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 March 31, 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.)
50 Orville Drive, Bohemia, New York 11716
(Address of principal executive offices)
Issuer's telephone number: (631) 784-4110
(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 March 31, 2000:
$.01 per share 28,935,925 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)
Balance Sheet - March 31, 1999........................................... 3
Statements of Operations -
Nine months ended March 31, 1999 and 1998............................... 4
Statements of Operations -
Three months ended March 31, 1999 and 1998.............................. 5
Statements of Cash Flows -
Nine months ended March 31, 1999 and 1998............................... 6
Notes to Financial Statements.......................................... 7-11
Item 2. Management's Discussion and Analysis or Plan of Operation..... 12-17
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities............................... 18
Item 6. Exhibits and Reports on Form 8-K.............................. 18
SIGNATURES............................................................. 19
<PAGE>
LOGIMETRICS, INC.
CONSOLIDATED BALANCE SHEET
March 31, 1999
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 429,467
Accounts receivable, less allowance
for doubtful accounts of $254,297 2,935,836
Inventories (Note 2) 2,384,780
Prepaid expenses and other current assets 69,476
---------
Total current assets 5,819,559
Equipment and fixtures, net 1,222,700
Other assets 82,518
---------
TOTAL ASSETS $ 7,124,777
=============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable and other accrued expenses $ 4,260,484
Advance payments 232,500
Current portion of long-term debt (Note 3) 186,904
---------
Total current liabilities 4,679,888
Long-term debt (Note 3) 12,079,467
----------
TOTAL LIABILITIES $ 16,759,355
----------
COMMITMENTS
Stockholders' deficiency (Note 4)
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, 28,490,430 shares 284,904
Additional paid-in capital 4,076,836
Deficit (14,731,393)
Stock subscriptions receivable (Note 4) (189,450)
------------
TOTAL STOCKHOLDERS' DEFICIENCY $ (9,634,578)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 7,124,777
===========
See Notes to Consolidated Financial Statements
<PAGE>
LOGIMETRICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended
March 31,
1999 1998
---- ----
Revenues (Note 5) $ 9,696,566 $ 6,865,193
Costs and expenses:
Cost of revenues 6,997,583 4,076,584
Selling, general and
administrative expenses 3,435,265 3,157,326
Research and development 876,274 352,416
---------- ----------
Loss from operations (1,612,556) (721,133)
Interest expense 1,256,418 709,450
---------- ----------
Loss before income taxes (2,868,974) (1,430,583)
Income tax benefit (19,497) (132,615)
----------- -----------
Net loss (2,849,477) (1,297,968)
Preferred stock dividends 178,663 159,238
---------- ----------
Net loss attributable
to common stockholders $ (3,028,140) $ (1,457,206)
=========== ==========
Basic and diluted loss
per common share (Note 6) $ (0.11) $ (0.06)
Basic and diluted weighted average
number of common shares (Note 6) 28,478,770 25,336,207
========== ==========
See Notes to Consolidated Financial Statements
<PAGE>
LOGIMETRICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
1999 1998
---- ----
Revenues (Note 5) $ 3,340,945 $ 1,552,849
Cost and expenses:
Cost of revenues 2,455,165 1,232,146
Selling, general and
administrative expenses 929,100 862,838
Research and development 262,224 123,636
--------- -----------
Loss from operations (305,544) (665,771)
Interest expense 473,612 231,880
---------- -----------
Loss before income taxes (779,156) (897,651)
Income tax benefit - (207,330)
---------- -----------
Net loss (779,156) (690,321)
Preferred stock dividends 58,685 58,685
---------- -----------
Net loss attributable to
common stockholders $ (837,841) $ (749,006)
=========== ===========
Basic and diluted loss per common
share (Note 6) $ (0.03) $ (0.03)
Basic and diluted weighted average number
of common shares (Note 6) 28,490,430 25,791,828
========== ==========
See Notes to Consolidated Financial Statements
<PAGE>
LOGIMETRICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
March 31
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,849,477) $ (1,297,968)
----------- ------------
Adjustments to reconcile net loss to net cash
used for operationg activities:
Depreciation and amortization 617,732 399,031
Allowance for doubtful accounts 100,000 355,875
Accrued interest expense 956,179 412,428
Stock compensation expense 34,635 -
Increase (decrease) in cash from:
Accounts receivable (1,373,722) (182,624)
Costs and estimated earnings
in excess of billings on
uncompleted contracts - 785,013
Inventories 474,128 (379,350)
Prepaid expenses and other
current assets (24,556) 44,254
Accounts payable and accrued expenses 274,180 (2,068,955)
Advance payments (384,705) (224,896)
Other assets/liabilities (15,663) (131,649)
----------- -----------
Total adjustments 658,208 (990,873)
----------- -----------
Net cash used for operating activities (2,191,269) (2,288,841)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and fixtures (858,710) (110,411)
----------- ----------
Net cash used for investing activities (858,710) (110,411)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt issuance 2,416,667 2,750,000
Proceeds from warrant issuance 83,333 567,500
Proceeds from sale of stock - 32,500
Capital leases - net 585,879 -
Loans from stockholders 387,347 -
Repayment of loans from stockholders (119,339) (200,000)
Proceeds from exercise of warrants 15,000 16,131
Stock subscriptions received - 8,500
Repayment of debt - net (321,691) (213,188)
------------ ----------
Net cash provided by financing activities 3,047,196 2,961,443
------------ ----------
NET (DECREASE) INCREASE IN CASH (2,783) 562,191
CASH, beginning of period 432,250 368,327
----------- ---------
CASH, end of period 429,467 930,518
=========== =========
See Notes to Consolidated Financial Statements
<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 1998
financial statements have been reclassified to conform with 1999 presentation.
The Company's financial statements have been prepared assuming that the Company
will continue as a going concern. The independent auditors' report on the
Company's financial statements for the fiscal year ended June 30, 1998 included
an emphasis paragraph concerning the Company's ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
The balance sheet as of March 31, 1999, the statements of operations for the
three-month and nine-month periods ended March 31, 1999 and 1998, and the
statements of cash flows for the nine-month periods ended March 31, 1999 and
1998, are unaudited. Such unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and with the instructions to Form 10-QSB. Accordingly, they
do not include all of the information and disclosures required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments, consisting of normal recurring accruals
considered necessary for a fair presentation, have been included. Results for
the three and nine months ended March 31, 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, 1999. 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, 1998.
2. Inventories
Inventory consists of the following at March 31, 1999:
Raw material and components $878,956
Work-in-progress 1,505,824
---------
$2,384,780
==========
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
3. Long-Term Debt
Long-term debt consists of the following at March 31, 1999:
Notes payable to Bank $ 2,165,056
Class A Debentures 4,527,133
Class B Debentures 1,951,117
Less: Discount at issuance (457,628)
Plus: Amortization of discount 429,032
Class C Debentures 2,666,667
Less: Discount at issuance (666,667)
Plus: Amortization of discount 313,495
Notes payable - stockholders 739,551
Capital lease obligations 598,615
----------
12,266,371
Less: current portion (186,904)
-----------
$12,079,467
===========
Pursuant to the terms of a Purchase Agreement, dated October 21, 1998 (the
"Purchase Agreement"), among the Company and the purchasers party thereto, the
Company issued and sold $2.7 million in aggregate face amount of its Class C 13%
Senior Subordinated Debentures due September 30, 1999 (the "Class C Debentures")
for an aggregate purchase price of $2.0 million. The Class C Debentures are
non-callable and are currently convertible into shares of Common Stock at a
conversion price of $0.31 per share, subject to adjustment in certain
circumstances. See Note 7 for a description of the subsequent extension of the
Class C Debentures.
Principal payment due on all long-term debt consists of the following:
Fiscal year ending June 30, 1999 $ 51,984
Fiscal year ending June 30, 2000 2,416,788
Fiscal year ending June 30, 2001 10,104,152
Thereafter 75,215
-----------
$ 12,648,139
============
4. Stockholders' Deficiency
Stock subscriptions receivable consists of the following at March 31, 1999:
Notes form former officers $ 154,450
Note from a director 35,000
-------
$ 189,450
=======
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
5. Revenue Recognition
In December 1997, CellularVision of New York, L.P. ("CVNY") entered into a
letter agreement with the Company pursuant to which CVNY agreed to pay on behalf
of CellularVision Technology & Telecommunications L.P. ("CT&T") approximately
$3.0 million of the amounts owed by CT&T . Under the terms of the letter
agreement, CVNY paid $350,000 to the Company, and delivered to the Company a
secured promissory note in the principal amount of approximately $2.6 million
(the "CVNY Note"). The CVNY Note relates to equipment, substantially all of
which had been ordered by CT&T and CVNY in prior periods, and which was being
held at the Company's premises at CVNY's request. In addition, CVNY has
confirmed to the Company in writing that it has purchased the equipment covered
by the CVNY Note and has assumed the risk of loss with respect thereto. CVNY has
committed to accept delivery of all such equipment by June 30, 1998. As of
December 28, 1997, CVNY had paid approximately $50,000 pursuant to the CVNY
Note. On December 31, 1997, the Company sold the CVNY Note without recourse to
an unrelated party for approximately $2.4 million. The loss of approximately
$190,000 on the sale of the CVNY Note was recorded in selling, general and
administrative expenses. During the second quarter of fiscal 1998, the Company
recorded approximately $3.0 million of sales related to these transactions.
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 and nine-month
periods ended March 31, 1999 and March 31, 1998 do not give effect to common
stock equivalents because they would have an antidilutive effect.
7. Subsequent Events
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 Revolver was reduced to $1.93 million (the amount
outstanding as of such date) and the maturity date of the Revolver was extended
to December 31, 1999. Under the terms of the Forebearance Agreement, the Bank
agreed to forebear, until December 31, 1999, from declaring any event of default
or from exercising any remedies under the Facility.
On February 17, 2000, the Company entered into a non-binding letter of intent
(the "Letter of Intent") with Signal Technology Corporation ("Signal") pursuant
to which Signal proposes to acquire the Company through the merger of a wholly
owned subsidiary of Signal with and into LogiMetrics (the "Merger"). In
connection with the proposed Merger, Signal currently intends to contribute the
assets of mmTech to Signal's recently formed Signal Wireless Group ("SWG").
Pursuant to the current terms of the proposed Merger, holders of the Company's
Common Stock (including shares issuable upon the exercise or conversion of
outstanding options, warrants and convertible securities), would receive, based
on a formula to be finalized, a certain percentage of a tracking security that
would reflect the performance of SWG ("SWG Equity"), which would be distributed
upon completion of a public offering of SWG Equity, and shares of Signal common
stock. The proposed Merger is intended to be tax-free to the stockholders of
LogiMetrics for federal income tax purposes.
In connection with the Letter of Intent, Signal has loaned $2,000,000 to the
Company for working capital and other purposes (the "Signal Loan") pursuant to
the terms of a Negotiable Secured Senior Subordinated Promissory Note (the
"Signal Note"). The Signal Loan matures on December 31, 2000 and bears interest
at a rate of 10% per annum, payable at maturity. The Signal Loan may be prepaid
by the Company at any time and is subject to mandatory repayment in the event
that the Company completes an institutional financing generating gross proceeds
of $7,500,000 or more or the Company engages in certain extraordinary
transactions (other than with Signal) or executes a letter of intent or
agreement relating thereto. The Signal Loan is secured by liens on all of the
Company's assets. Signal has the right to accelerate the repayment of the Signal
Loan upon the occurrence of certain events of default, including the failure of
the Company to pay amounts owed under the Signal Note when due, a material
breach by the Company of certain covenants and representations and warranties
made to Signal or the occurrence of certain insolvency events.
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
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
Investor Loans are evidenced by a Substitute Negotiable Secured Senior
Subordinated Promissory Note (the "Investor Notes") and are secured pari passu
with the Signal Loan. The Investor Loans bear interest at a rate of 13% per
annum (payable at maturity) and mature on July 1, 2000. The Signal Loan and the
Investor Loans are referred to collectively as the "Loan Transactions."
Pursuant to the Letter of Intent, the Company granted to Signal the option (the
"Option") to purchase the Company's high-power amplifier business (the "New York
Business"). The exercise price of the Option is $2,000,000 less the unpaid
amount of the Signal Loan less any funded indebtedness of the Company assumed by
Signal. The Option expires on the earlier of (i) 30 days after the payment in
full of the Signal Loan and (ii) December 31, 2000.
In addition, upon execution of the Letter of Intent, the Company and Signal
entered into a Management Agreement (the "Management Agreement") pursuant to
which, Signal, through its Keltec division, assumed the management and operation
of the New York Business and has assumed all current liabilities of the New York
Business. Pursuant to the Management Agreement, Signal has relocated the assets
of the New York Business (excluding real estate and fixtures) to Signal's
facility in Florida. Under the Management Agreement, Signal is responsible for
all expenses incurred and is entitled to retain all revenues generated in
connection with its operation of that business. Signal also has agreed to make
interest payments due on the Revolver during the period it is operating the New
York Business. Pursuant to the Management Agreement, if the Merger is not
consummated and the Company enters into an acquisition transaction with a third
party prior to December 31, 2000, Signal has the right either to retain
ownership of the assets of the New York Business for no additional consideration
or to return such assets to the Company. In the event that Signal returns such
assets to the Company, the Company is obligated to reimburse Signal for the
expenses of moving the assets both to and from Signal's Florida facility and for
any interest payments made by Signal in respect of the Revolver.
Pursuant to the Letter of Intent, the Company is obligated under certain
circumstances to re-pay all loans made by Signal, together with a prepayment
penalty of $100,000, and to pay a termination fee of $800,000 in the event that
the Company enters into a letter of intent or similar agreement for an
acquisition transaction with a third party prior to June 16, 2000.
The transactions described above are collectively referred to as the "Signal
Transactions."
The consummation of the proposed Merger is subject to the satisfaction or waiver
of a number of customary conditions precedent, including the satisfactory
completion of the Company's and Signal's due diligence investigation of the
business and affairs of one another, the Company's compliance with its reporting
obligations under the Securities Exchange Act of 1934, as amended, the
negotiation and execution of definitive agreements for the Merger, the approval
of the proposed Merger by the boards of directors and shareholders of Signal and
the Company and the receipt of any required consents, authorization and
approvals. No assurances can be given that such conditions will be satisfied or
as to the timing thereof. Further, no assurances can be given that the Merger
will be consummated on the terms summarized above or at all.
In connection with the Signal Transactions, the holders of the Company's Class A
Debentures, Class B Debentures and Class C Debentures agreed to extend the
maturity dates of all such debentures to July 1, 2000.
In connection with the Signal Transactions, the Company and the Bank entered
into a Consent Letter (the "Consent Letter") pursuant to which the Bank
consented to the Signal Transactions and agreed to waive any defaults under the
Revolver 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 Revolver to $1.8 million (the amount outstanding
thereunder as of such date), (ii) that no further advances would be made under
the Revolver, and (iii) to pay all past due amounts outstanding under the
Revolver, and to pay the Bank certain additional fees specified in the Consent
Letter.
<PAGE>
LOGIMETRICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
It is a condition to the Signal Transactions that approximately $10.7 million of
the Company's indebtedness (excluding obligations owed to the Bank and certain
other indebtedness) be converted into shares of the Company's Common Stock.
Based on discussions with the holders of such indebtedness, the Company believes
that such holders will convert that indebtedness to Common Stock, although no
assurance can be given that the Company will receive all of the consents
required to effect such conversion or as to the terms thereof. In addition,
pursuant to the terms of the Signal Transactions, all previously issued options,
warrants and other convertible securities must to be converted into Common
Stock. Based on discussions with the holders of such securities, the Company
believes that such holders will convert, exercise or exchange such securities
for shares of Common Stock, although no assurance can be given that the Company
will receive all of the consents required to effect such conversions, exercises
and exchanges or as to the terms thereof. Based on the discussions held to date,
the Company believes that it will be required to issue shares of Common Stock to
the holders of such indebtedness and securities in an amount substantially in
excess of 50% of the shares then-outstanding (after giving effect to such
issuance).
The summary of the Signal Transactions contained herein is not intended to be
complete and is qualified in its entirety by reference to the Letter of Intent,
the loan documents for the Loan Transactions and the Management Agreement,
copies of which have been filed as exhibits to the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1998.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Nine Months Ended March 31, 1999 Compared to Nine Months Ended March 31, 1998
Net revenues for the nine months ended March 31, 1999 increased $2.8 million, or
41.2%, to $9.7 million from $6.9 million for the comparable period of 1998. The
increase in revenues for the nine months ended March 31, 1999 resulted from
increases in sales of traveling wave tube amplifiers, the Company's traditional
products. As described in Note 5 to the accompanying consolidated financial
statements, during the quarter ended December 31, 1997, the Company recognized
approximately $3.0 million in revenue from the sale of point-to-multipoint
("PMP") equipment to CT&T and certain of its affiliates.
Cost of revenues for the nine months ended March 31, 1999 increased $2.9
million, or 71.7%, to $7.0 million from $4.1 million for the comparable period
of 1998. As a percentage of net revenues, cost of revenues was 72.2% for the
nine months ended March 31, 1999 and 59.4% for the nine months ended March 31,
1998. The decrease in gross margin resulted primarily as a result of an
unfavorable shift in product mix toward products with lower margins.
Selling, general and administrative expenses for the nine months ended March 31,
1999 increased $0.2 million, or 8.8%, to $3.4 million from $3.2 million for the
comparable period of 1998, primarily as a result of increased commissions based
on increased sales and increased staffing expenses associated with the Company's
receipt of orders for its PMP equipment during the nine-month period ended March
31, 1999.
Research and development expenses for the nine months ended March 31, 1999
increased $0.5 million, or 148.6%, to $0.9 million from $0.4 million for the
comparable period of 1998 as a result of a shift in personnel from production to
design and development activities related to new product development and product
enhancement of both the Company's PMP and traditional product lines.
For the reasons discussed above, the Company recorded an operating loss of $1.6
million for the nine months ended March 31, 1999, compared to an operating loss
of $0.7 million for the comparable period in 1998.
Interest expense for the nine months ended March 31, 1999 increased $0.6
million, or 77.1%, to $1.3 million from $0.7 million for the comparable period
of 1998, primarily as a result of a higher level of average outstanding
indebtedness.
During the nine months ended March 31, 1999, the Company had an income tax
benefit of $19,000, compared to an income tax benefit of $0.1 million for the
nine months ended March 31, 1998. LogiMetrics and mmTech currently file separate
federal and state tax returns.
During the nine months ended March 31, 1999 and 1998, the Company accrued
dividends on its outstanding preferred stock of $0.2 million in each period.
For the reasons discussed above, the Company recorded a net loss attributable to
common stockholders for the nine months ended March 31, 1999 of $3.0 million,
compared to a net loss attributable to common stockholders of $1.5 million for
the comparable period in 1998.
Liquidity and Capital Resources
At March 31, 1999, the Company had cash of $0.4 million. At such date, the
Company had total current assets of $5.8 million and total current liabilities
of $4.7 million.
<PAGE>
Net cash used for operating activities was $2.2 million for the nine months
ended March 31, 1999, compared to $2.3 million for the comparable period in
1998. Net cash used for operating activities during the nine months ended March
31, 1999, resulted primarily from a net loss of $2.8 million and an increase in
accounts receivable, offset in part by an increase in accrued interest expense
and accounts payable and accrued expenses and a decrease in inventories. Net
cash used for operating activities during the nine months ended March 31, 1998
resulted primarily from a net loss of $1.3 million, the repayment of accounts
payable and increases in inventory, offset in part by a decrease in costs and
estimated earnings in excess of billings or uncompleted contracts, and increases
in accrued interest expense and allowance for doubtful accounts.
Net cash used for investing activities was $0.9 million for the nine months
ended March 31, 1999, and $0.1 million 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 $3.0 million for each of the
nine-month periods ended March 31, 1999 and 1998. Net cash provided by financing
activities during both the 1999 and 1998 periods resulted primarily from the
proceeds of certain debt and warrant issuances by the Company, offset in part by
the repayment of certain outstanding indebtedness as well as the repayment of
loans from stockholders of the Company.
From July 1, 1997 to March 31, 1999, the Company raised approximately $5.9
million from private sales of convertible debentures and warrants 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, may have to curtail its
marketing, development or operations, and may be unable to continue as a going
concern.
On December 31, 1998, the Company repaid in full the Restated and Amended Term
Loan Note in accordance with its terms.
On February 9, 1999, the Company repaid in full the Senior Subordinated Notes.
At March 31, 1999, the Company was a party to a Modified Revolving Credit Note,
dated as of April 30, 1998, pursuant to which North Fork Bank (the "Bank") had
provided the Company with a revolving credit facility (the "Revolver") maturing
on July 1, 1999. Pursuant to the terms of the Revolver, the Company was entitled
to draw up to $2.2 million assuming sufficient eligible inventory and accounts
receivable. At March 31, 1999, the Company had $35,000 available under the
Revolver. Outstanding amounts under the Revolver bear interest at the rate of 2%
per annum in excess of the Bank's prime rate. At March 31, 1999, the Bank's
prime rate was 7.75%. At March 31, 1999, the Company was in violation of two
covenants contained in the Facility 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, 1998 by
September 30, 1998 (the "Reporting Requirement Covenant"). As of March 31, 1999,
the Bank had waived compliance with the Net Income Covenant for each fiscal
quarter commencing with the fiscal quarter ended June 30, 1998 and ending on and
including the fiscal quarter ended March 31, 1999, and had waived compliance
with the Reporting Requirement Covenant until May 28, 1999. See Management's
Discussion and Analysis or Plan of Operation - Recent Developments for a
description of the subsequent extension of the Revolver.
<PAGE>
In addition to the Revolver, at March 31, 1999 the Company had issued and
outstanding $4.5 million of its Class A 13% Senior Subordinated Convertible
Pay-in-Kind Debentures due July 29, 1999 (the "Class A Debentures"), $2.0
million of its Amended and Restated Class B 13% Senior Subordinated Convertible
Pay-in-Kind Debentures due July 29, 1999 (the "Class B Debentures") and $2.7
million of its Class C 13% Senior Subordinated Debentures due September 30, 1999
(the "Class C Debentures" and together with the Class A Debentures and the Class
B Debentures, the "Senior Subordinated Indebtedness"). The Class A Debentures
and the Class B Debentures contained financial covenants identical to those
contained in the Revolver. Accordingly, at March 31, 1999, the Company was in
default of the Net Income Covenant and the Reporting Requirement Covenant to the
same extent as under the Revolver. As of March 31, 1999, the holders of the
Class A Debentures and the Class B Debentures had waived compliance with the Net
Income Covenant for each quarter, commencing with the quarter ended June 30,
1998, through the quarter ended June 30, 1999, and had waived compliance with
the Reporting Requirement 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, par value $0.01 per share (the "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). 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 Management's
Discussion and Analysis or Plan of Operation - Recent Developments for a
description of the subsequent extension of the Class A Debentures and the Class
B Debentures.
Recent Developments
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 the Bank. Pursuant to
the terms of the Replacement Note, the amount available for borrowing under the
Revolver was reduced to $1.93 million (the amount outstanding as of such date)
and the maturity date of the Revolver was extended to December 31, 1999. Under
the terms of the Forebearance Agreement, the Bank agreed to forebear, until
December 31, 1999, from declaring any event of default or from exercising any
remedies under the Facility.
On February 17, 2000, the Company entered into a non-binding letter of intent
(the "Letter of Intent") with Signal Technology Corporation ("Signal") pursuant
to which Signal proposes to acquire the Company through the merger of a wholly
owned subsidiary of Signal with and into LogiMetrics (the "Merger"). In
connection with the proposed Merger, Signal currently intends to contribute the
assets of mmTech to Signal's recently formed Signal Wireless Group ("SWG").
Pursuant to the current terms of the proposed Merger, holders of the Company's
Common Stock (including shares issuable upon the exercise or conversion of
outstanding options, warrants and convertible securities), would receive, based
on a formula to be finalized, a certain percentage of a tracking security that
would reflect the performance of SWG ("SWG Equity"), which would be distributed
upon completion of a public offering of SWG Equity, and shares of Signal common
stock. The proposed Merger is intended to be tax-free to the stockholders of
LogiMetrics for federal income tax purposes.
In connection with the Letter of Intent, Signal has loaned $2,000,000 to the
Company for working capital and other purposes (the "Signal Loan") pursuant to
the terms of a Negotiable Secured Senior Subordinated Promissory Note (the
"Signal Note"). The Signal Loan matures on December 31, 2000 and bears interest
at a rate of 10% per annum, payable at maturity. The Signal Loan may be prepaid
by the Company at any time and is subject to mandatory repayment in the event
that the Company completes an institutional financing generating gross proceeds
of $7,500,000 or more or the Company engages in certain extraordinary
transactions (other than with Signal) or executes a letter of intent or
agreement relating thereto. The Signal Loan is secured by liens on all of the
Company's assets. Signal has the right to accelerate the repayment of the Signal
Loan upon the occurrence of certain events of default, including the failure of
the Company to pay amounts owed under the Signal Note when due, a material
breach by the Company of certain covenants and representations and warranties
made to Signal or the occurrence of certain insolvency events.
<PAGE>
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
Investor Loans are evidenced by a Substitute Negotiable Secured Senior
Subordinated Promissory Note (the "Investor Notes") and are secured pari passu
with the Signal Loan. The Investor Loans bear interest at a rate of 13% per
annum (payable at maturity) and mature on July 1, 2000. The Signal Loan and the
Investor Loans are referred to collectively as the "Loan Transactions."
Pursuant to the Letter of Intent, the Company granted to Signal the option (the
"Option") to purchase the Company's high-power amplifier business (the "New York
Business"). The exercise price of the Option is $2,000,000 less the unpaid
amount of the Signal Loan less any funded indebtedness of the Company assumed by
Signal. The Option expires on the earlier of (i) 30 days after the payment in
full of the Signal Loan and (ii) December 31, 2000.
In addition, upon execution of the Letter of Intent, the Company and Signal
entered into a Management Agreement (the "Management Agreement") pursuant to
which, Signal, through its Keltec division, assumed the management and operation
of the New York Business and has assumed all current liabilities of the New York
Business. Pursuant to the Management Agreement, Signal has relocated the assets
of the New York Business (excluding real estate and fixtures) to Signal's
facility in Florida. Under the Management Agreement, Signal is responsible for
all expenses incurred and is entitled to retain all revenues generated in
connection with its operation of that business. Signal also has agreed to make
interest payments due on the Revolver during the period it is operating the New
York Business. Pursuant to the Management Agreement, if the Merger is not
consummated and the Company enters into an acquisition transaction with a third
party prior to December 31, 2000, Signal has the right either to retain
ownership of the assets of the New York Business for no additional consideration
or to return such assets to the Company. In the event that Signal returns such
assets to the Company, the Company is obligated to reimburse Signal for the
expenses of moving the assets both to and from Signal's Florida facility and for
any interest payments made by Signal in respect of the Revolver.
Pursuant to the Letter of Intent, the Company is obligated under certain
circumstances to re-pay all loans made by Signal, together with a prepayment
penalty of $100,000, and to pay a termination fee of $800,000 in the event that
the Company enters into a letter of intent or similar agreement for an
acquisition transaction with a third party prior to June 16, 2000.
The transactions described above are collectively referred to as the 'Signal
Transactions."
The consummation of the proposed Merger is subject to the satisfaction or waiver
of a number of customary conditions precedent, including the satisfactory
completion of the Company's and Signal's due diligence investigation of the
business and affairs of one another, the Company's compliance with its reporting
obligations under the Securities Exchange Act of 1934, as amended, the
negotiation and execution of definitive agreements for the Merger, the approval
of the proposed Merger by the boards of directors and shareholders of Signal and
the Company and the receipt of any required consents, authorization and
approvals. No assurances can be given that such conditions will be satisfied or
as to the timing thereof. Further, no assurances can be given that the Merger
will be consummated on the terms summarized above or at all.
In connection with the Signal Transactions, the holders of the Company's Class A
Debentures, Class B Debentures and Class C Debentures agreed to extend the
maturity dates of all such debentures to July 1, 2000.
In connection with the Signal Transactions, the Company and the Bank entered
into a Consent Letter (the "Consent Letter") pursuant to which the Bank
consented to the Signal Transactions and agreed to waive any defaults under the
Revolver 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 Revolver to $1.8 million (the amount outstanding
thereunder as of such date), (ii) that no further advances would be made under
the Revolver, and (iii) to pay all past due amounts outstanding under the
Revolver, and to pay the Bank certain additional fees specified in the Consent
Letter.
<PAGE>
It is a condition to the Signal Transactions that approximately $10.7 million of
the Company's indebtedness (excluding obligations owed to the Bank and certain
other indebtedness) be converted into shares of the Company's Common Stock.
Based on discussions with the holders of such indebtedness, the Company believes
that such holders will convert that indebtedness to Common Stock, although no
assurance can be given that the Company will receive all of the consents
required to effect such conversion or as to the terms thereof. In addition,
pursuant to the terms of the Signal Transactions, all previously issued options,
warrants and other convertible securities must to be converted into Common
Stock. Based on discussions with the holders of such securities, the Company
believes that such holders will convert, exercise or exchange such securities
for shares of Common Stock, although no assurance can be given that the Company
will receive all of the consents required to effect such conversions, exercises
and exchanges or as to the terms thereof. Based on the discussions held to date,
the Company believes that it will be required to issue shares of Common Stock to
the holders of such indebtedness and securities in an amount substantially in
excess of 50% of the shares then-outstanding (after giving effect to such
issuance).
The summary of the Signal Transactions contained herein is not intended to be
complete and is qualified in its entirety by reference to the Letter of Intent,
the loan documents for the Loan Transactions and the Management Agreement,
copies of which have been filed as exhibits to the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1998.
Year 2000 Issue
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Certain computer programs
may recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business activity.
The Company established a team in February 1999 to assess risk, identify and
correct exposures when possible, and develop contingency plans for Year 2000
compliance issues. The assessment was completed in April 1999. The committee
identified several areas of potential concern to the Company, most particularly
the software and hardware used as part of its own information systems, the
impact of Year 2000 problems on the operation of its products, both current and
discontinued, the impact of Year 2000 issues on its vendors, the impact of Year
2000 issues as it affects the physical working environment in which the Company
operates, the potential impact of Year 2000 problems on the markets that the
Company sells into and finally, contingency planning.
The Company completed its review of the software and hardware systems used by
the Company's information systems in April 1999. Based on that review, and
certain modifications made to its existing software and hardware and conversions
to new software, the Company believes its internal systems and hardware are Year
2000 compliant.
<PAGE>
The Company has completed a review of its products and believes that Year 2000
issues will have no material impact on the performance of its product line as
its products' functionality is not dependent on date or time references.
The Company formally communicated with its significant suppliers, customers, and
critical business partners to determine the extent to which the Company might be
vulnerable in the event that those parties failed to properly remediate their
own Year 2000 issues. Based on those communications, the Company believes that
its significant suppliers, customers and critical business partners are Year
2000 compliant.
The Company also reviewed the operating environment within which it functions to
assess the Year 2000 risks relating to, among other things, its heating and air
conditioning systems, security systems, communication systems and related
hardware and believes its operating environment will not be materially impacted
by Year 2000 issues. Based on the Company's current assessments of its markets
and customers, the Company does not believe that Year 2000 issues will
significantly alter demand for the Company's products.
The Company has developed a contingency plan to deal with certain critical Year
2000 "what if" situations should they arise. The Company currently expects that
it will shift supply orders to suppliers that can demonstrate Year 2000
compliance if disruptions occur. However, the Company continues to monitor
potential Year 2000 issues, and will seek to modify its plan to respond to any
Year 2000 issues that may arise.
The Company believes that it is currently Year 2000 compliant. There can be no
assurances, however, that the Company's internal systems and products or those
of third parties on which the Company relies will not suffer disruptions
relating to Year 2000 issues. The failure to achieve Year 2000 compliance or to
have appropriate contingency plans in place to deal with any noncompliance could
result in a significant disruption of the Company's operations and could have a
material adverse effect on the Company's financial condition or results of
operations.
Based on the assessments described above, the Company estimates that it expended
less than $0.1 million to achieve Year 2000 compliance.
Currently, the Company has not experienced any significant system problems
relating to Year 2000.
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 can not 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, cash
constraints and ability to continue as a going concern; 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 PTMP 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
PTMP 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
<PAGE>
other reports filed with the Securities and Exchange Commission, particularly
the Company's Form 10-KSB for the year ended June 30, 1998, 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.
<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:
Not applicable.
<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: April 28, 2000 By: /s/Erik S. Kruger
Erik S. Kruger
Vice President -
Finance and Administration and
Principal Accounting Officer
<PAGE>
LOGIMETRICS, INC.
INDEX TO EXHIBITS
Exhibit Number Page No.
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE REGISTRANT'S FORM 10-QSB FOR THE NINE MONTHS ENDED MARCH 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000060128
<NAME> LOGIMETRICS, INC.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 429,467
<SECURITIES> 0
<RECEIVABLES> 3,390,133
<ALLOWANCES> (254,297)
<INVENTORY> 2,384,780
<CURRENT-ASSETS> 5,819,559
<PP&E> 3,716,808
<DEPRECIATION> 2,494,108
<TOTAL-ASSETS> 7,124,777
<CURRENT-LIABILITIES> 4,679,888
<BONDS> 12,266,371
0
924,525
<COMMON> 284,904
<OTHER-SE> (10,844,007)
<TOTAL-LIABILITY-AND-EQUITY> 7,124,777
<SALES> 9,696,566
<TOTAL-REVENUES> 9,696,566
<CGS> 6,997,583
<TOTAL-COSTS> 11,309,122
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 100,000
<INTEREST-EXPENSE> 1,256,418
<INCOME-PRETAX> (2,868,974)
<INCOME-TAX> (19,497)
<INCOME-CONTINUING> (2,849,477)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,849,477)
<EPS-BASIC> (0.11)
<EPS-DILUTED> (0.11)
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