberus purchased 30 units, each composed of one $50,000 Senior Debenture
and one Common Stock Purchase Warrant, Series C ("Series C Warrant")
entitling the holder thereof to purchase 84,746 shares of Common Stock for
$.01 per share, subject to adjustment in certain circumstances, at any
time prior to March 7, 2003.
The Company allocated the $1,500,000 received between the Senior
Debentures and the Series C Warrants based on their estimated fair value
as of March 7, 1996.
Each Senior Debenture is convertible into 84,746 shares of Common Stock,
subject to adjustment in certain circumstances. The Senior Debentures are
senior in right of payment to the Company's Subordinated Debentures, but
are subordinate to the Company's Term Loan and Revolver. The principal is
payable on the Senior Debentures in one balloon payment due December 31,
1998.
As of November 12, 1996, the Company has not paid accrued interest on the
Senior Debentures, has not filed in a timely manner the registration
statement effecting the Senior Debentures and Series C Warrant holder's
registration rights, and is not in compliance with the financial covenants
described below. Therefore, the Company has reclassified these Debentures
as current liabilities. Cerberus has waived these defaults for a limited
period as described more fully below.
Accrued and unpaid interest on the Senior Debentures totaled $87,361 as of
November 12, 1996. Interest is currently payable at the rate of 15% per
annum on the outstanding principal and at the rate of 15% on the past-due
interest. Interest accrued on the unpaid principal at the rate of 12% per
8
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
annum until June 5, 1996. On June 6, 1996, the interest rate increased to
13.5% per annum for the ensuing three-month period, due to the Company's
failure to file a registration statement effecting the Senior Debentures
and Series C Warrant holder's registration rights. Thereafter, the
interest rate increased each 30-day period by 0.5% per annum to a rate of
15% per annum on November 12, 1996. Until the Company files a registration
statement effecting the Senior Debentures and Series C Warrant holder's
registration rights, the interest rate will increase by 0.5% per annum for
each ensuing 30 day period, to a maximum interest rate on unpaid
principal and interest of 17% per annum. Upon the filing of the
registration statement and the payment of past due interest, the interest
rate will revert to 12% per annum.
The Senior Debentures contain certain financial covenants, which were in
default as of September 30, 1996. The covenants have five components: (i)
a minimum tangible net worth of $4.5 million, (ii) a current ratio of at
least 2.75 to 1.0, (iii) a minimum working capital level of $5.5 million,
(iv) a maximum ratio of total liabilities to tangible net worth of 1.25 to
1.0, and (v) a minimum debt service coverage ratio of 1.05 to 1.0. As of
October 31, 1996, in exchange for a note in the amount of $15,000
(increasing to $22,500 in certain circumstances), Cerberus has waived the
requirements for the Company to comply with these financial covenants
through the end of the Company's fiscal year ending June 30, 1997 and has
waived its right to declare an event of default with respect to the late
interest payment until December 15, 1996.
North Fork Bank Credit Facilities
---------------------------------
The Company has two credit facilities available to it from its senior
lender, the Bank. The facilities, as amended in October 1995 and March
1996, provide the Company with a Revolver of $2,200,000, which matures
October 31, 1997, and a Term Loan of $800,000, which matures December 31,
1998. The Revolver bears interest at the rate of 2% per annum in excess
of the Bank's prime rate; the Term Loan bears interest at the rate of 1.5%
per annum in excess of the Bank's prime rate. On November 12, 1996, the
Bank's prime rate was 8.25% per annum.
The Company is current with respect to its interest payments on the
Revolver and its interest and principal payments on the Term Loan.
However, the credit facilities with the Bank contain certain financial
covenants, which were in default as of September 30, 1996. The covenants
have five components: (i) a minimum tangible net worth of $4.5 million,
(ii) a current ratio of at least 2.75 to 1.0, (iii) a minimum working
capital level of $5.5 million, (iv) a maximum ratio of total liabilities
to tangible net worth of 1.25 to 1.0, and (v) a minimum debt service
coverage ratio of 1.05 to 1.0. Pursuant to a Forbearance Agreement, by
and between the Company and the Bank, dated as of October 31, 1996 (the
"Forbearance Agreement"), the Bank has agreed to forbear any rights it may
9
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
have under the Revolver or Term Loan in connection with the Company's
failure to comply with the financial covenants of the Revolver and Term
Loan until the earlier of February 28, 1997, or the date on which the Bank
receives the Company's December 31, 1996 interim financial statements.
Therefore, the Company has reclassified the Revolver and the Term Loan as
current liabilities.
Under the Term Loan and the Revolver, the Company is required to maintain
an aggregate average monthly ledger balance of $175,000 in non-interest
deposit accounts with the Bank ("Compensating Balance Requirement"). For
the three months ended September 30, 1996, the Company's aggregate average
monthly ledger balance was less than the required amount. Accordingly,
the Company paid penalties totaling approximately $3,000 to the Bank,
which represent (a) the difference between $175,000 and the aggregate
average monthly ledger balance maintained, multiplied by (b) a fixed rate
(the "Deficiency Rate") equal to four percent (4%) in excess of the Bank's
prime rate, based on a 360-day year and actual number of days elapsed.
The Deficiency Rate is established on the first day of each January and
July and is applicable for the immediately ensuing six month period.
Principal payments due on all long-term debt consist of the following:
Fiscal year ending June 30, 1997 $3,744,489
Fiscal year ending June 30, 1998 35,898
Thereafter 43,814
---------
$3,824,201
=========
5. Stockholders' Equity
--------------------
a) Common and Preferred Stock
--------------------------
During the year ended June 30, 1995, the Company awarded 130,000 shares of
Class A Common Stock to two employees and options to purchase 200,000
shares of Class A Common Stock were exercised, increasing the number of
issued and outstanding Class A shares to 2,610,614.
In August 1995, all outstanding shares (250,000 shares) of Class B Common
Stock were converted to Class A Common Stock. As a result of this
conversion, the number of shares of Class A Common Stock issued and
outstanding increased by 250,000 shares to 2,860,614 shares.
In March 1996, the Company's Certificate of Incorporation was amended.
Among other things, the authorized Common Stock of the Company was
increased from 7,000,000 shares of Class A Common Stock, par value $.10
per share, to 35,000,000 shares of Common Stock, par value, $.01 per
10
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
share. The appellation "Class A" was eliminated from the Common Stock,
since there were no longer any shares of Class B Common Stock outstanding.
In addition, the Company's Certificate of Incorporation was amended to
authorize 200 shares of Preferred Stock, par value $.01 per share.
During the year ended June 30, 1996, the Company granted stock options to
two officers. Richard K. Laird, the former President and Chief Executive
Officer, effectively received options to purchase 225,000 shares of Common
Stock at an exercise price of $.40 per share, subject to adjustment in
certain circumstances. Russell J. Reardon, the Chief Financial Officer,
received options to purchase 250,000 shares of Common Stock at an exercise
price of $.50 per share, subject to adjustment in certain circumstances.
In June 1996, one Common Stock Purchase Warrant, Series D ("Series D
Warrant") was exercised. As a result, the number of shares of Common
Stock increased by 94,340 to 2,954,954 shares.
Preferred Stock and Series D Warrants
-------------------------------------
On March 7, 1996, the Company completed a private offering with respect to
an additional 30 units of its securities. Each unit was comprised of one
share of Series A 12% Cumulative Convertible Redeemable Preferred Stock
(the "Preferred Stock") and one Series D Warrant. Each share of Preferred
Stock is convertible into 94,340 shares of Common Stock, subject to
adjustment in certain circumstances. Each Series D Warrant entitles the
holder thereof to purchase 94,340 shares of Common Stock at $.01 per
share, subject to adjustment in certain circumstances, at any time prior
to March 7, 2003. Holders of Preferred Stock have no voting or preemptive
rights.
The Company allocated the $1,500,000 received between the Preferred Stock
and the Series D Warrants based on their estimated fair value as of
March 7, 1996.
Dividends on the Preferred Stock are payable quarterly, beginning June 15,
1996. With respect to the dividend payments due on June 15, 1996 and
September 15, 1996, the Board of Directors has elected to defer payment
until the Company has sufficient cash for that purpose. The holders of the
Preferred Stock and the Series D Warrants also have registration rights.
The Company has not filed in a timely manner the registration statement
effecting these holders' rights.
The accumulated amount of dividends due on the Preferred Stock as of
November 12, 1996, is $137,146. Accumulated dividends were payable at the
rate of 12.0% per annum until June 5, 1996. On June 6, 1996, the dividend
rate increased to 13.5% per annum for the ensuing three-month period
because the Company failed to file in a timely manner the registration
statement effecting the Preferred Stock and Series D Warrant holders'
11
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
registration rights. Thereafter, the dividend rate increased monthly by
0.5% per annum to a rate of 15% per annum on November 12, 1996. Until the
Company files the registration statement, the dividend rate will increase
monthly by 0.5% per annum to a maximum rate on unpaid accumulated
dividends of 17% per annum. Upon the filing of the registration statement
and the payment of accumulated dividends, the dividend rate will revert to
12% per annum.
The Preferred Stock is redeemable, at the Company's option, upon the
giving of thirty days prior written notice, unless the price of the
Company's Common Stock fell below $5.00 per share during the 120-day
period immediately preceding the date of the notice. If redeemed by the
Company, the Preferred Stock must be redeemed at stated value plus all
accrued and unpaid accumulated dividends.
Series E Warrants
-----------------
In December 1995, the Company entered into a consulting agreement with two
companies, SFM and Phipps, Teman & Company, L.L.C. ("PTCO"), for services
to be rendered in obtaining additional financing for the Company. In
addition to fees paid under the agreement, on March 7, 1996, SFM and PTCO
were granted warrants to purchase a total of 1,000,000 shares of the
Company's Common Stock at $.50 per share, subject to adjustment in certain
circumstances, any time prior to March 7, 2003 (the "Series E Warrants").
These warrants were estimated to have a fair market value of $.01 per
warrant, and the Company reflected such amount as a charge to professional
fee expense. As of November 12, 1996, the Company has not filed in a
timely manner the registration statement effecting the Series E Warrant
holders' registration rights.
Series F Warrants
-----------------
On May 1, 1996, the Company granted Common Stock Purchase Warrants, Series
F ("Series F Warrants") to certain directors, officers and other related
parties as compensation for services performed for the Company. These
warrants were estimated to have a fair market value of $.01 per warrant,
and the Company reflected such amount as a charge to professional fee
expense. The Series F Warrants are exercisable at any time prior to
March 7, 2003 at $.50 per share, subject to adjustment in certain
circumstances. Specifically, the Company granted: (i) Mr. Lawrence I.
Schneider, a director, Series F Warrants to purchase 331,190 shares of
Common Stock; (ii) PTCO, a company whose principals include director
Norman Phipps and officer Wade Teman, Series F Warrants to purchase
235,850 shares of Common Stock; and (iii) Alfred Mendelsohn, a director,
Series F Warrants to purchase 100,000 shares of Common Stock. As of
November 12, 1996, the Company has not filed in a timely manner the
12
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
registration statement effecting the Series F Warrant holders'
registration rights.
Registration Rights
-------------------
Under the terms of the Senior Debentures, the Subordinated Debentures, the
Preferred Stock, the Series A Warrants, the Series B Warrants, the Series
C Warrants, the Series D Warrants, the Series E Warrants, the Series F
Warrants and the options granted to Russell J. Reardon described below,
the Company was obligated to file a registration statement effecting the
respective holders' registration rights within 90 days after issuance. As
of November 12, 1996, the Company has not filed such a registration
statement and, accordingly, the Company is not in compliance with respect
to this obligation.
b) Stock Options
-------------
Non-Qualified Stock Options
---------------------------
On May 16, 1994, the Board of Directors granted non-qualified stock
options to two officers to each purchase 300,000 shares of Common Stock at
the fair market value of $.10 per share. These options are exercisable in
whole or in part at any time until December 31, 1998. During the year
ended June 30, 1995, each officer exercised options for 100,000 shares of
Common Stock. During the year ended June 30, 1996, each officer agreed to
terminate options for 100,000 shares of Common Stock. At September 30,
1996, the balance of these exercisable options equaled 100,000 shares of
Common Stock for each of the two former officers.
On March 7, 1996, the Board of Directors granted non-qualified stock
options to an officer to purchase 1,000,000 shares of Common Stock at an
exercise price ranging from $.40 per share to $3.40 per share.
Subsequently, on September 14, 1996, in connection with a settlement
agreement with the former officer, the grant was effectively reduced to a
total of 225,000 shares of Common Stock at $.40 per share, subject to
adjustment in certain circumstances.
13
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The options are exercisable in accordance with the following vesting
schedule:
Date Vested Exercise Price Number of Shares
----------- -------------- ----------------
March 7, 1996 $.40 125,000
September 14, 1996 $.40 100,000
-------
Total 225,000
=======
On May 1, 1996, the Board of Directors granted non-qualified stock options
to an officer to purchase 250,000 shares of Common Stock at an exercise
price of $.50 per share, subject to adjustment in certain circumstances,
exercisable at any time on or prior to March 7, 2003.
(c) Stock Subscriptions Receivable
------------------------------
As of September 30, 1996, two former officers of the Company, Murray H.
Feigenbaum and Jerome Deutsch, were indebted to the Company in the amounts
of $106,350 and $57,850, respectively, for Common Stock purchased from the
Company. By agreement, such amounts are payable at the rate of $.25 per
common share as shares are sold. Interest accrues on the unpaid balance
at the rate of 4% per annum, and is payable annually.
6. (Loss) Income Per Share
-----------------------
(Loss) Income per common share was computed by dividing net (loss) income
by the weighted average number of shares of Common Stock and equivalents
outstanding during each of the periods presented. For the three months
ended September 30, 1996, the fully diluted earnings per share does not
give effect to the contingently issuable shares because they would have an
antidilutive effect.
14
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
---------------------------------------------------------
(a) General - Plan of Operation
---------------------------
On March 7, 1996, the Company was recapitalized and new management was
brought in to lead a restructuring of the Company's operations. (The
recapitalization of the Company is described in more detail below.) The
primary objective of the restructuring is to redirect the Company's focus
toward the higher value-added, broadband wireless communications market.
The results of operations have been significantly impacted by this change
in focus.
As a result of this change in focus, as well as the inactivity and other
operating inefficiencies resulting from a shortage of cash, the Company
has incurred net losses in each period following the change in control.
In addition, as of September 30, 1996, the Company was in payment default
under the Subordinated Debentures and the Senior Debentures. The Company
was also in default in respect of certain financial covenants in the
Revolver and the Term Loan with the Bank, and the Senior Debentures.
However, as described in Note 4 to the Company's Notes to Consolidated
Financial Statements above, the holder of the Senior Debentures has waived
compliance with certain financial covenants through June 30, 1997 and has
waived its right to declare an event of default with respect to the late
interest payment until December 15, 1996. Pursuant to the Forbearance
Agreement, the Bank has agreed to forbear any rights it may have under the
Revolver or Term Loan in connection with the Company's failure to comply
with the financial covenants of the Revolver and Term Loan until the
earlier of February 28, 1997, or the date on which the Bank receives the
Company's December 31, 1996, interim financial statements. Therefore, the
Company has reclassified these Debentures, the Revolver and the Term Loan
as current liabilities.
There can be no assurance that the Bank and the holder of the Senior
Debentures will agree to waive or forbear any rights they may have after
the Forbearance Agreement and the waiver described above expire.
The Company has not paid any dividends on its Preferred Stock, which have
accumulated in the amount of $137,146 through November 12, 1996. Under
the terms of the Preferred Stock, these dividends accumulate. As of
November 12, 1996, the Company is overdue in payments to vendors in the
amount of approximately $1.3 million.
The Company is currently seeking bridge financing and is exploring certain
strategic alliance opportunities so that it can pay overdue amounts to
suppliers and financial creditors, complete projects in process and fund
the planned growth in operations. If, however, the Company is unable to
promptly obtain bridge financing or other cash infusions, the Company may
seek protection from its creditors under the Bankruptcy Code or pursue an
insolvency proceeding. The Company's creditors could also file an
involuntary petition against the Company under the Bankruptcy Code.
15
<PAGE>
(b) Managements's Discussion and Analysis of Financial Condition and
Results of Operations
----------------------------------------------------------------
Results of Operations
---------------------
Net revenues for the three-months ended September 30, 1996, were
$1,893,862. Compared to the corresponding prior period, revenues declined
$408,942 (18%). The decline was a result of project delays and inactivity
due to a shortage of cash.
Cost of revenues for the period was $1,818,061 (96% of revenues). In the
corresponding prior period, cost of revenues was $1,742,303 (76% of
revenues). The increase in cost reflects the operating inefficiencies
resulting from a shortage of cash and inefficiencies resulting from the
implementation of the new marketing focus.
Selling, general and administrative expense was $614,302 for the period.
Compared to the corresponding prior period, the expense increased $210,518
(52%). The increase includes an increase in professional fees of $171,000
and amortization of loan costs of $31,000.
Interest expense for the period was $171,454. Compared to the
corresponding prior period, interest expense increased $89,092 (108%).
The increased expense reflects increased borrowing levels, including the
addition of the Senior Debentures and the Subordinated Debentures, and
amortization of the discount on these Debentures.
Financial Condition, Liquidity and Capital Resources
----------------------------------------------------
The Company had $171,536 in cash at September 30, 1996 compared with
$244,271 at June 30, 1996.
The decrease in cash resulted from net cash used in operating activities
($23,018), capital expenditures ($13,822) and repayment of debt ($35,895).
As more fully discussed under Item 2(a) above, the Company requires bridge
financing or other cash infusions in order to continue operating. See
also Note 4 to the Company's Notes to Consolidated Financial Statements.
The existing capital structure of the Company is described below.
Subordinated Debentures and Series A and Series B Warrants
----------------------------------------------------------
On July 14, 1995, the Company completed a private offering of 15 units of
its securities at a price of $20,800 per unit. Each unit consists of one
$20,000 12% Convertible Subordinated Debenture and one Common Stock
Purchase Warrant, Series A. For managing the financing, Common Stock
16
<PAGE>
Purchase Warrants, Series B, to purchase 1,500,000 shares of Common Stock
were sold to SFM at a price of $.02 per share.
Subsequently, on March 7, 1996, in connection with the recapitalization
and change in control of the Company, all of the holders of the 12%
Convertible Subordinated Debentures and Common Stock Purchase Warrants,
Series A, and Common Stock Purchase Warrants, Series B, exchanged such
debentures and warrants for the Subordinated Debentures and the Series A
and Series B Warrants.
The Subordinated Debentures are convertible into an aggregate of 1,200,000
shares of Common Stock at $.25 per share, subject to adjustment in certain
circumstances. As of November 12, 1996, the Company was in default with
respect to the payment of interest under the Subordinated Debentures;
accrued and unpaid interest totaled $49,110. Therefore, the Company has
reclassified these Debentures as current liabilities. Interest accrues at
the rate of 15% per annum on unpaid interest and 12% per annum on the
outstanding principal. The principal is payable in one balloon payment on
July 14, 1997. The Subordinated Debentures are subordinated in right of
payment to the Company's Term Loan, Revolver, Senior Debentures and
capital lease obligations.
The Series A Warrants may be exercised at a price of $.25 per share,
subject to adjustment in certain circumstances, for an aggregate of
600,000 shares of Common Stock. The Series B Warrants may be exercised at
a price of $.25 per share, subject to adjustment in certain circumstances,
for an aggregate of 1,500,000 shares of Common Stock. Both Series A and
Series B Warrants may be exercised at any time until July 15, 2002. As of
November 12, 1996, the Company has not filed in a timely manner the
registration statement effecting the Series A and Series B Warrant
holders' registration rights. See "Registration Rights" below.
Senior Debentures and Series C Warrants
---------------------------------------
On March 7, 1996, the Company completed a private offering with respect to
an additional 30 units of its securities. Pursuant to a Unit Purchase
Agreement between the Company and Cerberus, Cerberus purchased 30 units,
each unit composed of one $50,000 Senior Debenture and one Series C
Warrant. Each Series C Warrant entitles the holder thereof to purchase
84,746 shares of Common Stock for $.01 per share, subject to adjustment in
certain circumstances, at any time prior to March 7, 2003.
Each Senior Debenture is convertible into 84,746 shares of Common Stock,
subject to adjustment in certain circumstances. The Senior Debentures are
senior in right of payment to the Company's Subordinated Debentures, but
are subordinate to the Company's Term Loan and Revolver. The principal is
payable on the Senior Debentures in one balloon payment due December 31,
1998.
As of November 12, 1996, the Company has not paid accrued interest on the
Senior Debentures, has not filed in a timely manner the registration
17
<PAGE>
statement effecting the Senior Debentures and Series C Warrant holder's
registration rights, and is not in compliance with the financial covenants
described below. Therefore, the Company has reclassified these Debentures
as current liabilities. See "Registration Rights" below. Cerberus has
waived these defaults for a limited period as described more fully below.
Accrued and unpaid interest on the Senior Debentures totaled $87,361 as of
November 12, 1996. Interest is currently payable at the rate of 15% per
annum on the outstanding principal and at the rate of 15% on the past-due
interest. Interest accrued on the unpaid principal at the rate of 12% per
annum until June 5, 1996. On June 6, 1996, the interest rate increased to
13.5% per annum for the ensuing three-month period, due to the Company's
failure to file a registration statement effecting the Senior Debentures
and Series C Warrant holder's registration rights. See "Registration
Rights" below. Thereafter, the interest rate increased each 30-day period
by 0.5% per annum to a rate of 15% per annum on November 12, 1996. Until
the Company files a registration statement effecting the Senior Debenture
and Series C Warrant holder's registration rights, the interest rate will
increase by 0.5% per annum for each ensuing 30 day period, to a maximum
interest rate on unpaid principal and interest of 17% per annum. Upon the
filing of the registration statement and the payment of past due interest,
the interest rate will revert to 12% per annum.
The Senior Debentures contain certain financial covenants, which were in
default as of September 30, 1996. The covenants have five components:
(i) a minimum tangible net worth of $4.5 million, (ii) a current ratio of
at least 2.75 to 1.0, (iii) a minimum working capital level of $5.5
million, (iv) a maximum ratio of total liabilities to tangible net worth
of 1.25 to 1.0, and (v) a minimum debt service coverage ratio of 1.05 to
1.0. As of October 31, 1996, in exchange for a note in the amount of
$15,000 (increasing to $22,500 in certain circumstances), Cerberus has
waived the requirements for the Company to comply with these financial
covenants through the end of the Company's fiscal year ending June 30,
1997 and has waived its right to declare an event of default with respect
to the late interest payment until December 15, 1996.
North Fork Bank Credit Facilities
---------------------------------
The Company has two credit facilities available to it from its senior
lender, the Bank. The facilities provide the Company with a Revolver of
$2,200,000, which matures October 31, 1997, and a Term Loan of $800,000,
which matures December 31, 1998. The Revolver bears interest at the rate
of 2% per annum in excess of the Bank's prime rate; the Term Loan bears
interest at the rate of 1.5% per annum in excess of the Bank's prime rate.
On November 12, 1996, the Bank's prime rate was 8.25% per annum.
The Company is current with respect to its interest payments on the
Revolver and its interest and principal payments on the Term Loan.
However, the credit facilities with the Bank contain certain financial
covenants, which were in default as of September 30, 1996. The covenants
have five components: (i) a minimum tangible net worth of $4.5 million,
18
<PAGE>
(ii) a current ratio of at least 2.75 to 1.0, (iii) a minimum working
capital level of $5.5 million, (iv) a maximum ratio of total liabilities
to tangible net worth of 1.25 to 1.0, and (v) a minimum debt service
coverage ratio of 1.05 to 1.0. Pursuant to the Forbearance Agreement, the
Bank has agreed to forbear any rights it may have under the Revolver or
Term Loan in connection with the Company's failure to comply with the
financial covenants of the Revolver and Term Loan until the earlier of
February 28, 1997, or the date on which the Bank receives the Company's
December 31, 1996 interim financial statements. Therefore, the Company
has reclassified the Revolver and the Term Loan as current liabilities.
Under the Term Loan and the Revolver, the Company is required to maintain
an aggregate average monthly ledger balance of $175,000 in non-interest
deposit accounts with the Bank ("Compensating Balance Requirement"). For
the three months ended September 30, 1996, the Company's aggregate average
monthly ledger balance was less than the required amount. Accordingly,
the Company paid penalties totaling approximately $3,000 to the Bank,
which represent (a) the difference between $175,000 and the aggregate
average monthly ledger balance maintained, multiplied by (b) a fixed rate
(the "Deficiency Rate") equal to four percent (4%) in excess of the Bank's
prime rate, based on a 360-day year and actual number of days elapsed.
The Deficiency Rate is established on the first day of each January and
July and is applicable for the immediately ensuing six month period.
Preferred Stock and Series D Warrants
-------------------------------------
On March 7, 1996, the Company completed a private offering with respect to
an additional 30 units of its securities. Each unit was comprised of one
share of Preferred Stock and one Series D Warrant. Each share of
Preferred Stock is convertible into 94,340 shares of Common Stock, subject
to adjustment in certain circumstances. Each Series D Warrant entitles
the holder thereof to purchase 94,340 shares of Common Stock at $.01 per
share, subject to adjustment in certain circumstances, at any time prior
to March 7, 2003. Holders of Preferred Stock have no voting or preemptive
rights.
Dividends on the Preferred Stock are payable quarterly, beginning June 15,
1996. With respect to the dividend payments due on June 15, 1996 and
September 15, 1996, the Board of Directors has elected to defer payment
until the Company has sufficient cash for that purpose. The holders of the
Preferred Stock and the Series D Warrants also have registration rights.
The Company has not filed in a timely manner the registration statement
effecting these holders' rights. See "Registration Rights" below.
The accumulated amount of dividends due on the Preferred Stock as of
November 12, 1996, is $137,146. Accumulated dividends were payable at the
rate of 12.0% per annum until June 5, 1996. On June 6, 1996, the dividend
rate increased to 13.5% per annum for the ensuing three-month period, due
to the Company's failure to file in a timely manner the registration
statement effecting the Preferred Stock and Series D Warrant holders'
registration rights. See "Registration Rights" below. Thereafter, the
19
<PAGE>
dividend rate increased monthly by 0.5% per annum to a rate of 15% per
annum on November 12, 1996. Until the Company files the registration
statement, the dividend rate will increase monthly by 0.5% per annum to a
maximum rate on unpaid accumulated dividends of 17% per annum. Upon the
filing of the registration statement and the payment of accumulated
dividends, the dividend rate will revert to 12% per annum.
The Preferred Stock is redeemable, at the Company's option, upon the
giving of thirty days' prior written notice, unless the price of the
Common Stock fell below $5.00 per share during the 120-day period
immediately preceding the date of the notice. If redeemed by the Company,
the Preferred Stock must be redeemed at stated value plus all accrued and
unpaid accumulated dividends.
Series E Warrants
-----------------
In December 1995, the Company entered into a consulting agreement with two
companies, SFM and PTCO, for services to be rendered in obtaining
additional financing for the Company. In addition to fees paid under the
agreement, on March 7, 1996, SFM and PTCO were granted Series E Warrants
to purchase a total of 1,000,000 shares of the Company's Common Stock at
$.50 per share, subject to adjustment in certain circumstances, any time
prior to March 7, 2003. As of November 12, 1996, the Company has not
filed in a timely manner the registration statement effecting the Series E
Warrant holders' registration rights. See "Registration Rights" below.
Series F Warrants
-----------------
On May 1, 1996, the Company granted Series F Warrants to certain
directors, officers and other related parties for services performed for
the Company. The Series F Warrants are exercisable at any time prior to
March 7, 2003 at $.50 per share, subject to adjustment in certain
circumstances. Specifically, the Company granted: (i) Mr. Lawrence I.
Schneider, a director, Series F Warrants to purchase 331,190 shares of
Common Stock; (ii) PTCO, a company whose principals include director
Norman Phipps and officer Wade Teman, Series F Warrants to purchase
235,850 shares of Common Stock; and (iii) Alfred Mendelsohn, a director,
Series F Warrants to purchase 100,000 shares of Common Stock. As of
November 12, 1996, the Company has not filed in a timely manner the
registration statement effecting the Series F Warrant holders'
registration rights. See "Registration Rights" below.
Registration Rights
-------------------
Under the terms of the Senior Debentures, the Subordinated Debentures, the
Preferred Stock, the Series A Warrants, the Series B Warrants, the Series
C Warrants, the Series D Warrants, the Series E Warrants, the Series F
Warrants and the options granted to Russell J. Reardon (see "Common Stock"
below), the Company was obligated to file a registration statement
20
<PAGE>
effecting the respective holders' registration rights within 90 days after
issuance. As of November 12, 1996, the Company has not filed such a
registration statement and, accordingly, the Company is not in compliance
with respect to this obligation.
Common Stock
------------
During the year ended June 30, 1995, the Company awarded 130,000 shares of
Class A Common Stock to two employees and options to purchase 200,000
shares of Class A Common Stock were exercised, increasing the number of
issued and outstanding Class A shares to 2,610,614.
In August 1995, all outstanding shares (250,000 shares) of Class B Common
Stock were converted to Class A Common Stock. As a result of this
conversion, the number of shares of Class A Common Stock issued and
outstanding increased by 250,000 shares to 2,860,614 shares.
In March 1996, the Company's Certificate of Incorporation was amended.
Among other things, the authorized Common Stock of the Company was
increased from 7,000,000 shares of Class A Common Stock, par value $.10
per share, to 35,000,000 shares of Common Stock, par value, $.01 per
share. The appellation "Class A" was eliminated from the Common Stock,
since there were no longer any shares of Class B Common Stock outstanding.
In addition, the Company's Certificate of Incorporation was amended to
authorize 200 shares of Preferred Stock, par value $.01 per share.
During the year ended June 30, 1996, the Company granted stock options to
two officers. Richard K. Laird, the former President and Chief Executive
Officer, effectively received options to purchase 225,000 shares of Common
Stock at an exercise price of $.40 per share, subject to adjustment in
certain circumstances. Russell J. Reardon, the Chief Financial Officer,
received options to purchase 250,000 shares of Common Stock at an exercise
price of $.50 per share, subject to adjustment in certain circumstances.
In June 1996, a Series D Warrant was exercised. As a result, the number
of issued and outstanding shares of Common Stock increased by 94,340 to
2,954,954 shares.
21
<PAGE>
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities
-------------------------------
See "Management's Discussion and Analysis or Plan of Operation" for a
description of the Company's defaults under the Revolver, the Term Loan,
the Senior Debentures, the Subordinated Debentures and the Preferred
Stock.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
Number Description
------ -----------
3 Amended and Restated Certificate of Incorporation of
LogiMetrics, Inc. as of March 7, 1996.
27 Financial Data Schedule for the three months ended
September 30, 1996.
(b) Reports on Form 8-K:
On September 9, 1996, the Company filed with the Securities and Exchange
Commission a Current Report on Form 8-K dated August 27, 1996 relating to
the dismissal of the Company's independent accountants.
On September 19, 1996, the Company filed with the Securities and Exchange
Commission a Current Report on Form 8-K dated September 13, 1996 relating
to the engagement of Deloitte & Touche LLP as the Company's independent
accountants.
22
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
LOGIMETRICS, INC.
Date: November 14, 1996 By:/s/ Norman M. Phipps
------------------------------------
Norman M. Phipps
Chairman of the Board
(Acting Principal Executive Officer)
Date: November 14, 1996 By:/s/ Russell J. Reardon
-----------------------------------
Russell J. Reardon
Chief Financial Officer
(Principal Accounting Officer)
23
<PAGE>
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
LOGIMETRICS, INC.
THE UNDERSIGNED, a natural person, for the purpose of organizing a
corporation under the provisions and subject to the requirements of the General
Corporation Law of the State of Delaware, hereby certifies that:
FIRST: The name of the Corporation is LOGIMETRICS, INC.
SECOND: The registered office of the Corporation is to be located at 306
South State Street, in the City of Dover, in the County of Kent, in the State of
Delaware. The name of its registered agent at that address is the United States
Corporation Company.
THIRD: The purpose of the Corporation is to engage in any lawful act of
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have the authority to issue is Thirty Five Million Two Hundred (35,000,200)
shares, of which Thirty Five Million (35,000,000) shares are designated as
Common Stock, $.01 par value per share, and Two Hundred (200) shares are
designated as Preferred Stock, $.01, par value per share.
The Board of Directors of the Corporation is authorized, subject to
limitations prescribed by law and the provisions of this Article FOURTH, to
provide for the issuance of the shares of Preferred Stock in series, and by
filing a certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
<PAGE>
series and the voting powers thereof, full or limited, and to fix the
designation, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof.
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determination of the
following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares
of that series;
(c) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting
rights;
(d) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion privileges, including
provision for adjustment of the conversion rate in such events as the
Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the date
or dates upon or after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of
such sinking fund;
- 2 -
<PAGE>
(g) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the
corporation, and the relative rights of priority, if any, of payment
of shares of that series; and
(h) Any other relative rights, preferences and limitations of that
series.
FIFTH: The name and address of the incorporator is:
NAME ADDRESS
---- -------
Robert S. Persky 477 Madison Avenue
New York, New York 10022
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The number of directors of the Corporation shall be such as from
time to time shall be fixed by, or in the manner provided in the by-laws.
Election of directors need not be by ballot unless the by-laws so provide.
(2) The Board of Directors shall have power without the assent or vote
of the stockholders.
(a) to make, alter, amend, change, add to or repeal the By-Laws of
the Corporation;
(b) to fix and vary the amount to be reserved for any proper
purpose;
(c) to authorize and cause to be executed mortgages and liens upon
all or any part of the property of the Corporation;
- 3 -<PAGE>
(d) to determine the use and disposition of any surplus or net
profits;
(e) to determine from time to time whether, and to what extent, and
at what times and places, and under what conditions and regulations, the
accounts and books of the Corporation (other than the stock ledger) or
any of them, shall be open to the inspection of the stockholders.
(3) The directors in their discretion may submit any contract or act for
approval or ratification at any annual meeting of the stockholders or at any
meeting of the stockholders called for the purpose of considering any such act
or contract, and any contract or act that shall be approved or be ratified by
the vote of the holders of a majority of the stock of the Corporation which is
represented in person or by proxy at such meeting and entitled to vote thereat
(provided that a lawful quorum of stockholders be there represented in person or
by proxy) shall be as valid and as binding upon the Corporation and upon all the
stockholders as though it had been approved or ratified by every stockholder of
the Corporation, whether or not the contract or act would otherwise be open to
legal attack because of directors' interest, or for any other reason.
(4) In addition to the powers and authorities hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation; subject, nevertheless, to the provisions of the statutes of
Delaware, of this certificate, and to any by-laws from time to time made by the
directors or stockholders; provided, however, that no by-laws so made shall
invalidate any prior act of the directors which would have been valid if such
by-law had not been made.
SEVENTH: (a) Every person who is or was a director, officer, employee or
agent of the Corporation shall be indemnified by the Corporation pursuant to the
provisions of Section 145 of the General Corporation Law of the State of
- 4 -
<PAGE>
Delaware (or any similar provision or provisions of applicable law at the time
in effect) to the fullest extent permitted thereby against all liabilities and
expenses imposed upon or incurred by that person in connection with any
proceeding in which that person may be made, or threatened to be made, a party,
or in which that person may become involved by reason of that person being or
having been a director or officer or continues to serve in any capacity with any
other enterprise at the request of the Corporation. The foregoing right of
indemnification shall not be deemed to be exclusive of any other rights to which
those seeking indemnification may be entitled under any by-law, agreement, vote
of stockholders or disinterested directors, or otherwise. No repeal or amendment
of this Article shall adversely affect any right or protection of any person
existing at the time of such repeal or amendment.
(b) No director of the Corporation shall be personally liable to the
Corporation or its stockholders for any monetary damages for breach of fiduciary
duty as a director; provided, however, that the foregoing clause shall not apply
to any liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders; (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law; (iii) under Section 174 of the General Corporation Law of the State of
Delaware; or (iv) for any transaction from which the director derived an
improper personal benefit. If the General Corporation Law of the State of
Delaware is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then by virtue of this Article
SEVENTH, the liability of a director of the Corporation shall be eliminated or
- 5 -
<PAGE>
limited to the fullest extent permitted thereby, as so amended. Any repeal or
amendment of this Article shall not adversely affect any right or protection of
a director of the Corporation existing at the time of such repeal or amendment.
EIGHTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation in the
- 6 -
<PAGE>
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power.
IN WITNESS WHEREOF, I have hereunto set my hand and seal as of the 7th
day of March 1996.
/S/ MURRAY H. FEIGENBAUM, PRESIDENT
-----------------------------------
Murray H. Feigenbaum, President
/S/ BARBARA DIVACK, SECRETARY
-----------------------------
Barbara Divack, Secretary
- 7 -<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-QSB FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 171,536
<SECURITIES> 0
<RECEIVABLES> 808,567
<ALLOWANCES> (75,000)
<INVENTORY> 2,238,593
<CURRENT-ASSETS> 4,597,846
<PP&E> 2,422,269
<DEPRECIATION> 1,942,117
<TOTAL-ASSETS> 5,353,128
<CURRENT-LIABILITIES> 6,917,296
<BONDS> 79,712
0
990,564
<COMMON> 29,549
<OTHER-SE> (2,663,993)
<TOTAL-LIABILITY-AND-EQUITY> 5,353,128
<SALES> 1,893,862
<TOTAL-REVENUES> 1,893,862
<CGS> 1,818,061
<TOTAL-COSTS> 2,432,363
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 171,454
<INCOME-PRETAX> (709,955)
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