<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission file number 0-10696
LogiMetrics, Inc.
(Name of small business issuer in its charter)
Delaware 11-2171701
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
435 Moreland Road, Hauppauge, New York 11788
(Address of principal executive offices)
Issuer's telephone number: (631) 231-1700
50 Orville Drive, Bohemia, New York 11716
(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 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 [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock, par value Outstanding at September 15, 2000:
$.01 per share 169,586,137 shares
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
LOGIMETRICS, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet - September 30, 1999.................... 3
Consolidated Statements of Operations -
Three months ended September 30, 1999 and 1998..................... 4
Consolidated Statements of Cash Flows -
Three months ended September 30, 1999 and 1998..................... 5
Notes to Consolidated Financial Statements......................... 6-15
Item 2. Management's Discussion and Analysis or Plan of Operation..... 16-24
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities............................... 25
Item 6. Exhibits and Reports on Form 8-K.............................. 25
SIGNATURES............................................................. 26
2
<PAGE>
LOGIMETRICS, INC.
CONSOLIDATED BALANCE SHEET
September 30, 1999
(Unaudited)
ASSETS
Current Assets:
Cash $ 408,049
Accounts receivable, less allowance
for doubtful accounts of $50,070 324,671
Inventories (Note 2) 1,597,484
Prepaid expenses and other current assets 26,969
------
Total current assets 2,357,173
Equipment and fixtures, net 1,255,131
Other assets 75,536
------
TOTAL ASSETS $ 3,687,840
============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable and other accrued expenses (Note 3) $ 4,567,103
Current portion of long-term debt (Note 4) 12,006,543
----------
Total current liabilities 16,573,646
Long-term debt (Note 4) 2,299,352
---------
TOTAL LIABILITIES 18,872,998
----------
Commitments and Contingencies
STOCKHOLDERS' DEFICIENCY
Preferred Stock:
Series A, stated value $50,000 per share; authorized,
200 shares; issued and outstanding, 28 shares 924,525
Common Stock:
Par value $.01; authorized 100,000,000 shares; issued and
outstanding, 28,672,245 shares 286,723
Additional paid-in capital 4,808,703
Accumulated deficit (21,015,659)
Stock subscriptions receivable (Note 5) (189,450)
--------
TOTAL STOCKHOLDERS' DEFICIENCY (15,185,158)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 3,687,840
============
See Notes to Consolidated Financial Statements
3
<PAGE>
LOGIMETRICS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
1999 1998
Revenues $ 537,315 $ 2,618,712
Costs and expenses:
Cost of revenues 1,215,383 1,875,719
Selling, general and
administrative expenses 2,012,679 1,106,336
Research and development 554,356 239,425
------- -------
Loss from operations (3,245,103) (602,768)
Interest expense 472,179 364,336
------- -------
Loss before income taxes (3,717,282) (967,104)
Income tax benefit -- (19,497)
------- -------
Net loss (3,717,282) (947,607)
Preferred stock dividends 59,989 59,989
------ ------
Net loss attributable to
common stockholders $ (3,777,271) $ (1,007,596)
============ ============
Basic and diluted loss per common share (Note 6) $ (0.13) $ (0.04)
============ ============
Basic and diluted weighted average number
of common shares (Note 6) 28,672,245 28,461,671
========== ==========
See Notes to Consolidated Financial Statements
4
<PAGE>
LOGIMETRICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss before preferred stock dividends $ (3,717,282) $ (947,607)
------------- -----------
Adjustments to reconcile net loss before preferred stock
dividends to net cash used in operating activities:
Depreciation and amortization 266,879 129,100
Provision for doubtful accounts 175,000 --
Accrued interest expense 407,208 251,879
Financing fee 764,678 --
Stock compensation expense -- 11,363
Increase (decrease) in cash from:
Accounts receivable 708,382 11,202
Inventories 255,507 (203,350)
Prepaid expenses and other
current assets (310) (31,648)
Accounts payable and accrued expenses 254,650 519,591
Other assets/liabilities (2,348) (44,086)
------ -------
Total adjustments 2,829,646 644,051
--------- -------
Net cash used in operating activities (887,636) (303,556)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and fixtures (50,023) (12,219)
------- -------
Net cash used in investing activities (50,023) (12,219)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt issuance 1,000,000 416,667
Proceeds from warrant issuance -- 83,333
Repayment of loans from stockholders (33,339) --
Proceeds from exercise of warrants -- 15,000
Repayment of debt (21,713) (156,864)
------- --------
Net cash provided by financing activities 944,948 358,136
------- -------
NET INCREASE IN CASH 7,289 42,361
CASH, beginning of period 400,760 432,250
------- -------
CASH, end of period $ 408,049 $ 474,611
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Financial Statements
The accompanying consolidated financial statements include the accounts of
LogiMetrics, Inc. ("LogiMetrics") and its wholly-owned subsidiaries, mmTech,
Inc. ("mmTech") and LogiMetrics FSC, Inc. (collectively, the "Company"). Unless
otherwise indicated, all references to the Company include mmTech and all
references to LogiMetrics mean the Company excluding mmTech. All intercompany
balances and transactions have been eliminated. Certain amounts in the 1999
financial statements have been reclassified to conform with the 2000
presentation.
The balance sheet as of September 30, 1999, the statements of operations for the
three-month periods ended September 30, 1999 and 1998, and the statements of
cash flows for the three-month periods ended September 30, 1999 and 1998, are
unaudited. Such unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America 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
recurring accruals considered necessary for a fair presentation, have been
included. Results for the three months ended September 30, 1999 are not
necessarily indicative of the results that may be achieved for any other interim
period or for the fiscal year ending June 30, 2000. 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, 1999.
2. Inventories
Inventory consists of the following at September 30, 1999:
Raw materials and components $ 577,957
Work-in-progress 1,019,527
------------
$ 1,597,484
============
3. Accounts Payable and Other Accrued Expenses
Accounts payable and other accrued expenses consists of the following at
September 30, 1999:
Accounts payable $ 2,547,053
Preferred stock dividends payable 807,934
Accrued professional fees 284,990
Other accrued expenses 927,126
-------------
$ 4,567,103
============
6
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
4. Long-Term Debt
Long-term debt consists of the following at September 30, 1999:
Notes payable to Bank $ 1,919,249
Class A Debentures 4,932,712
Class B Debentures 2,125,914
Class C Debentures 2,998,889
Bridge Notes 1,008,306
Notes payable - officers 698,324
Capital lease obligations 622,501
------------
14,305,895
Less: current portion 12,006,543
------------
$ 2,299,352
============
As of September 1, 1999, the Company entered into a Reduced and Extended
Revolving Credit Note (the "Replacement Note") and a Recognition and Limited
Forebearance Agreement (the "Forebearance Agreement") with North Fork Bank (the
"Bank"). Pursuant to the terms of the Replacement Note, the amount available for
borrowing was reduced to $1.93 million (the amount outstanding as of such date)
and the maturity date of the Replacement Note was extended to December 31, 1999.
Under the terms of the Forebearance Agreement, the Bank agreed to forbear, until
December 31, 1999, from declaring any event of default or from exercising any
remedies under the Replacement Note. See Note 9 for a discussion of the
extension of the Replacement Note maturity date.
On September 7, 1999, the Company sold an aggregate of $1,000,000 of its
Negotiable Secured Senior Subordinated Promissory Notes due March 7, 2000 (the
"Bridge Notes") to a group of institutional investors (the "Lenders") for an
aggregate cash purchase price of $1,000,000. The Bridge Notes bear interest at a
rate of 13% per annum. Pursuant to the terms of the Second Amended and Restated
Security Agreement, Intercreditor Agreement, Waiver and Consent (the
"Intercreditor Agreement"), the Bridge Notes are secured by a security interest
in all of the Company's assets which ranks junior to the Replacement Note
entered into by the Company with the Bank, and senior to the Class A 13%
Convertible Senior Subordinated Pay-in-Kind Debentures, due July 29, 1999 (the
"Class A Debentures"), the Amended and Restated 13% Senior Subordinated
Convertible Pay-in-Kind Debentures due July 29, 1999 (the "Class B Debentures")
and the Class C 13% Senior Subordinated Debentures due September 30, 1999 (the
"Class C Debentures"). Pursuant to the terms of the Intercreditor Agreement,
each of the holders of the Class A Debentures, the Class B Debentures and the
Class C Debentures consented to the issuance of the Bridge Notes and the
granting of the security interest described above. As consideration for the
purchase of the Bridge Notes, Mr. Charles S. Brand, the Company's Chairman,
transferred to the Lenders an aggregate of 3,000,000 shares of the Company's
common stock, par value $0.01 per share (the "Common Stock") owned by him.
Accordingly, a financing fee of $0.8 million was recorded by the Company. All of
the Class A Debentures, Class B Debentures and Class C Debentures were converted
into shares of the Company's Common Stock subsequent to September 30, 1999. See
Note 9.
From time to time subsequent to September 30, 1999, the Company has received
advances from certain of the Company's other investors (the "Investor Loans").
The Investor Loans have been made on the same terms and conditions as the Bridge
Notes, but rank senior to the Bridge Notes. The Investor Loans were repaid
subsequent to September 30, 1999. See Note 9.
Principal payments due on all long-term debt consist of the following:
Fiscal year ending June 30, 2000 274,674
Fiscal year ending June 30, 2001 13,871,772
Fiscal year ending June 30, 2002 154,051
Fiscal year ending June 30, 2003 5,398
----------
14,305,895
==========
See Note 9.
7
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
5. Stock Subscriptions Receivable
Stock subscriptions receivable consist of the following at September 30, 1999:
Notes from former officers $ 154,450
Note from a director 35,000
----------
$ 189,450
==========
6. Loss Per Share
Loss per common share was computed by dividing the net loss by the weighted
average number of shares of common stock outstanding during each of the periods
presented. The loss per share calculations for the three-month periods ended
September 30, 1999 and September 30, 1998 do not give effect to common stock
equivalents because they would have an antidilutive effect.
7. Operating Segments
At September 30, 1999, the Company had two reportable segments:
point-to-multipoint ("PMP"), and traveling wave tube amplifiers ("TWTAs"). The
Company designs, manufactures and markets solid state, broadband wireless
communications infrastructure equipment, subsystems and modules used to provide
PMP terrestrial and satellite-based distribution services in frequency bands
from 24 GHz to 38 GHz. The Company's products enable telecommunications service
providers to establish reliable and cost-effective data, voice and video
communications links within their networks. The Company's infrastructure
equipment includes solid-state power amplifiers, hub transmitters, active
repeaters, cell-to-cell relays, Internet access systems and other millimeter
wave-based modules and subsystems. These products are used in various
applications, such as broadband communications, including LMDS, local loop
services and Ka-band satellite communications.
In addition to the Company's broadband products, at September 30, 1999, the
Company designed, manufactured and marketed a wide range of high power
amplifiers, including TWTAs, instrumentation amplifiers and other peripheral
transmission equipment used to transmit communication signals for industrial,
commercial and military applications. The Company's TWTAs operate in frequency
bands from 0.5 GHz to 45 GHz, with power levels up to 10 kiloWatts.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates the financial
performance of its business units based on operating income of the respective
business units.
8
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Segment information for the three-month periods ended September 30, 1999 and
1998 was as follows:
<TABLE>
<CAPTION>
PMP TWTA
Division Division Intercompany Total
-------- -------- ------------ -----
<S> <C> <C> <C> <C>
1999
Net sales from external customers $ 234,461 $ 302,854 $ - $ 537,315
Operating loss (1) 1,093,011 2,152,092 3,245,103
Interest expense 26,078 446,101 472,179
Total assets 1,734,852 4,948,252 (2,995,264) 3,687,840
Capital expenditures 48,531 1,492 50,023
Depreciation and amortization 53,340 213,539 266,879
1998
Net sales from external customers $ 426,199 $ 2,192,513 $ - $ 2,618,712
Operating (loss) gain(1) (759,399) 156,631 (602,768)
Interest expense 9,357 354,979 364,336
Total assets 1,536,188 4,889,270 (541,115) 5,884,343
Capital expenditures 2,110 10,109 12,219
Depreciation and amortization 9,588 119,512 129,100
</TABLE>
(1) Includes depreciation and amortization.
8. Related Party Transactions
Mr. Brand owns 40% of the outstanding common stock of Advanced Control
Components, Inc. ("ACC"). ACC sublets space from the Company at its Eatontown,
New Jersey facility and pays to mmTech $36,474 in annual rent. Employees from
mmTech perform services for ACC and employees from ACC perform services for
mmTech from time to time. The company utilizing such services pays to the
company providing such services an amount equal to two times the base hourly
salary of the employees providing such services for the number of hours
involved. Pursuant to such arrangements, ACC paid to mmTech a net amount of
$23,421 for the three months ended September 30, 1999.
9. Subsequent Events
From time to time subsequent to September 30, 1999, the Company has received
advances in the form of the Investor Loans. The Investor Loans have been made on
the same terms and conditions as the Bridge Notes, but rank senior to the Bridge
Notes. The aggregate principal amount of the Investor Loans advanced to the
Company was $1,000,000. See below for a discussion of the repayment of the
Investor Loans.
In August 1998, the Company entered into a three-year employment agreement with
Mr. Kenneth C. Thompson, pursuant to which Mr. Thompson agreed to serve as the
Company's Chief Executive Officer. Effective November 15, 1999, Mr. Thompson
resigned as the Company's Chief Executive Officer. In connection with his
resignation, the Company and Mr. Thompson entered into a separation agreement
(the "Separation Agreement"). In the Separation Agreement, the Company agreed to
pay Mr. Thompson an aggregate of $137,097 in five monthly installments, without
interest, in repayment of certain amounts owed to him and in lieu of any rights
Mr. Thompson had under the employment agreement he entered into with the Company
in August 1998. In addition, the Company issued to Mr. Thompson stock options
exercisable for an aggregate of 500,000 shares of Common Stock (the "Option
Shares") at an exercise price of $0.60 per share (the "Thompson Option"). The
Thompson Option expires, as to one-half of the Option Shares, on November 15,
2001, and as to the remainder of such Option Shares, on November 15, 2002.
Pursuant to the terms of the Separation Agreement, all prior agreements between
Mr. Thompson and the Company were terminated and the Company and Mr. Thompson
agreed to release certain claims against each other and certain related parties.
Under the Separation Agreement, Mr. Thompson is subject to certain
confidentiality obligations and agreed to non-competition and certain other
covenants for a period of one year.
9
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
In July 2000, the Company and L-3 Communications Corporation ("L-3") entered
into a Purchase Agreement, dated July 10, 2000 (the "Purchase Agreement"),
pursuant to which, among other things, L-3 acquired on July 11, 2000,
beneficially and of record, 93,236,794 newly issued shares (the "L-3 Shares") of
the Company's outstanding Common Stock, for an aggregate purchase price of $15.0
million, $8.5 million of which was paid in cash at the closing on July 11, 2000
of the transactions contemplated by the Purchase Agreement (the "Closing") and
the balance of which was paid in the form of a secured promissory note (the
"Note"). At the Closing, the L-3 Shares constituted approximately 53.5% of the
Company's outstanding Common Stock on a fully diluted basis (calculated after
giving effect to the transactions contemplated by the Purchase Agreement and
certain anti-dilution adjustments set forth in the Purchase Agreement). Pursuant
to the terms of a Stock Pledge Agreement, dated July 10, 2000 (the "Stock Pledge
Agreement"), executed by L-3 in favor of the Company, the obligations of L-3
under the Note are secured by a pledge of 43.33% of the L-3 Shares. The Note
will be prepaid from time to time as necessary to fund the Company's reasonable
ongoing working capital needs. If not paid prior thereto, the Note will be paid
in full on the earlier of (i) January 2, 2001 and (ii) the date that the Company
consummates a qualifying Public Offering (as defined in the Purchase Agreement)
of its equity securities (a "Qualifying Offering").
The number of shares of Common Stock issuable to L-3 will be adjusted, if
necessary, after the Closing so that the L-3 Shares will, following such
adjustment, constitute 53.5% of the Company's outstanding Common Stock after
giving effect to the dilutive effects of the conversion of certain contingently
issuable securities as specified in the Purchase Agreement.
Under the Purchase Agreement, L-3 has agreed, subject to the satisfaction of
certain conditions, to purchase up to 3,333,333 shares of Common Stock (the
"Additional Shares") for $5.0 million on or after January 2, 2001 (unless L-3
elects to acquire any Additional Shares in its sole discretion prior to January
2, 2001), to the extent the Company requires additional reasonable ongoing
working capital to operate its business.
Pursuant to the terms of the Purchase Agreement, the Company has granted to L-3
an option (the "L-3 Option") to acquire up to 5,555,555 shares of Common Stock
at an exercise price of $0.54 per share (subject to adjustment in certain
circumstances). The L-3 Option is exercisable upon the purchase of all of the
Additional Shares.
In the Purchase Agreement, L-3 granted to the Company the option, exercisable by
a majority of the entire Board of Directors of the Company (the "Board"), to
cause L-3 to transfer without further consideration certain technology and other
assets to the Company in connection with the Qualifying Offering upon the
satisfaction of certain conditions. Pursuant to the Purchase Agreement, L-3 may,
in its sole discretion, provide administration and other services and equipment
(including team services, support services, facilities, tools and equipment) to
the Company. Such services and equipment will be billed, from time to time, at
cost to the Company, including direct labor, direct material, other direct
charges and expenses and overhead (including a corporate expense allocation
charge equal to 1.5% of the Company's consolidated sales).
L-3 also has agreed to use its reasonable best efforts (i) for a specified
period of time after the Closing to obtain an additional $5.0 million investment
in the Company from one or more investment banks on the same terms as L-3's
purchase of the Additional Shares; and (ii) to cooperate with the Company to
consummate the Qualifying Offering no later than December 31, 2000, subject to
market and economic conditions.
Pursuant to the Purchase Agreement, the Company has agreed to maintain
directors' and officers' insurance in place for a period of six years (subject
to certain expense limitations) and to maintain certain provisions in its
charter and by-laws relating to the indemnification of directors and officers
for such six-year period.
10
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Under the Purchase Agreement, the Company may not, without the approval of
either (i) those holders of Common Stock (excluding L-3, entities controlled,
directly or indirectly, by L-3 and executive officers (within the meaning of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of L-3) (the
"Minority Stockholders") that represent not less than a majority of the
outstanding Common Stock held by all such holders (a "Special Stockholder
Majority") or (ii) a majority of the directors elected by the Existing Holders
(as defined below), effect the following extraordinary transactions: (A) certain
mergers, consolidations or share exchanges, (B) the sale of all or substantially
all of its assets in one transaction or a series of related transactions, (C)
the seeking of protection under applicable bankruptcy and insolvency laws, (D)
the issuance, offer or sale of any shares of its capital stock or securities
exercisable for, convertible into or otherwise giving the holder the right to
obtain shares of capital stock (other than the issuance of shares and options
pursuant to the Purchase Agreement, shares issuable upon the exercise or
conversion of outstanding securities, the granting of certain options and rights
to purchase Common Stock contemplated by the Purchase Agreement and shares of
Common Stock issuable upon the exercise of such options and rights), (E) the
amendment of its certificate of incorporation or by-laws if the terms of such
amendment would conflict with the terms of the Purchase Agreement and the
transactions contemplated thereby or would materially and adversely affect the
rights of the Minority Stockholders, (F) amend or modify any of the provisions
of the documents relating to the Purchase Agreement, (G) enter into a Rule 13e-3
transaction (as defined in Rule 13e-3 promulgated under the Exchange Act), or
(H) enter into, assume or become bound by any agreement, instrument or
understanding to do any of the foregoing or otherwise attempt to do any of the
foregoing. In addition, L-3 has agreed not to sell to a non-affiliated third
party more than 53.27% of the L-3 Shares prior to December 31, 2001.
The directors appointed by the Existing Holders will have the right to enforce
the provisions of the Purchase Agreement and to otherwise act on behalf of the
Company with respect to the Purchase Agreement and the other documents relating
thereto. These provisions will expire upon the earlier of (i) the consummation
of a Qualifying Offering and (ii) the date upon which the Existing Holders
collectively cease to own at least 10% of the outstanding Common Stock (as
determined pursuant to the provisions of the Purchase Agreement).
Under the Purchase Agreement, L-3 has the right to cancel (in whole or in part),
at L-3's option, its obligation to make any payment in respect of the Note if,
in L-3's reasonable discretion: (i) a breach by the Company of any
representation, warranty, covenant or agreement contained in the Purchase
Agreement or any other document relating thereto results from or has resulted in
a Material Adverse Effect (as defined in the Purchase Agreement) with respect to
either (A) the Company, or (B) L-3; or (ii) a Material Adverse Effect (as
defined in the Purchase Agreement) has occurred or shall occur with respect to
the Company as a result of certain specified litigation claims. If L-3 exercises
its right not to pay amounts due under the Note and it is determined by a court
of competent jurisdiction in a final, non-appealable judgment or order or by a
final, non-appealable arbitration award that L-3 did not in fact have the right
to cancel its obligation to make any payment in respect of the Note, then L-3
must pay to the Company the Liability Amount (as defined below), as liquidated
damages for loss of a bargain and not a penalty. The payment of the Liability
Amount will be the sole and exclusive remedy of the Company in connection with
such a breach by L-3 and L-3 will have no other liability to the Company in
respect thereof. The term "Liability Amount" is defined in the Purchase
Agreement as the portion of the purchase price for the L-3 Shares not paid in
cash by L-3 to the Company at such time.
In addition, pursuant to the terms of the Purchase Agreement, L-3 has the right
to cancel (in whole or in part), at L-3's option, its obligation to purchase
Additional Shares if, in L-3's reasonable discretion: (i) a breach by the
Company of any representation, warranty, covenant or agreement contained in the
Purchase Agreement or any other document relating thereto results from or
results in a Material Adverse Effect (as defined in the Purchase Agreement) with
respect to either (A) the Company, or (B) L-3; or (ii) after the Closing, a
Material Adverse Effect has occurred or shall occur with respect to the Company.
If L-3 exercises its right not to consummate the purchase of the Additional
Shares and it is determined by a court of competent jurisdiction in a final,
non-appealable judgment or order or by a final, non-appealable arbitration award
that L-3 did not in fact have the right to cancel its obligation to purchase the
Additional Shares, then L-3 must pay to the Company the Damage Amount (as
defined below), as liquidated damages for loss of a bargain and not a penalty.
The payment of the Damage Amount will be the sole and exclusive remedy of the
Company in connection with such a breach by L-3 and L-3 will have no other
liability to the Company in respect thereof. The term "Damage Amount" is defined
in the Purchase Agreement as the portion of the purchase price for the
Additional Shares not paid in cash by L-3 to the Company at such time.
11
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Each of the Company and L-3 has agreed in the Purchase Agreement to indemnify
the other party and certain related parties and hold them harmless from any
losses arising from, in connection with or otherwise with respect to its breach
of any representation or warranty contained in the Purchase Agreement (subject
to the expiration of such representations and warranties) or its failure to
perform any covenant or agreement made or contained in the Purchase Agreement or
fulfill any obligation in respect thereof. If the Company is required to
indemnify L-3 pursuant to these provisions (as determined by a court of
competent jurisdiction or by an arbitration award), then L-3 is entitled, in
addition to any other right or remedy it may have, to exercise rights of set-off
against any amounts then due and payable to the Company under the Purchase
Agreement or that may thereafter become due and payable to the Company under the
Purchase Agreement (including under the Note and in respect of the purchase
price for the Additional Shares). L-3's obligation to indemnify the Company and
certain related parties pursuant to these provisions (as determined by a court
of competent jurisdiction or by an arbitration award) shall not exceed in the
aggregate $20 million, such $20 million to be reduced from time to time
beginning on the Closing by any and all amounts paid in cash to the Company or
on its behalf pursuant to the Purchase Agreement (including the $8.5 million
which was paid in cash at the Closing, payments or other credits with respect of
the Note and the purchase price paid for the Additional Shares).
Effective as of the Closing, the number of directors constituting the Board was
reduced to three; Charles S. Brand, Frank A. Brand and Mark B. Fisher resigned
as directors of the Company and Jay B. Langner was appointed as a director of
the Company. Pursuant to the terms of the Stockholders Agreement, dated July 10,
2000 (the "Stockholders Agreement"), among the Company, L-3 and the other
parties thereto (the "Existing Holders"), upon compliance by the Company with
the requirements of Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder (the "Effective Time"), the number of directors constituting the
Board was set at seven. The Existing Holders have the right to designate three
directors so long as they continue to beneficially own at least 15% of the
outstanding Common Stock (as determined pursuant to a specified formula). If the
Existing Holders beneficially own less than 15% of the outstanding Common Stock
(as so determined), the number of directors the Existing Holders will have the
right to appoint will be reduced to two. If the Existing Holders beneficially
own less than 10% of the outstanding Common Stock, they no longer will have the
right to designate directors of the Company. From and after the Effective Time,
L-3 has the right under the Stockholders Agreement to designate the remaining
members of the Board so long as it continues to be the owner of at least 25% of
the outstanding Common Stock (as so determined).
Under the terms of the Stockholders Agreement, so long as L-3 remains the owner
of at least 25% of the Common Stock (as so determined), L-3 has a right of first
offer with respect to the proposed transfer, in one or a series of related
transactions, by a Major Selling Stockholder (as defined in the Stockholders
Agreement) of (i) 10% or more of the Common Stock Equivalents (as so defined),
other than in certain specified market transactions, or (ii) Common Stock
Equivalents which to the actual knowledge of the Major Selling Stockholder,
together with the holdings of Common Stock Equivalents of the person to which
the transfer is to be made, would result in such person owning more than 10% of
the Common Stock Equivalents (after giving effect to such transfer).
Pursuant to the terms of the Stockholders Agreement, the Existing Holders
effected the conversion or exchange of certain convertible indebtedness and
warrants held by them as described below, waived certain anti-dilution rights,
including rights resulting from the Transaction, waived certain registration
rights and consented to the Transaction. In addition, the Existing Holders
agreed to extend the maturity date of the Bridge Notes to the earlier of (i) the
fifth day following the consummation of a Qualifying Offering and (ii) June 30,
2001, and agreed to waive certain other rights specified in the Stockholders
Agreement.
The Stockholders Agreement terminates upon the earliest to occur of (i) the
consummation of a Qualifying Offering, (ii) with respect to L-3 or an Existing
Holder, when such party has effected the transfer of its entire ownership
interest in the Company to persons that are not affiliates of L-3 or the
Existing Holders, as the case may be, (iii) the consummation of a qualifying
"Company Sale" (as defined in the Stockholders Agreement), and (iv) the written
mutual consent of L-3 and the Existing Holders that collectively own a majority
of the Common Stock Equivalents then held by all Existing Holders.
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LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Effective upon the Closing, the following persons were elected to hold the
offices set forth opposite their respective names.
John S. Mega......................... Acting President
Charles S. Brand..................... Senior Vice President of Technology and
Acting General Manager -- New Jersey
Operations
Norman M. Phipps..................... Senior Vice President of Administration
Christopher C. Cambria............... Vice President and Secretary
In connection with and prior to the Closing, the holders of the Company's
outstanding Class A Debentures, Class B Debentures and Class C Debentures
(collectively, the "Convertible Debt") converted such indebtedness into an
aggregate of 30,612,420 shares of Common Stock. In addition, prior to the
Closing, the holders of the Company's outstanding Series A 12% Cumulative
Convertible Redeemable Preferred Stock, stated value $50,000 per share (the
"Series A Preferred Stock"), converted the Series A Preferred Stock into an
aggregate of 2,358,500 shares of Common Stock. The conversion of the Series A
Preferred Stock resulted in the elimination of accrued and unpaid dividends on
the Series A Preferred Stock of approximately $0.9 million. Prior to the
Closing, the Existing Holders also exchanged their outstanding warrants to
purchase Common Stock for an aggregate of 12,301,802 shares of Common Stock.
In connection with and prior to the Closing, the Company amended (i) its
Certificate of Incorporation to increase the number of authorized shares to
355,000,000 shares, consisting of 350,000,000 shares of Common Stock and
5,000,000 shares of preferred stock, par value $0.01 per share, and (ii) its
By-laws to allow the holders of a majority of the outstanding Common Stock to
call special meetings of the stockholders of the Company. Copies of the
amendment of the Company's Certificate of Incorporation and By-laws have been
filed as Exhibits to the Company's Annual Report on Form 10-KSB for the fiscal
year ended June 30, 1999.
The Company, L-3 and the Existing Holders also entered into a Registration
Rights Agreement, dated as of July 10, 2000 (the "Registration Rights
Agreement"). Pursuant to the terms of the Registration Rights Agreement, L-3 (or
certain qualifying holders of shares purchased by L-3) has the right to demand
at any time that the Company effect the registration of the shares of Common
Stock acquired by L-3 for offering and sale under applicable securities laws
(subject to certain black-out provisions described below). L-3 (or such
qualifying successors) have the right to make four such demands. Under the
Registration Rights Agreement, after the earlier to occur of (i) consummation of
a Qualifying Offering and (ii) March 31, 2001, one or more Existing Holders
meeting certain requirements have the right to demand that the Company effect
the registration of the shares of Common Stock acquired by such Existing Holders
(and any other Existing Holders who timely agree to participate in such
offering) for offering and sale under applicable securities laws (subject to
certain black-out provisions described below). The Existing Holders have the
right to make two such demands. A registration effected pursuant to the
provisions described above is hereinafter referred to as a "Long-Form
Registration."
In addition, if at any time after the earlier of (i) January 2, 2001 and (ii)
the consummation of a Qualifying Offering, the Company is eligible to effect
such registration on Form S-3 (or a successor form), L-3 and the Existing
Holders have the unlimited right to demand that the Company effect the
registration of their shares of Common Stock (a "Short-Form Registration") so
long as the shares to be offered for the benefit of the requesting holders (and
any other parties to the Registration Rights Agreement who timely agree to
participate in such offering) are reasonably expected to have an aggregate
offering price of at least $1,000,000.
The Company is not required to prepare and file a registration statement
pursuant to a Long-Form Registration for a period of not more than 90 days
following receipt by the Company of a request for registration, if (i) the
Company in good faith gives written notice within five days after such receipt
by the Company of such request that the Company is commencing to prepare a
Company-initiated registration statement, and (ii) the Company actively employs
in good faith all reasonable efforts to cause such registration statement to
become effective.
If the Company receives a request to effect a Long-Form Registration within 90
days of the date on which a previous registration statement filed pursuant to a
Long-Form Registration has become effective, the Company is not required to
commence preparation of such Long-Form Registration in accordance with such
request until 90 days has elapsed since such effective date.
13
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LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
If the Company furnishes to the persons requesting registration a certificate
signed by the chief executive or chief financial officer of the Company stating
that the Company, in good faith, has determined that (i) there exists material
non-public information about the Company which the Company has a bona fide
business purpose for preserving as confidential, or (ii) is undertaking (or is
about to undertake) a proposed acquisition or financing that would significantly
impact the pricing of the contemplated public offering, and in each case the
Company provides such persons written notice thereof promptly after the Company
makes such determination, then the Company has the right to defer the filing or
the declaration of effectiveness of a registration statement, for a period of
not more than (A) 90 days, in the case of a Long-Form Registration, or (B) 60
days, in the case of a Short-Form Registration, after receipt of the request to
register; provided, however, that the Company is not entitled to defer such
filing or declaration of effectiveness more than 120 days in any 12-month
period.
The parties to the Registration Rights Agreement also have unlimited "piggy
back" rights with respect to any registration effected by the Company for its
own account or for the account of another person (other than registrations
relating to sales of securities to participants in a Company stock plan or in a
transaction covered by Rule 145 promulgated under the Securities Act of 1933, as
amended), subject to certain cut-back provisions.
The Company will be required to bear all expenses incurred in effecting any
Long-Form Registration and up to six Short-Form Registrations, including the
fees and disbursements of any counsel or accountant retained by the holders of
more than fifty percent of the stock being registered, but excluding
underwriting discounts and brokerage fees or commissions. In addition, the
Company has agreed to indemnify participants in any registration for certain
liabilities, including liabilities arising under applicable securities laws, and
is obligated to contribute to any damages paid by such participants if such
indemnification is unavailable to such participants.
In connection with the Transaction, the Company entered into new two-year
employment agreements with Messrs. Brand and Phipps (the "New Employment
Agreements"). Pursuant to the New Employment Agreements, Mr. Brand and Mr.
Phipps will each receive an annual base salary of $210,000. The base salary is
subject to periodic increases at the discretion of the Board. Under his New
Employment Agreement, Mr. Phipps was granted an option to acquire 750,000 shares
of Common Stock at an exercise price of $0.54 per share (subject to adjustment
in certain circumstances) (the "Phipps Option"). The Phipps Option vests in
equal installments of one-third per year and expires, subject to earlier
termination, ten years from the date of grant.
Under the New Employment Agreements, the Company agreed to reimburse Mr. Brand
and Mr. Phipps for the costs of maintaining a $1,000,000 term-life insurance
policy for the benefit of each of Mr. Brand and Mr. Phipps, subject to a cap of
$2,000 per annum. Mr. Brand and Mr. Phipps also are entitled to participate in
certain compensation and employee benefit plans maintained by the Company. In
the event of the termination of employment by the Company (other than upon
death, permanent disability or a termination for "Cause" (as defined in the New
Employment Agreements)) or a termination of employment by the employee for "Good
Reason" (as so defined), each of Mr. Brand and Mr. Phipps would be entitled to
receive his then-current base salary for a period equal to the greater of (i)
the remainder of the term of his employment agreement, and (ii) 12 months (in
the case of Mr. Brand) or six months (in the case of Mr. Phipps) from the
effective date of termination. The Phipps Option will vest immediately upon a
termination of employment giving Mr. Phipps the right to continue to receive his
base salary as described above or upon the occurrence of a "Change in Control
Event" (as defined in the Phipps Option). The New Employment Agreements also
contain certain non-competition, confidentiality and intellectual property
ownership covenants.
Pursuant to the terms of the Transaction, options to purchase 150,000 shares of
Common Stock were issued to each of Dr. Frank A. Brand, Mr. Carreras and Mr.
Fisher (collectively, the "Former Director Options"). The Former Director
Options have an exercise price of $0.54 per share (subject to adjustment in
certain circumstances), are immediately exercisable and expire, subject to
earlier termination, ten years from the date of grant. In addition, as described
above, Mr. Phipps received an option to acquire 750,000 shares of Common Stock
in connection with the execution of his new employment agreement. Options to
purchase an aggregate of 8,902,200 shares of Common Stock also were issued under
the Stock Compensation Program to certain other employees of the Company and to
certain employees of L-3 in connection with the Transaction (the "Employee
Options"). All of the Employee Options have an exercise price of $0.54 per share
(subject to adjustment in certain circumstances), vest in equal installments of
one-third per year and expire, subject to earlier termination, ten years from
the date of grant. Pursuant to this grant, two officers of the Company, Mr.
James Meckstroth and Mr. Erik Kruger received options to acquire 740,000 shares
and 400,000 shares of Common Stock, respectively.
14
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LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
In addition, pursuant to the Transaction, options to purchase an aggregate of
12,665,308 shares of Common Stock were granted to L-3, Cramer Rosenthal McGlynn,
LLC ("CRM") and Cerberus Partners, L.P. ("Cerberus") (the "Founder Options")
(with each such party having the ability to direct all or part of its options to
certain parties related to such party). The Founder Options have an exercise
price of $0.54 per share (subject to adjustment in certain circumstances), are
immediately exercisable and expire ten years from the date of grant.
On July 20, 2000, the Company filed with the Securities and Exchange Commission
(the "Commission") an Information Statement pursuant to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder (the "Information
Statement"). The Information Statement was mailed on July 21, 2000 to all
holders of record of the Company at the close of business on July 10, 2000 in
connection with the appointment by L-3 of a majority of the members of the
Board.
In connection with the Transaction, the Company terminated its letter of intent
(the "Signal Letter of Intent") with Signal Technology Corporation ("Signal")
relating to the proposed merger of the Company with a subsidiary of Signal. In
connection with the Signal Letter of Intent, Signal had loaned $2,000,000 to the
Company for working capital and other purposes (the "Signal Loan"). Concurrently
with the making of the Signal Loan, certain existing investors in the Company
also loaned the Company $1,000,000 (the "Investor Loans"). The Signal Loan and
the Investor Loans were repaid with a portion of the net proceeds of the
Transaction.
The Company and Signal also had entered into a Management Agreement (the
"Management Agreement") pursuant to which Signal, through its Keltec division,
assumed the management and operation of the Company's high-power amplifier
business, formerly conducted by the Company at its Bohemia, New York facility
(the "New York Business") and assumed certain liabilities of the New York
Business. Under the Management Agreement, Signal was responsible for all
expenses incurred and was entitled to retain all revenues generated in
connection with its operation of that business. Signal also agreed to make
interest payments on the Company's outstanding bank indebtedness during the
period it is operating the New York Business. In November 2000, Signal acquired
the New York Business, and the Company paid Signal $2.1 million to offset
certain costs incurred by Signal during the course of its management of the New
York Business and certain known liabilities of this business. Additionally, the
Company has agreed to retain other specific liabilities of the New York
Business.
In connection with the proposed acquisition of the Company by Signal, the
Company and the Bank entered into a Consent Letter (the "Consent Letter")
pursuant to which the Bank consented to the transactions contemplated by the
Signal Letter of Intent and agreed to waive any defaults under the Replacement
Note resulting therefrom. In addition, in the Consent Letter, the Bank agreed to
modify and extend the maturity date of the Replacement Note from December 31,
1999 to June 30, 2000 and to eliminate certain covenants contained therein. In
exchange, the Company agreed, among other things, (i) to reduce the amount
available under the Replacement Note to $1.8 million (the amount outstanding
thereunder as of such date), (ii) that no further advances would be made under
the Replacement Note, (iii) to pay all past due amounts outstanding under the
Replacement Note, and to pay the Bank certain additional fees specified in the
Consent Letter, and (iv) to extend the expiration date of the Common Stock
Purchase Warrants, Series J (the "Series J Warrants") to June 30, 2000. Pursuant
to the terms of the Consent Letter, the Replacement Note matured on June 30,
2000.
On August 21, 2000, the Bank agreed to modify and extend the maturity date of
the Replacement Note from June 30, 2000 to January 2, 2001 (the "Modified
Replacement Note"). In exchange, the Company agreed, among other things, (i) to
reduce the amount outstanding under the Modified Replacement Note to $1.5
million, (ii) that no further advances would be made under the Modified
Replacement Note, (iii) to pay all past due interest on the Modified Replacement
Note, and to pay the Bank certain additional fees specified in the Modified
Replacement Note, (iv) to make mandatory prepayments to the Modified Replacement
Note equal to a minimum of 25% of any prepayments made by L-3 to the Company
under the Note, and (v) to extend the expiration date of the Series J Warrants
to January 2, 2003.
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<PAGE>
LOGIMETRICS, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998
Revenues for the three months ended September 30, 1999 decreased $2.1 million,
or 79.5%, to $0.5 million from $2.6 million for the comparable period of 1998.
The decrease in revenues for the quarter ended September 30, 1999 resulted
primarily from a decrease in the Company's sale of traveling wave tube
amplifiers ("TWTAs").
Cost of revenues for the three months ended September 30, 1999 decreased $0.7
million, or 35.2%, to $1.2 million from $1.9 million for the comparable period
of 1998. The decrease resulted primarily from a lower level of sales and the
costs related thereto, offset in part by the write-off of obsolete inventory and
overhead costs spread over a lower revenue base.
Selling, general and administrative expenses for the three months ended
September 30, 1999 increased $0.9 million, or 81.9%, to $2.0 million from $1.1
million for the comparable period of 1998. The increase in SG&A expenses was
primarily a result of increases in financing fees and allowance for doubtful
accounts, offset in part by a decrease in professional fees.
Research and development expenses for the three months ended September 30, 1999
increased $0.4 million, or 131.5%, to $0.6 million from $0.2 million for the
comparable period of 1998. The increase was due primarily to a shift in
personnel from production to design and development activities related to new
product development and product enhancements of both the Company's
point-to-multipoint ("PMP") and TWTA product lines.
For the reasons discussed above, the operating loss for the three months ended
September 30, 1999 increased $2.6 million, or 438.4%, to $3.2 million from $0.6
million for the comparable period in 1998.
Interest expense for the three months ended September 30, 1999 increased $0.1
million, or 29.6%, to $0.5 million from $0.4 million for the comparable period
of 1998, primarily as a result of a higher level of average outstanding
indebtedness used to finance the Company's working capital requirements.
During the quarter ended September 30, 1999, the Company had no income tax
benefit compared to an income tax benefit of $20,000 for the quarter ended
September 30, 1998. LogiMetrics and mmTech currently file separate federal and
state income tax returns. The tax benefit recorded in the quarter ended
September 30, 1999 relates to pre-tax losses generated by mmTech in that period.
The Company accrued dividends on its outstanding preferred stock of $60,000
during each of the quarters ended September 30, 1999 and 1998. See "Recent
Developments" for a description of the elimination of the accrued dividends.
For the reasons discussed above, net loss attributable to common stockholders
for the quarter ended September 30, 1999 increased $2.8 million, or 274.9%, to
$3.8 million from $1.0 million for the comparable period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company had cash of $0.4 million. At such date, the
Company had total current assets of $2.4 million and total current liabilities
of $16.6 million.
Net cash used in operating activities was $0.9 million for the three months
ended September 30, 1999, and $0.3 million for the comparable period in 1998.
Net cash used in operating activities during the three months ended September
30, 1999 resulted primarily from a net loss of $3.7 million, offset in part by
decreases in accounts receivable and inventory, and increases in financing fees,
accounts payable and accrued expenses and accrued interest expense. Net cash
used in operating activities during the three months ended September 30, 1998
resulted primarily from a net loss of $0.9 million, and an increase in
inventory, offset in part by increases in accounts payable and accrued expenses
and accrued interest expense.
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LOGIMETRICS, INC.
Net cash used for investing activities was $50,000 for the three months ended
September 30, 1999, and $12,000 for the comparable period in 1998. Net cash used
for investing activities in each period resulted from the purchase of equipment
to support the Company's operations.
Net cash provided by financing activities was $0.9 million for the three months
ended September 30, 1999, and $0.4 million for the three months ended September
30, 1998. Net cash provided by financing activities during both periods resulted
primarily from the proceeds of debt and warrant issuances by the Company, offset
in part by the repayment of outstanding indebtedness.
From July 1, 1998 to September 30, 1999, the Company raised $3.5 million from
private sales of convertible debentures, warrants and bridge financing to fund a
portion of its cash flow needs. However, to date, the Company has continued to
record losses and has failed to generate sufficient cash flow to fund working
capital requirements. To the extent that the Company is unable to meet its
working capital requirements by generating positive cash flow from operations,
the Company intends to continue to fund a portion of its working capital
requirements through the sale of its securities. There can be no assurance that
the Company can continue to finance its operations through the sale of
securities or as to the terms of any such sales that may occur in the future. If
the Company is unable to attain profitable operations and to generate sufficient
cash flow or to obtain sufficient financing to fund its operations, the Company
may not be able to achieve its growth objectives and may have to curtail its
marketing, development or operations.
As of September 1, 1999, the Company entered into a Reduced and Extended
Revolving Credit Note (the "Replacement Note") and a Recognition and Limited
Forebearance Agreement (the "Forebearance Agreement") with North Fork Bank (the
"Bank"). Pursuant to the terms of the Replacement Note, the amount available for
borrowing under the Replacement Note was reduced to $1.93 million (the amount
outstanding as of such date) and the maturity date of the Replacement Note was
extended to December 31, 1999. At September 30, 1999, the Company had $11,000
available under the Replacement Note. Outstanding amounts under the Replacement
Note bear interest at the rate of 2% per annum in excess of the Bank's prime
rate. At September 30, 1999, the Bank's prime rate was 8.25%. At September 30,
1999, the Company was in violation of two covenants contained in the Replacement
Note that the Company report net income of at least $1.00 for each fiscal
quarter (the "Net Income Covenant") and that the Company file its Form 10-KSB
for the fiscal year ended June 30, 1999 by September 30, 1999 (the "Reporting
Requirement Covenant"). Under the terms of the Forebearance Agreement, the Bank
agreed to forbear, until December 31, 1999, from declaring any event of default
or from exercising any remedies under the Replacement Note. See "Recent
Developments" for a discussion of the subsequent extension of the Replacement
Note.
On September 7, 1999, the Company sold an aggregate of $1,000,000 of its
Negotiable Secured Senior Subordinated Promissory Notes due March 7, 2000 (the
"Bridge Notes") to a group of institutional investors (the "Lenders") for an
aggregate cash purchase price of $1,000,000. The Bridge Notes bear interest at a
rate of 13% per annum. Pursuant to the terms of the Second Amended and Restated
Security Agreement, Intercreditor Agreement, Waiver and Consent (the
"Intercreditor Agreement"), the Bridge Notes are secured by a security interest
in all of the Company's assets which ranks junior to the Replacement Note, and
senior to the Class A 13% Convertible Senior Subordinated Pay-in-Kind
Debentures, due July 29, 1999 (the "Class A Debentures"), the Amended and
Restated 13% Senior Subordinated Convertible Pay-in-Kind Debentures due July 29,
1999 (the "Class B Debentures") and the Class C 13% Senior Subordinated
Debentures due September 30, 1999 (the "Class C Debentures"). Pursuant to the
terms of the Intercreditor Agreement, each of the holders of the Class A
Debentures, the Class B Debentures and the Class C Debentures consented to the
issuance of the Bridge Notes and the granting of the security interest described
above. As consideration for the purchase of the Bridge Notes, Mr. Charles S.
Brand, the Company's Chairman, transferred to the Lenders an aggregate of
3,000,000 shares of the Company's common stock, par value $0.01 per share (the
"Common Stock") owned by him.
In addition to the Replacement Note, at September 30, 1999, the Company had
issued and outstanding $4.9 million of its Class A Debentures, $2.1 million of
its Class B Debentures, $3.0 million of its Class C Debentures and $1,000,000 of
its Bridge Notes. The Class A Debentures and the Class B Debentures contained
financial covenants identical to those contained in the Replacement Note.
Accordingly, at September 30, 1999, the Company was in default of the Net Income
Covenant and the Reporting Requirement Covenant to the same extent as under the
Replacement Note. As of September 30, 1999, the holders of the Class A
Debentures and the Class B Debentures had waived compliance with the Net Income
Covenant and the Reporting Requirement
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LOGIMETRICS, INC.
Covenant until maturity. Pursuant to the terms of the Class A Debentures and the
Class B Debentures, the Company was required to file a registration statement
covering, among other things, the resale of the shares of Common Stock issuable
upon the conversion of the Class A Debentures and the Class B Debentures on or
prior to October 27, 1997 and to have the registration statement declared
effective by the Securities and Exchange Commission (the "SEC") on or prior to
January 25, 1998. Unless the Company completed the required registration, the
interest rate on the Class A Debentures and the Class B Debentures increased
(subject to a maximum interest rate of 17% per annum). At September 30, 1999,
the interest rate was 17% per annum. The holders of the Class A Debentures and
the Class B Debentures had the right to declare all amounts thereunder due and
payable if the registration statement was not declared effective by the SEC on
or prior to April 25, 1998. The holders of the Class A Debentures and the Class
B Debentures have waived their respective rights until maturity to declare any
default arising as a result of the Company's failure to have the required
registration statement declared effective by the SEC. See "Recent Developments"
for a discussion of the subsequent conversion of all the Class A Debentures,
Class B Debentures and Class C Debentures.
From time to time subsequent to September 30, 1999, the Company has received
advances from certain of the Company's other investors (the "Investor Loans").
The Investor Loans have been made on the same terms and conditions as the Bridge
Notes, but rank senior to the Bridge Notes. See "Recent Developments" for a
discussion of the repayment of the Investor Loans.
RECENT DEVELOPMENTS
In July 2000, the Company and L-3 Communications Corporation ("L-3") entered
into a Purchase Agreement, dated July 10, 2000 (the "Purchase Agreement"),
pursuant to which, among other things, L-3 acquired on July 11, 2000,
beneficially and of record, 93,236,794 newly issued shares (the "L-3 Shares") of
the Company's outstanding Common Stock, for an aggregate purchase price of $15.0
million, $8.5 million of which was paid in cash at the closing on July 11, 2000
of the transactions contemplated by the Purchase Agreement (the "Closing") and
the balance of which was paid in the form of a secured promissory note (the
"Note"). At the Closing, the L-3 Shares constituted approximately 53.5% of the
Company's outstanding Common Stock on a fully diluted basis (calculated after
giving effect to the transactions contemplated by the Purchase Agreement and
certain anti-dilution adjustments set forth in the Purchase Agreement). Pursuant
to the terms of a Stock Pledge Agreement, dated July 10, 2000 (the "Stock Pledge
Agreement"), executed by L-3 in favor of the Company, the obligations of L-3
under the Note are secured by a pledge of 43.33% of the L-3 Shares. The Note
will be prepaid from time to time as necessary to fund the Company's reasonable
ongoing working capital needs. If not paid prior thereto, the Note will be paid
in full on the earlier of (i) January 2, 2001 and (ii) the date that the Company
consummates a qualifying Public Offering (as defined in the Purchase Agreement)
of its equity securities (a "Qualifying Offering"). The number of shares of
Common Stock issuable to L-3 will be adjusted, if necessary, after the Closing
so that the L-3 Shares will, following such adjustment, constitute 53.5% of the
Company's outstanding Common Stock after giving effect to the dilutive effects
of the conversion of certain contingently issuable securities as specified in
the Purchase Agreement.
Under the Purchase Agreement, L-3 has agreed, subject to the satisfaction of
certain conditions, to purchase up to 3,333,333 shares of Common Stock (the
"Additional Shares") for $5.0 million on or after January 2, 2001 (unless L-3
elects to acquire any Additional Shares in its sole discretion prior to January
2, 2001), to the extent the Company requires additional reasonable ongoing
working capital to operate its business.
Pursuant to the terms of the Purchase Agreement, the Company has granted to L-3
an option (the "L-3 Option") to acquire up to 5,555,555 shares of Common Stock
at an exercise price of $0.54 per share (subject to adjustment in certain
circumstances). The L-3 Option is exercisable upon the purchase of all of the
Additional Shares.
In the Purchase Agreement, L-3 granted to the Company the option, exercisable by
a majority of the entire Board of Directors of the Company (the "Board"), to
cause L-3 to transfer without further consideration certain technology and other
assets to the Company in connection with the Qualifying Offering upon the
satisfaction of certain conditions. Pursuant to the Purchase Agreement, L-3 may,
in its sole discretion, provide administration and other services and equipment
(including team services, support services, facilities, tools and equipment) to
the Company. Such services and equipment will be billed, from time to time, at
cost to the Company, including direct labor, direct material, other direct
charges and expenses and overhead (including a corporate expense allocation
charge equal to 1.5% of the Company's consolidated sales).
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LOGIMETRICS, INC.
L-3 also has agreed to use its reasonable best efforts (i) for a specified
period of time to obtain an additional $5.0 million investment in the Company
from one or more investment banks on the same terms as L-3's purchase of the
Additional Shares; and (ii) to cooperate with the Company to consummate the
Qualifying Offering no later than December 31, 2000, subject to market and
economic conditions.
Pursuant to the Purchase Agreement, the Company has agreed to maintain
directors' and officers' insurance in place for a period of six years (subject
to certain expense limitations) and to maintain certain provisions in its
charter and by-laws relating to the indemnification of directors and officers
for such six-year period.
Under the Purchase Agreement, the Company may not, without the approval of
either (i) those holders of Common Stock (excluding L-3, entities controlled,
directly or indirectly, by L-3 and executive officers (within the meaning of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of L-3) (the
"Minority Stockholders") that represent not less than a majority of the
outstanding Common Stock held by all such holders (a "Special Stockholder
Majority") or (ii) a majority of the directors elected by the Existing Holders
(as defined below), effect the following extraordinary transactions: (A) certain
mergers, consolidations or share exchanges, (B) the sale of all or substantially
all of its assets in one transaction or a series of related transactions, (C)
the seeking of protection under applicable bankruptcy and insolvency laws, (D)
the issuance, offer or sale of any shares of its capital stock or securities
exercisable for, convertible into or otherwise giving the holder the right to
obtain shares of capital stock (other than the issuance of shares and options
pursuant to the Purchase Agreement, shares issuable upon the exercise or
conversion of outstanding securities, the granting of certain options and rights
to purchase Common Stock contemplated by the Purchase Agreement and shares of
Common Stock issuable upon the exercise of such options and rights), (E) the
amendment of its certificate of incorporation or by-laws if the terms of such
amendment would conflict with the terms of the Purchase Agreement and the
transactions contemplated thereby or would materially and adversely affect the
rights of the Minority Stockholders, (F) amend or modify any of the provisions
of the documents relating to the Purchase Agreement, (G) enter into a Rule 13e-3
transaction (as defined in Rule 13e-3 promulgated under the Exchange Act), or
(H) enter into, assume or become bound by any agreement, instrument or
understanding to do any of the foregoing or otherwise attempt to do any of the
foregoing. In addition, L-3 has agreed not to sell to a non-affiliated third
party more than 53.27% of the L-3 Shares prior to December 31, 2001. The
directors appointed by the Existing Holders will have the right to enforce the
provisions of the Purchase Agreement and to otherwise act on behalf of the
Company with respect to the Purchase Agreement and the other documents relating
thereto. These provisions will expire upon the earlier of (i) the consummation
of a Qualifying Offering and (ii) the date upon which the Existing Holders
collectively cease to own at least 10% of the outstanding Common Stock (as
determined pursuant to the provisions of the Purchase Agreement).
Under the Purchase Agreement, L-3 has the right to cancel (in whole or in part),
at L-3's option, its obligation to make any payment in respect of the Note if,
in L-3's reasonable discretion: (i) a breach by the Company of any
representation, warranty, covenant or agreement contained in the Purchase
Agreement or any other document relating thereto results from or has resulted in
a Material Adverse Effect (as defined in the Purchase Agreement) with respect to
either (A) the Company, or (B) L-3; or (ii) a Material Adverse Effect (as
defined in the Purchase Agreement) has occurred or shall occur with respect to
the Company as a result of certain specified litigation claims. If L-3 exercises
its right not to pay amounts due under the Note and it is determined by a court
of competent jurisdiction in a final, non-appealable judgment or order or by a
final, non-appealable arbitration award that L-3 did not in fact have the right
to cancel its obligation to make any payment in respect of the Note, then L-3
must pay to the Company the Liability Amount (as defined below), as liquidated
damages for loss of a bargain and not a penalty. The payment of the Liability
Amount will be the sole and exclusive remedy of the Company in connection with
such a breach by L-3 and L-3 will have no other liability to the Company in
respect thereof. The term "Liability Amount" is defined in the Purchase
Agreement as the portion of the purchase price for the L-3 Shares not paid in
cash by L-3 to the Company at such time.
In addition, pursuant to the terms of the Purchase Agreement, L-3 has the right
to cancel (in whole or in part), at L-3's option, its obligation to purchase
Additional Shares if, in L-3's reasonable discretion: (i) a breach by the
Company of any representation, warranty, covenant or agreement contained in the
Purchase Agreement or any other document relating thereto results from or
results in a Material Adverse Effect (as defined in the Purchase Agreement) with
respect to either (A) the Company, or (B) L-3; or (ii) after the Closing, a
Material Adverse Effect has occurred or shall occur with respect to the Company.
If L-3 exercises its right not to consummate the purchase of the Additional
Shares and it is determined by a court of competent jurisdiction in a final,
non-appealable judgment or order or by a final, non-appealable arbitration award
that L-3 did not in fact have the right to cancel its obligation to purchase the
Additional Shares, then L-3 must pay to the Company the Damage Amount (as
defined below), as liquidated damages for loss of a bargain and not a penalty.
19
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LOGIMETRICS, INC.
The payment of the Damage Amount will be the sole and exclusive remedy of the
Company in connection with such a breach by L-3 and L-3 will have no other
liability to the Company in respect thereof. The term "Damage Amount" is defined
in the Purchase Agreement as the portion of the purchase price for the
Additional Shares not paid in cash by L-3 to the Company at such time.
Each of the Company and L-3 has agreed in the Purchase Agreement to indemnify
the other party and certain related parties and hold them harmless from any
losses arising from, in connection with or otherwise with respect to its breach
of any representation or warranty contained in the Purchase Agreement (subject
to the expiration of such representations and warranties) or its failure to
perform any covenant or agreement made or contained in the Purchase Agreement or
fulfill any obligation in respect thereof. If the Company is required to
indemnify L-3 pursuant to these provisions (as determined by a court of
competent jurisdiction or by an arbitration award), then L-3 is entitled, in
addition to any other right or remedy it may have, to exercise rights of set-off
against any amounts then due and payable to the Company under the Purchase
Agreement or that may thereafter become due and payable to the Company under the
Purchase Agreement (including under the Note and in respect of the purchase
price for the Additional Shares). L-3's obligation to indemnify the Company and
certain related parties pursuant to these provisions (as determined by a court
of competent jurisdiction or by an arbitration award) shall not exceed in the
aggregate $20 million, such $20 million to be reduced from time to time
beginning on the Closing by any and all amounts paid in cash to the Company or
on its behalf pursuant to the Purchase Agreement (including the $8.5 million
which was paid in cash at the Closing, payments or other credits with respect of
the Note and the purchase price paid for the Additional Shares).
Effective as of the Closing, the number of directors constituting the Board was
reduced to three; Charles S. Brand, Frank A. Brand and Mark B. Fisher resigned
as directors of the Company and Jay B. Langner was appointed as a director of
the Company. Pursuant to the terms of the Stockholders Agreement, dated July 10,
2000 (the "Stockholders Agreement"), among the Company, L-3 and the other
parties thereto (the "Existing Holders"), upon compliance by the Company with
the requirements of Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder (the "Effective Time"), the number of directors constituting the
Board was set at seven. The Existing Holders have the right to designate three
directors so long as they continue to beneficially own at least 15% of the
outstanding Common Stock (as determined pursuant to a specified formula). If the
Existing Holders beneficially own less than 15% of the outstanding Common Stock
(as so determined), the number of directors the Existing Holders will have the
right to appoint will be reduced to two. If the Existing Holders beneficially
own less than 10% of the outstanding Common Stock, they no longer will have the
right to designate directors of the Company. From and after the Effective Time,
L-3 has the right under the Stockholders Agreement to designate the remaining
members of the Board so long as it continues to be the owner of at least 25% of
the outstanding Common Stock (as so determined).
Under the terms of the Stockholders Agreement, so long as L-3 remains the owner
of at least 25% of the Common Stock (as so determined), L-3 has a right of first
offer with respect to the proposed transfer, in one or a series of related
transactions, by a Major Selling Stockholder (as defined in the Stockholders
Agreement) of (i) 10% or more of the Common Stock Equivalents (as so defined),
other than in certain specified market transactions, or (ii) Common Stock
Equivalents which to the actual knowledge of the Major Selling Stockholder,
together with the holdings of Common Stock Equivalents of the person to which
the transfer is to be made, would result in such person owning more than 10% of
the Common Stock Equivalents (after giving effect to such transfer).
Pursuant to the terms of the Stockholders Agreement, the Existing Holders
effected the conversion or exchange of certain convertible indebtedness and
warrants held by them as described below, waived certain anti-dilution rights,
including rights resulting from the Transaction, waived certain registration
rights and consented to the Transaction. In addition, the Existing Holders
agreed to extend the maturity date of certain loans made by them to the earlier
of (i) the fifth day following the consummation of a Qualifying Offering and
(ii) June 30, 2001, and agreed to waive certain other rights specified in the
Stockholders Agreement.
20
<PAGE>
LOGIMETRICS, INC.
The Stockholders Agreement terminates upon the earliest to occur of (i) the
consummation of a Qualifying Offering, (ii) with respect to L-3 or an Existing
Holder, when such party has effected the transfer of its entire ownership
interest in the Company to persons that are not affiliates of L-3 or the
Existing Holders, as the case may be, (iii) the consummation of a qualifying
"Company Sale" (as defined in the Stockholders Agreement), and (iv) the written
mutual consent of L-3 and the Existing Holders that collectively own a majority
of the Common Stock Equivalents then held by all Existing Holders.
Effective upon the Closing, the following persons were elected to hold the
offices set forth opposite their respective names.
John S. Mega.......................... Acting President
Charles S. Brand...................... Senior Vice President of Technology and
Acting General Manager -- New Jersey
Operations
Norman M. Phipps...................... Senior Vice President of Administration
Christopher C. Cambria................ Vice President and Secretary
In connection with and prior to the Closing, the holders of the Company's
outstanding Class A Debentures, Class B Debentures and Class C Debentures
(collectively, the "Convertible Debt") converted such indebtedness into an
aggregate of 30,612,420 shares of Common Stock. In addition, prior to the
Closing, the holders of the Company's outstanding Series A 12% Cumulative
Convertible Redeemable Preferred Stock, stated value $50,000 per share (the
"Series A Preferred Stock"), converted the Series A Preferred Stock into an
aggregate of 2,358,500 shares of Common Stock. The conversion of the Series A
Preferred Stock resulted in the elimination of accrued and unpaid dividends on
the Series A Preferred Stock of approximately $0.9 million. Prior to the
Closing, the Existing Holders also exchanged their outstanding warrants to
purchase Common Stock for an aggregate of 12,301,802 shares of Common Stock.
In connection with and prior to the Closing, the Company amended (i) its
Certificate of Incorporation to increase the number of authorized shares to
355,000,000 shares, consisting of 350,000,000 shares of Common Stock and
5,000,000 shares of preferred stock, par value $0.01 per share, and (ii) its
By-laws to allow the holders of a majority of the outstanding Common Stock to
call special meetings of the stockholders of the Company. Copies of the
amendment of the Company's Certificate of Incorporation and By-laws have been
filed as Exhibits to the Company's Annual Report on Form 10-KSB for the fiscal
year ended June 30, 1999.
The Company, L-3 and the Existing Holders also entered into a Registration
Rights Agreement, dated as of July 10, 2000 (the "Registration Rights
Agreement"). Pursuant to the terms of the Registration Rights Agreement, L-3 (or
certain qualifying holders of shares purchased by L-3) has the right to demand
at any time that the Company effect the registration of the shares of Common
Stock acquired by L-3 for offering and sale under applicable securities laws
(subject to certain black-out provisions described below). L-3 (or such
qualifying successors) have the right to make four such demands. Under the
Registration Rights Agreement, after the earlier to occur of (i) consummation of
a Qualifying Offering and (ii) March 31, 2001, one or more Existing Holders
meeting certain requirements have the right to demand that the Company effect
the registration of the shares of Common Stock acquired by such Existing Holders
(and any other Existing Holders who timely agree to participate in such
offering) for offering and sale under applicable securities laws (subject to
certain black-out provisions described below). The Existing Holders have the
right to make two such demands. A registration effected pursuant to the
provisions described above is hereinafter referred to as a "Long-Form
Registration."
In addition, if at any time after the earlier of (i) January 2, 2001 and (ii)
the consummation of a Qualifying Offering, the Company is eligible to effect
such registration on Form S-3 (or a successor form), L-3 and the Existing
Holders have the unlimited right to demand that the Company effect the
registration of their shares of Common Stock (a "Short-Form Registration") so
long as the shares to be offered for the benefit of the requesting holders (and
any other parties to the Registration Rights Agreement who timely agree to
participate in such offering) are reasonably expected to have an aggregate
offering price of at least $1,000,000.
21
<PAGE>
LOGIMETRICS, INC.
The Company is not required to prepare and file a registration statement
pursuant to a Long-Form Registration for a period of not more than 90 days
following receipt by the Company of a request for registration, if (i) the
Company in good faith gives written notice within five days after such receipt
by the Company of such request that the Company is commencing to prepare a
Company-initiated registration statement, and (ii) the Company actively employs
in good faith all reasonable efforts to cause such registration statement to
become effective.
If the Company receives a request to effect a Long-Form Registration within 90
days of the date on which a previous registration statement filed pursuant to a
Long-Form Registration has become effective, the Company is not required to
commence preparation of such Long-Form Registration in accordance with such
request until 90 days has elapsed since such effective date.
If the Company furnishes to the persons requesting registration a certificate
signed by the chief executive or chief financial officer of the Company stating
that the Company, in good faith, has determined that (i) there exists material
non-public information about the Company which the Company has a bona fide
business purpose for preserving as confidential, or (ii) is undertaking (or is
about to undertake) a proposed acquisition or financing that would significantly
impact the pricing of the contemplated public offering, and in each case the
Company provides such persons written notice thereof promptly after the Company
makes such determination, then the Company has the right to defer the filing or
the declaration of effectiveness of a registration statement, for a period of
not more than (A) 90 days, in the case of a Long-Form Registration, or (B) 60
days, in the case of a Short-Form Registration, after receipt of the request to
register; provided, however, that the Company is not entitled to defer such
filing or declaration of effectiveness more than 120 days in any 12-month
period.
The parties to the Registration Rights Agreement also have unlimited "piggy
back" rights with respect to any registration effected by the Company for its
own account or for the account of another person (other than registrations
relating to sales of securities to participants in a Company stock plan or in a
transaction covered by Rule 145 promulgated under the Securities Act of 1933, as
amended), subject to certain cut-back provisions.
The Company will be required to bear all expenses incurred in effecting any
Long-Form Registration and up to six Short-Form Registrations, including the
fees and disbursements of any counsel or accountant retained by the holders of
more than fifty percent of the stock being registered, but excluding
underwriting discounts and brokerage fees or commissions. In addition, the
Company has agreed to indemnify participants in any registration for certain
liabilities, including liabilities arising under applicable securities laws, and
is obligated to contribute to any damages paid by such participants if such
indemnification is unavailable to such participants.
In connection with the Transaction, the Company entered into new two-year
employment agreements with Messrs. Brand and Phipps (his "New Employment
Agreements"). Pursuant to the New Employment Agreements, Mr. Brand and Mr.
Phipps will each receive an annual base salary of $210,000. The base salary is
subject to periodic increases at the discretion of the Board. Under his New
Employment Agreement, Mr. Phipps was granted an option to acquire 750,000 shares
of Common Stock at an exercise price of $0.54 per share (subject to adjustment
in certain circumstances) (the "Phipps Option"). The Phipps Option vests in
equal installments of one-third per year and expires, subject to earlier
termination, ten years from the date of grant.
Under the New Employment Agreements, the Company agreed to reimburse Mr. Brand
and Mr. Phipps for the costs of maintaining a $1,000,000 term-life insurance
policy for the benefit of each of Mr. Brand and Mr. Phipps, subject to a cap of
$2,000 per annum. Mr. Brand and Mr. Phipps also are entitled to participate in
certain compensation and employee benefit plans maintained by the Company. In
the event of the termination of employment by the Company (other than upon
death, permanent disability or a termination for "Cause" (as defined in the New
Employment Agreements)) or a termination of employment by the employee for "Good
Reason" (as so defined), each of Mr. Brand and Mr. Phipps would be entitled to
receive his then-current base salary for a period equal to the greater of (i)
the remainder of the term of his employment agreement, and (ii) 12 months (in
the case of Mr. Brand) or six months (in the case of Mr. Phipps) from the
effective date of termination. The Phipps Option will vest immediately upon a
termination of employment giving Mr. Phipps the right to continue to receive his
base salary as described above or upon the occurrence of a "Change in Control
Event" (as defined in the Phipps Option). The New Employment Agreements also
contain certain non-competition, confidentiality and intellectual property
ownership covenants.
22
<PAGE>
LOGIMETRICS, INC.
Pursuant to the terms of the Transaction, options to purchase 150,000 shares of
Common Stock were issued to each of Dr. Frank A. Brand, Mr. Carreras and Mr.
Fisher (collectively, the "Former Director Options"). The Former Director
Options have an exercise price of $0.54 per share (subject to adjustment in
certain circumstances), are immediately exercisable and expire, subject to
earlier termination, ten years from the date of grant. In addition, as described
above, Mr. Phipps received an option to acquire 750,000 shares of Common Stock
in connection with the execution of his new employment agreement. Options to
purchase an aggregate of 8,902,200 shares of Common Stock also were issued under
the Stock Compensation Program to certain other employees of the Company and to
certain employees of L-3 to be designated by L-3 in connection with the
Transaction (the "Employee Options"). All of the Employee Options have an
exercise price of $0.54 per share (subject to adjustment in certain
circumstances), vest in equal installments of one-third per year and expire,
subject to earlier termination, ten years from the date of grant. Pursuant to
this grant, two officers of the Company, Mr. James Meckstroth and Mr. Erik
Kruger received options to acquire 740,000 shares and 400,000 shares of Common
Stock, respectively.
In addition, pursuant to the Transaction, options to purchase an aggregate of
12,665,308 shares of Common Stock were granted to L-3, Cramer, Rosenthal
McGlynn, LLC ("CRM") and Cerberus Partners, L.P. ("Cerberus") (the "Founder
Options") (with each such party having the ability to direct all or part of its
options to certain parties related to such party). The Founder Options have an
exercise price of $0.54 per share (subject to adjustment in certain
circumstances), are immediately exercisable and expire ten years from the date
of grant.
Copies of the Purchase Agreement, the Note, the Stock Pledge Agreement, the
Stockholders Agreement and the Registration Rights Agreement (collectively, the
"Agreements") have been attached as Exhibits to the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1999, and are incorporated herein
by reference. The description of each Agreement set forth above is a summary
only, is not intended to be complete, and is qualified in its entirety by
reference to such Agreement. The transactions described above are collectively
referred to as the "Transaction."
On July 20, 2000, the Company filed with the Securities and Exchange Commission
(the "Commission") an Information Statement pursuant to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder (the "Information
Statement"). The Information Statement was mailed on July 21, 2000 to all
holders of record of the Company at the close of business on July 10, 2000 in
connection with the appointment by L-3 of a majority of the members of the
Board. A copy of the Information Statement has been attached as an Exhibit to
the Company's Annual Report on Form 10-KSB for the fiscal year ended June 30,
1999, and is incorporated herein by reference.
In connection with the Transaction, the Company terminated its letter of intent
(the "Signal Letter of Intent") with Signal Technology Corporation ("Signal")
relating to the proposed merger of the Company with a subsidiary of Signal. In
connection with the Signal Letter of Intent, Signal had loaned $2,000,000 to the
Company for working capital and other purposes (the "Signal Loan"). Concurrently
with the making of the Signal Loan, certain existing investors in the Company
also loaned the Company $1,000,000 (the "Investor Loans"). The Signal Loan and
the Investor Loans were repaid with a portion of the net proceeds of the
Transaction.
The Company and Signal also had entered into a Management Agreement (the
"Management Agreement") pursuant to which Signal, through its Keltec division,
assumed the management and operation of the Company's high-power amplifier
business, formerly conducted by the Company at its Bohemia, New York facility
(the "New York Business") and assumed certain liabilities of the New York
Business. Under the Management Agreement, Signal was responsible for all
expenses incurred and was entitled to retain all revenues generated in
connection with its operation of that business. Signal also agreed to make
interest payments on the Company's outstanding bank indebtedness during the
period it is operating the New York Business. In November 2000, Signal acquired
the New York Business, and the Company paid Signal $2.1 million to offset
certain costs incurred by Signal during the course of its management of the New
York Business and certain known liabilities of this business. Additionally, the
Company has agreed to retain other specific liabilities of the New York
Business.
23
<PAGE>
LOGIMETRICS, INC.
On August 21, 2000, the Bank agreed to modify and extend the maturity date of
the Replacement Note from June 30, 2000 to January 2, 2001 (the "Modified
Replacement Note"). In exchange, the Company agreed, among other things, (i) to
reduce the amount outstanding under the Modified Replacement Note to $1.5
million, (ii) that no further advances would be made under the Modified
Replacement Note, (iii) to pay all past due interest on the Modified Replacement
Note, and to pay the Bank certain additional fees specified in the Modified
Replacement Note, (iv) to make mandatory prepayments to the Modified Replacement
Note equal to a minimum of 25% of any prepayments made by L-3 to the Company
under the Note, and (v) to extend the expiration date of the Series J Warrants
to January 2, 2003.
FORWARD-LOOKING STATEMENTS
Certain information contained in this Form 10-QSB contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
that are based on the beliefs of the Company's management as well as assumptions
made by and information currently available to the Company's management. When
used in this Form 10-QSB, the words "estimate," "project," "believe,"
"anticipate," "intend," "expect," "plan," "predict," "may," "should," "will,"
the negative thereof and similar expressions are intended to identify
forward-looking statements. Forward-looking statements are inherently subject to
risks and uncertainties, many of which cannot be predicted with accuracy and
some of which might not even be anticipated. Future events and actual results,
financial and otherwise, could differ materially from those set forth in or
contemplated by the forward-looking statements herein. Important factors that
could contribute to such differences include, but are not limited to, the
following: general economic and political conditions, as well as conditions in
the markets for the Company's products; the Company's history of losses and cash
constraints; the shift in the Company's business focus; the Company's dependence
on and the effects of government regulation; the Company's dependence on the PMP
market and uncertainties relating to the size and timing of any such market that
ultimately develops; the Company's dependence on large orders and the effects of
customer concentrations; the Company's dependence on the private sale of
securities to meet its working capital needs; the Company's dependence on future
product development and market acceptance of the Company's products,
particularly in the PMP market; the Company's limited proprietary technology;
possible fluctuations in quarterly results; the effects of competition; risks
related to international business operations; and the Company's dependence on a
limited number of suppliers. Other factors may be described from time to time in
the Company's other filings with the Securities and Exchange Commission, news
releases and other communications. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. The Company does not undertake any obligation to release publicly any
revisions to these forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events. The
Company cautions readers that a number of important factors discussed herein,
and in other reports filed with the Securities and Exchange Commission,
particularly the Company's Form 10-KSB for the year ended June 30, 1999, could
affect the Company's actual results and cause actual results to differ
materially from those in the forward looking statements.
Subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the cautionary statements set forth above and contained elsewhere in
this Form 10-QSB.
24
<PAGE>
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities
For a description of certain defaults under the Company's debt securities, see
Item 2. Management's Discussion and Analysis or Plan of Operation - Liquidity
and Capital Resources.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Number Description
27 Financial Data Schedule
(b) Reports on Form 8-K: None
25
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LOGIMETRICS, INC.
Dated: December 4, 2000 By: /s/ Erik S. Kruger
------------------
Erik S. Kruger
Vice President -
Finance and Administration
and Principal Accounting Officer
26
