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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 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 112171701
(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) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER: (631) 231-1700
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS)
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]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [ ]
State issuer's revenues for its most recent fiscal year: $11,760,878
As of July 28, 2000, the aggregate market value of the voting and
non-voting common equity held by non-affiliates computed by reference to the
average bid and asked price of such common equity as of July 28, 2000 was
$20,557,452.
State the number of shares outstanding of each of the issuer's classes
of common equity as of the latest practicable date.
Class of Common Equity Outstanding at July 28, 2000
---------------------- ----------------------------
Common Stock, par value 168,870,780 shares
$.01 per share
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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LOGIMETRICS, INC.
FORM 10-KSB
YEAR ENDED JUNE 30, 1999
INDEX
PART I
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Page
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Item 1. Description of Business............................................... 3
Item 2. Description of Property............................................... 20
Item 3. Legal Proceedings..................................................... 20
Item 4. Submission of Matters to a Vote of Security Holders................... 20
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.............. 21
Item 6. Management's Discussion and Analysis or Plan of Operation............. 22
Item 7. Financial Statements.................................................. 26
Item 8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.............................................. 53
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act..................... 53
Item 10. Executive Compensation................................................ 59
Item 11. Security Ownership of Certain Beneficial Owners and Management........ 63
Item 12. Certain Relationships and Related Transactions........................ 67
Item 13. Exhibits and Reports on Form 8-K...................................... 70
</TABLE>
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
LogiMetrics, Inc., a Delaware corporation ("LogiMetrics"), and its
wholly owned subsidiary, mmTech, Inc., a New Jersey corporation ("mmTech")
(collectively, the "Company"), designs, manufactures and markets solid state,
broadband wireless communications infrastructure equipment, subsystems and
modules used to provide point-to-multipoint ("PMP") terrestrial and
satellite-based distribution services in frequency bands from 24 gigahertz
("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 Local Multipoint
Distribution Service ("LMDS"), local loop services and Ka-band satellite
communications.
In addition to the Company's broadband products, at June 30, 1999, the
Company designed, manufactured and marketed a wide range of high power
amplifiers, including traveling wave tube amplifiers ("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 Company was founded in December 1968 as a Delaware corporation. The
Company's headquarters are located at 435 Moreland Road, Hauppauge, New York
11788. The Company's telephone number is (631) 231-1700.
RECENT EVENTS
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, par value $.01 per share
(the "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, on the first
business day following the 30th day after the Closing so that the L-3 Shares
will, following such adjustment, constitute 53.5% of the Company's outstanding
Common Stock (determined after giving effect to the dilutive effects 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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L-3 also has agreed to use its reasonable best efforts (i) until the
60th day 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.
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.
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
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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.
In addition, pursuant to the terms of the Stockholders Agreement, until
compliance by the Company with the requirements of Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder, the Company agreed to operate its
business in the ordinary course and to refrain from taking certain actions
without L-3's consent.
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.
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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
</TABLE>
For certain information regarding these individuals, see Item 9. Directors,
Executive Officers, Promoters and Control Persons;
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Compliance With Section 16(a) of the Exchange Act.
In connection with and prior to the Closing, the holders of the
Company's outstanding Class A 13% Senior Subordinated Convertible Pay-in-Kind
Debentures due July 29, 1999 (the "Class A Debentures"), Amended and Restated
Class B 13% Convertible Senior Subordinated Pay-in-Kind Debentures due 1999 (the
"Class B Debentures") and Class C 13% Convertible Senior Subordinated Debentures
due September 30, 1999 (the "Class C Debentures" and, collectively with the
Class A Debentures and the Class B Debentures, 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 this Annual Report on Form 10-KSB.
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.
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
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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.
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, Mr. Meckstroth received options to acquire 740,000 shares of Common
Stock and Mr. Kruger received options to acquire 400,000 shares of Common Stock.
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 this Annual Report on Form
10-KSB 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 is attached hereto as an Exhibit 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
7
<PAGE>
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. Pursuant to the Management
Agreement, Signal has advised the Company that it has exercised its right to
return the New York Business to the Company. Under the Management Agreement, the
Company is required to reimburse Signal for certain expenses incurred by it in
connection with its operation of the New York Business. The Company and Signal
are discussing the status of the New York Business and any amounts that may be
payable to Signal in respect of its operation thereof. Copies of all the
agreements between the Company and Signal have been attached as Exhibits to this
Annual Report on Form 10-KSB and are incorporated herein by reference.
The Company indebtedness for borrowed money owing to North Fork Bank
matured on June 30, 2000. The Company is seeking an extension of such
indebtedness. See Item 6. Management's Discussion and Analysis or Plan of
Operation -- Financial Condition, Liquidity and Capital Resources.
POINT-TO-MULTIPOINT BROADBAND WIRELESS ACCESS SERVICES
Introduction
The proliferation of the Internet, local area networks ("LANs") and
home computers has resulted in greatly increased demand for increased bandwidth
to speed the flow of information. While technology has adapted to needs of a new
marketplace by providing faster processors, video conferencing, data sharing
and distributed offices, communications technology companies continue to
struggle to provide high-speed access to the desktop. The Company believes that
point-to-multipoint broadband wireless access services, often referred to as
"PMP" or "BWA" and which in the United States is available as a service called
local multipoint distribution service, offer the speed and capacity to provide a
high-speed, reliable connection from a workstation or LAN to existing fiber
optic backbones at a cost that is advantageous compared to existing
alternatives. Although most industry observers feel that LMDS will be used
primarily for high speed internet service and computer data, LMDS also has the
bandwidth and capacity to provide CATV, local telephony, and other broadband
access simultaneously to users in each cell.
LMDS Auctions
The Federal Communications Commission's ("FCC") initial LMDS auction
was completed on March 25, 1998. In that auction, the FCC offered two LMDS
licenses in each of 493 Basic Trading Areas ("BTAs") throughout the United
States, for a total of 986 licenses. In each BTA, the FCC auctioned a Block A
license consisting of 1,150 megahertz ("MHz") of spectrum and a Block B license
consisting of 150 MHz of spectrum. The Block A licenses can carry the equivalent
of 16,000 telephone calls and 200 video channels simultaneously.
Of the 986 available licenses, 864 were awarded to 104 different
bidders for bids totaling approximately $576 million. The remaining 122
licenses, mostly in small and/or rural markets, went unclaimed.
The FCC prohibited local telephone companies (known as "local exchange
carriers" or "LECs") and cable companies from owning Block A LMDS licenses in
their service areas for a three year period ending June 30, 2000, in order to
allow smaller companies to compete for the licenses and to prevent LECs or cable
operators from bidding for LMDS spectrum in order to impede new competition.
Thus, many large communications companies were excluded from the auction, but
may acquire such licenses in the future. The FCC has reserved the right to
extend the restriction on LECs and cable operators beyond June 30, 2000 if the
FCC determines that an extension is necessary to further competition.
The FCC commenced a second LMDS auction on April 27, 1999. In this
auction, the FCC offered for sale a total of 161 LMDS licenses, including the
122 licenses unclaimed in the initial auction and 39 additional licenses on
which the winning bidder in the initial auction defaulted on its payment
obligation. The second LMDS auction was completed on May 12, 1999, with all 161
licenses claimed.
LMDS Services
LMDS is a broadband fixed wireless system that uses millimeter wave
signals in the 28 GHz spectrum to transmit voice, video and data signals in
1,300 MHz of licensed spectrum. LMDS offers line-of-sight coverage over a 3
kilometer ("km") to 5 km range and is capable of providing data and telephony
service for up to 80,000 customers per sector. A 360-degree transmission
pattern, usually divided into four sectors of alternating polarization, allows
effective reuse of all spectrum resources.
The Company believes that LMDS technology can bridge the access gap
between multigiga-bit-per-second fiber optic
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backbones and LANs and personal computers. Currently, this gap is filled
primarily by dial-up modems, ISDN lines, or xDSL products, all of which are
relatively slow compared to LMDS. LMDS provides a flexible, economical and
reliable source of broadband communications capability in the "local loop." The
Company believes that this technology, which is scaleable and modular in nature,
can provide significant cost advantages over an incumbent provider's network.
Physically, a system consists of two primary functional layers:
transport and services. The transport layer comprises the customer premises
solid-state transceiver and the cell node or hub electronics, including
solid-state transmitters, receivers and other related elements located at the
transmit site. The services layer comprises a network interface unit ("NIU") at
the customer premises and the base electronics. The NIU provides
industry-standard interfaces to the customer, and the base electronics provide
control and transport functions from the hub site or central office/traffic
aggregation site.
The distances between cell sites for LMDS systems are typically 3 km to
5 km. The close spacing of LMDS sites is necessary to maintain the line-of-sight
transmissions in the presence of signal attenuation caused by rain, which can be
a significant factor at millimeter wave frequencies. Through the close proximity
of cell sites and the use of transmission techniques such as forward error
correction and dynamic power adaptation, LMDS systems can be engineered to
provide enhanced system reliability, with the availability and quality of
service required of modern communication networks.
Spectrum has also been allocated for PMP services in many other areas
of the world. In certain cases, the allocations provide for considerably more
bandwidth than in the United States. In Canada, for example, 3 GHz of bandwidth
in six bands has been allocated. Spectrum in two of these bands has been awarded
to service providers and systems are currently being built out. In general,
frequencies designated for broadband PMP service vary from country to country
with some overlap. The Company believes this wide variation will encourage PMP
system integrators to outsource the millimeter wave subsystems and modules to
suppliers, such as the Company.
Competition
There are a number of alternative technologies that are competing with
LMDS to fill the access gap. These technologies include asymmetric digital
subscriber line ("ADSL"), cable modems, fiber optic cable, other wireless
services and satellite systems. The latter two, while in competition with LMDS
service providers, represent significant opportunities for the Company in
that the Company's products can be used in these alternative terrestrial and
satellite systems.
ADSL: ADSL, the current xDSL standard, provides varying data rates,
both downstream and upstream, to customers using the existing telephone
company's twisted pair copper wires. It is estimated that 20 percent to 40
percent of U.S. access lines will be able to receive ADSL service with little or
no upgrade to existing infrastructure. ADSL solutions, however, are relatively
costly, and competing standards, a lack of interoperability between modems made
by different manufacturers, implementation costs and other factors have slowed
the implementation of ADSL. However, the introduction of lower cost application
specific integrated circuits may result in a reduction in the prices of second
and third generation ADSL modems.
CABLE MODEMS: Cable modems can provide relatively significant data
rates downstream. However, cost per home passed is still relatively expensive,
excluding the additional cost of a modem to the subscriber.
FIBER-TO-THE-CURB: The installation of fiber optic cable to the home or
curb is another alternative. However, installation is expensive and currently is
cost-effective only for heavy business users. The Company believes that full
installation of fiber in the U.S. local loop would take many years to complete.
OTHER WIRELESS SOLUTIONS: 38 GHz radio, or "cable in the sky," is
operating successfully in several major metropolitan areas. Lower frequency
wireless systems, such as multi-channel multi-point distribution services, and
several unlicensed services in the lower frequency microwave bands are being
considered for data services. Generally, these systems have considerably less
bandwidth available compared to the millimeter wave systems. However, given that
these systems operate at lower frequency, atmospheric attenuation is lower
enabling the signal to travel over longer distances. The Company feels that each
of the various wireless systems has advantages in specfic circumstances and that
service providers will ultimately begin to consolidate services using the most
appropriate system for a particular service offering. The Company believes that
broadband PMP services will play a pivotal role because of the adaptability
offered by the greater bandwidth.
In addition to currently available competing systems, the Company
believes that several satellite system operators plan to offer two-way data
services in the future. Expected data rates of the various satellite
constellations vary significantly for both downstream and upstream transmission,
as well as business plans for services to residential and corporate users.
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BASIC MICROWAVE TECHNOLOGY
Generally, microwaves are defined as radio waves with extremely high
frequencies of 1 GHz and above, and derive their name because the wavelength of
the actual radio waves is very small (see Table 1). Because microwaves have very
high frequencies, they are able to carry large amounts of information, making
them suitable for telecommunications applications. All radio waves, including
microwaves, carry information in proportion to their frequency. Simply stated,
microwave communications systems encode information and send it over the
airwaves to the desired destination where the information is decoded and used in
either audio, visual, or computerized form. Terrestrial microwave communications
systems transmit information, using analog or digitally modulated signals,
to a receiver and can either be point-to-point (linking one microwave site to
another) or, as is the case with LMDS, point-to-multipoint (linking one
microwave site to multiple microwave sites).
TABLE 1: SEGMENTS OF THE MICROWAVE FREQUENCY SPECTRUM
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
SEGMENT FREQUENCY WAVELENGTH
---------------------------- ---------------------------- ------------------------
<S> <C> <C>
Centimeter waves 1 Gigahertz 30 centimeters
3 Gigahertz 10 centimeters
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
30 Gigahertz 1 centimeter
Millimeter waves 30 Gigahertz 10 millimeters
300 Gigahertz 1 millimeter
Sub-millimeter waves 300 Gigahertz 1 millimeter
1,000 Gigahertz 0.3 millimeter
</TABLE>
Note: 1 Gigahertz (GHz) = 1,000 Megahertz (MHz) = 1 billion Hertz (Hz)
--------------------------------------------------------------------------------
Source: Reference Data For Radio Engineers, 4th Edition
Microwave propagation characteristics are not uniform. As microwaves
increase in frequency and become shorter in wavelength, they take on different
propagation characteristics (see Table 2). Lower frequency microwaves (such as 2
GHz and 6 GHz) have lower attenuation than higher frequency microwaves, meaning
that they can travel longer distances without as much resulting signal loss due
to atmospheric absorption and rain. Lower frequency microwaves are affected less
by rain, and are therefore better suited for long-haul applications that require
longer microwave path lengths. Useful path length depends on other factors as
well, such as antenna gain and power level.
TABLE 2: MICROWAVE FREQUENCY PROPAGATION
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FREQUENCY TYPICAL RANGE
<S> <C>
2 GHz 50 miles (80 km)
6 GHz 50 miles (80 km)
11 GHz 15 miles (24 km)
18 GHz 7 miles (11 km)
23 GHz 5 miles (8 km)
38 GHz 3 miles (5 km)
60 GHz 1 mile (1.6 km)
--------------------------------------------------------------------------------
</TABLE>
Source: Reference Data For Radio Engineers, 4th Edition
At higher microwave frequencies, practical path lengths begin to
decrease markedly. For example, as Table 2 indicates, at 18 GHz, path lengths
for narrow beam point-to-point links drop to about 7 miles (11 km), at 38 GHz
about 3 miles (5 km) and at 60 GHz about 1 mile (1.6 km). For PMP services which
uses broader beamwidth antennas at the hub, distances are shorter. This is
generally due to higher atmospheric absorption and fading caused by rain. At
these frequencies, line-of-sight propagation is needed to assure error-free
transmission. However, these higher frequency microwaves generally require
smaller antennas and less power to radiate and propagate the microwave signal.
Advancing microwave technology has also allowed microwave systems to utilize
frequencies over 30 GHz (millimeter-wave) for an increasing number of
communications applications. The shorter path lengths of higher frequency
microwaves can be a major advantage for some types of applications. Because
these higher frequencies can be "reused" many times within a given area with
less risk of interference, they can be used for applications that are quite
localized, such as building-to-building wireless computer links and automobile
radar and traffic signal control. In all of these instances, interference from
distant transmissions would cause significant problems.
Terrestrial microwave radio systems have large capacities. Capacity
refers to the data rate that can be transmitted at one time and for digital
microwave systems is usually measured in bits per second (bps or bit/s),
kilobits per second ("Kbps") or megabits per second ("Mbps"). Typically, a
digital microwave radio's capacity can range from 64 Kbps up to 155 Mbps.
Low-capacity to medium-capacity systems (up to 45 Mbps) are very common and are
used for a variety of applications, while high-capacity systems (140 Mbps to 155
Mbps) are primarily used by common carriers for long-haul, backbone network
applications. The capacity of a radio system is directly related to the
bandwidth of the system. Given that radio equipment operation is generally
limited to a bandwidth that is a certain percentage of its operating frequency,
the higher the operating frequency, the higher the percentage bandwidth and the
capacity of the overall system. The Company believes that as the demand for
higher data rates grows, it will drive the growth of millimeter wave equipment
for LMDS and other PMP systems.
KA-BAND SATELLITE COMMUNICATIONS
Introduction
Ka-band satellite systems refer to a new generation of communications
satellites that will occupy the 20 GHz to 40 GHz frequency range and use
on-board processing and switching to provide full two-way services to and from
small earth stations comparable in size to today's satellite television dish. To
do this efficiently they will use multiple pencil-like spot beams. A number of
proposals also include use of inter-satellite links. Apart from the conventional
geosynchronous orbit
10
<PAGE>
("GEO"), both low earth orbit ("LEO") and middle earth orbit ("MEO") systems
have been planned. Such Ka-band satellite systems have also been described in
other terms such as "multimedia satellites", "ATM satellites", "broadband
switched" and "broadband interactive satellites" and will offer the ability to
provide high-bandwidth access to places without high-bandwidth infrastructure.
The basic elements of a satellite communication system begin at an
earth station - an installation designed to transmit and receive signals from a
satellite in orbit around the earth. Earth stations send information in the form
of high-powered, high-frequency signals to satellites which receive and
retransmit the signals back to earth were they are received by other earth
stations in the coverage area of the satellite. The transmission system from the
earth station to the satellite is called the uplink and the system from the
satellite to the earth station is called the downlink.
These satellites will be used for everything that a terrestrial line
would be used for: desktop-to-desktop videoconferencing, Internet access,
electronic messaging, faxing, telemedicine, direct-to-home video, electronic
transaction processing, distance learning and a wide variety of other
applications.
Ka-Band Satellite Services
The technologies that enable Ka-band satellites to be used with
point-to-multipoint communications applications are spot beam technology,
on-board processing and switching, inter-satellite links and all-digital
transmission capability.
Spot beam technology enables a satellite to subdivide a single large
"footprint" (area of coverage) into many "subfootprints" (spot beams). The
satellite can then focus these subfootprints on particular areas. Subdivision
enables a high degree of frequency reuse. Rather than spreading the entire
frequency over the whole footprint, it spreads subsets of the frequency over
smaller footprints. Most importantly, it reuses these subsets in nonadjacent
footprints. This frequency reuse and multiple beams are a consequence of the use
of the millimeter wave frequency. The shorter the wavelength, the higher the
degree of focus a given size antenna can achieve.
On-board processing and switching allows the satellite to act
effectively as a sophisticated telephone switchboard/data switch. Most
satellites are "bent pipes" - a signal goes up and then comes back down
immediately. On-board processing and switching enables the caching of
information until one or more spot beams are aimed; this also enables
inter-satellite links and switching.
Inter-satellite links and switching allow the transfer of signals and
information between satellites. Thus, instead of having to "hop" a signal off
the ground to another satellite and then to its destination, these proposed
Ka-band satellites are capable of communication with each other, thereby
minimizing transmission time and maximizing efficiency.
However, all of this is only possible with all-digital transmissions.
Due to the high frequency of Ka-band satellite transmissions, they also face the
same line-of-sight and rain fade issues faced by other high frequency wireless
communications systems, such as LMDS. In order to circumvent this problem,
all-digital transmissions are necessary in order to incorporate similar error
correction codes to those that are used in terrestrial cellular systems to
overcome similar problems.
These technologies are capable of making Ka-band satellite systems
operate like public telephone networks with the facility to offer digital
services with a wide variety of bit rates. Users will be offered "bit rate on
demand" - that is to say they will only pay for the time that they use a link.
This contrasts with conventional satellites where users usually have had to pay
for permanent leases, which is only economic if there are massive amounts of
information to be moved, such as television channels and trunk telephony links.
The Ka-band concept offers the equivalent of a local loop telephone circuit
where the user pays for temporary lease of time or for each bit of information
moved.
The development of Ka-band services is intimately bound up with the
development of the international marketplace for information technology and the
convergence of computing, broadcasting and telecommunications technology. The
Ka-band satellite concept offers the prospect of quick and scaleable (therefore,
economically realistic) rollouts of advanced infrastructure and services.
The Market
The primary market for Ka-band satellite communications will be for the
provision of high-bandwidth access to places without a high-bandwidth
infrastructure. It is unlikely that a satellite system could compete with a
digital subscriber line ("DSL") to the home or fiber to the office - if those
services are available. However, in rural areas of the U.S. - or in low
population areas in any country - Ka-band satellites will be able provide an
effective alternative, enabling not only high-speed Internet browsing, but all
forms of high-speed networking and communication.
11
<PAGE>
Satellite Frequency Bands
The three most commonly used satellite frequency bands are the C-band,
Ku-Band and Ka-band. C-band and Ku-band are the two most common frequency
spectrums used by today's satellites.
C-BAND SATELLITE transmissions occupy the 4 GHz to 8 GHz frequency
range. The minimum size of an average C-band antenna is approximately 2 meters
to 3 meters in diameter.
KU-BAND SATELLITE transmissions occupy the 11 GHz to 17 GHz frequency
range. Ku-band antennas can be as small as 18 inches in diameter, as commonly
seen in the RCA DSS and Sony DSS systems.
KA-BAND SATELLITE transmissions occupy the 20 GHz to 40 GHz frequency
range. The typical size of a Ka-band antenna is approximately 12 inches in
diameter.
PRODUCTS
Point-To-Multipoint Systems
PMP systems are wireless networks capable of providing fixed broadband
multimedia services, including high speed data, voice and video. These systems
are based on broadband millimeter wave radios and employ a variety of
architectures, including asynchronous transfer mode, depending on the specific
application of the system. The Company believes that PMP systems, which include
LMDS and Ka-band satellite applications, are capable of providing data rates and
capacity comparable to fiber optic networks at significantly lower installation
and maintenance costs.
The layout of a typical PMP system is similar to traditional cellular
telephone infrastructures with cell transmitters located at the center of a cell
surrounded by subscribers. The primary difference of an LMDS system is that the
subscribers are fixed; therefore, they typically receive and transmit with a
single cell transceiver, instead of undergoing "handoffs" between multiple
transceivers as mobile subscribers do when they pass from one cell to another.
This simplifies architectural considerations and the network management of the
system. The frequencies utilized, coupled with an efficient network design,
enable service providers to become increasingly "granular" in sizing their
cells, which expands their ability to reuse frequencies.
The basic segments of a typical system used in a cell include a hub
transceiver with connections to the public switched telephone networks, Internet
and video sources, and subscriber equipment that differs in terms of the
services used. The service differentiation is typically determined by the amount
of bandwidth required by the customer. The large commercial or industrial
subscriber with substantial requirements for telephony, data and/or video and
the small office-home office user both have access to bandwidth that is
appropriately sized to meet their specific needs. The flexibility afforded by
the technology gives the service provider the opportunity to differentiate
services based on the individual requirements of the user, and thus provide both
the service and customer premise equipment at a cost appropriate to the
situation.
The Company builds a wide variety of radio equipment at many of the
frequencies designated for PMP service. The Company also supplies subsystems and
modules to several large, multinational telecommunications equipment companies
that manufacture and integrate complete systems. Additionally, the Company has
installed and has the capability to supply complete systems for niche
opportunities.
TWTAs
In addition to the Company's emerging PMP business, at June 30, 1999,
the Company was a leading manufacturer of TWTAs and other peripheral
transmission equipment. At June 30, 1999, the Company's TWTAs were used in
industrial, commercial and military applications and were sold either as
stand-alone units or as part of electromagnetic test systems used to measure the
electromagnetic compatibility ("EMC") and the electromagnetic susceptibility
("EMS") of various equipment, including satellite earth stations, wireless
communication systems, automobiles and other transportation equipment. These
test systems typically incorporated multiple TWTAs covering several frequency
bands.
TWTAs sold by the Company have been used in LMDS and Very Small
Aperture Terminal transmitting devices for satellite communications, EMC/EMS
testing, microwave studies and general high-power component testing. In
addition, at June 30, 1999, the Company sold complete radio-based specialty
systems built to customer specifications. These systems are typically designed
to meet specific end-user needs and range from automated EMC/EMS testing systems
to electronic ground-based or airborne electronic warfare equipment. These
systems typically incorporate one or more TWTAs and may also include software
developed by the Company or by third parties, as well as other ancillary
equipment. See "Description of Business -- Recent Events" in this Item 1 for
the discussion on developments concerning the management by Signal of the TWTAs
business that occurred subsequent to June 30, 1999.
12
<PAGE>
SALES, MARKETING AND DISTRIBUTION
At June 30, 1999, LogiMetrics marketed its products to system
integrators, service providers and industrial and governmental entities, both
domestically and internationally, through direct and indirect sales
organizations. At June 30, 1999, the Company had distribution agreements with 32
sales organizations. Additionally, at June 30, 1999, the Company sold its
products through a direct sales organization from its facilities in New York and
New Jersey. In addition, at such date, the Company utilized a network of
independent sales representatives located in North America, Asia and Europe. The
Company selected its international sales organizations based on their
understanding of the technology, product offerings and local markets and their
awareness of the business and cultural climate of the countries in which they
operate. Representative organizations provided primary coverage and were
typically assigned to a specific geographic or vertical industry segment,
depending upon their capabilities. Key strategic accounts were handled directly
through the Company's internal sales organization. In all cases, internal sales
management personnel were closely involved in coordinating the sales and
marketing efforts. The Company or its independent sales representatives
generally targeted sales prospects, although the Company also responded to
requests for proposals. Many of the Company's specialty systems were sold
through competitive bidding after receipt of a request for proposal.
At June 30, 1999, the Company's marketing strategy made extensive use
of its representative network to disseminate materials and information. The
Company also demonstrated its products at exhibitions and trade shows that focus
on the communications and instrumentation marketplaces.
CUSTOMERS
Point-To-Multipoint Systems
In June 1998, the Company began shipments of solid-state amplifier
modules for use in Teligent Inc.'s ("Teligent") point-to-multipoint system in
the United States. The Company believes that the FCC's auction of licenses to
provide LMDS services, coupled with the Company's relationship as a supplier of
equipment to Nortel Networks, Inc. for use in Teligent's system and other PMP
systems, and direct sales of hub radios to Alcatel and others will allow the
Company to broaden its point-to-multipoint customer base. The Company has also
sold solid-state Ka-band satellite modules and subsystems to a number of
governmental entities and Fortune 100 companies. Prior to June 1998, the
Company's customers for its PMP products consisted primarily of CellularVision
Technology & Telecommunications, L.P. ("CT&T") and several of its licensees,
which included CellularVision of New York, L.P. ("CVNY"), and entities operating
in Canada, Brazil, Thailand, the Philippines and Russia.
TWTAs
At June 30, 1999, the Company's TWTA customers included military and
governmental agencies, original equipment manufacturers, system integrators,
manufacturing organizations and testing laboratories. Both amplifier and EMC/EMS
customers primarily included Fortune 500 companies.
BACKLOG
The Company measures its backlog as orders for which contracts or
purchase orders have been signed but that have not yet been shipped and for
which revenues have not yet been recognized. The Company includes in its backlog
only those customer orders that are scheduled for delivery within the next 18
months. The Company typically ships its products within six months of receiving
an order. At June 30, 1999, the Company had a $1.2 million backlog of orders for
its equipment. Substantially all of such backlog was shipped during the fiscal
year ending June 30, 2000. Any failure by the Company to meet an agreed-upon
schedule could lead to the cancellation of the related order. All orders are
subject to cancellation or delay by the customer and, accordingly, there can be
no assurance that such backlog will eventually result in revenues.
MANUFACTURING AND ASSEMBLY
The Company designs, assembles, manufactures, tests, performs quality
assurance, packs and ships its PMP transmitting equipment and related modules at
its facility in Eatontown, New Jersey. At June 30, 1999, these same functions
for the Company's product line of TWTAs and other peripheral equipment were
performed at its facility in Bohemia, New York.
The Company purchases a majority of the components used in its PMP
products from third-party suppliers, and, at June 30, 1999, purchased all its
traveling wave tubes and certain other components from third parties. Where
appropriate, the Company purchases and utilizes common components to optimize
design and build cycles and enhance manufacturing flexibility. The Company
inspects all direct materials purchased for quality, groups the components into
kits by production order and then either releases these kits for internal
manufacturing or ships the kits to its subcontractors for assembly. It is the
Company's intention to utilize its internal manufacturing capabilities on all
products that it sells. This enables the
13
<PAGE>
Company to resolve design issues, fully characterize the manufacturing and test
processes and shorten design and build cycles. The Company uses secondary
manufacturing or assembly sources from time to time.
Although many of the basic components used in the Company's products,
such as circuit boards, resistors, capacitors and other similar components are
readily available from a number of sources, the Company typically purchases such
components from single suppliers to take advantage of available volume
discounts. However, to assure an adequate supply of wafers and traveling wave
tubes (at June 30, 1999), two critical components in many of the Company's
products, the Company established multiple supply sources. A limited number of
components and sub-assemblies are manufactured for the Company pursuant to the
Company's proprietary specifications, but the Company does not believe it is
dependent on any single source for these items. The Company does not have any
long-term supply arrangements.
The Company inspects and tests its products during the assembly and
manufacturing processes and tests finished products using internally developed
procedures. The Company typically works with its customers to develop its test
procedures to ensure that both the product attributes and methods used for
quantification are mutual. The Company's quality inspection and testing employs
"best practices" throughout the process to ensure the quality of the Company's
products. The Company utilizes customized testing equipment to facilitate its
assembly operations and quality programs, and believes that its practice of
conducting all testing and calibration internally has contributed to the
reliability of its products.
RESEARCH AND DEVELOPMENT
The Company has an ongoing development program to enhance its existing
products and to introduce new products. The Company invested $1.4 million and
$0.6 million in the fiscal years ended June 30, 1999 and 1998, respectively, in
development efforts. The Company expects to substantially increase its
investment in product development. The Company's development activities focus on
evolving its initial development and production efforts for PMP and related
satellite applications to subsystems that are increasingly integrated. The
Company's development efforts are currently focused on developing a wide variety
of solid state radios, subsystems and modules for PMP applications for the LMDS
and Ka-band satellite markets. At June 30, 1999, the Company's efforts also
included developing a new generation power supply for its TWTA product line.
COMPETITION
PMP Markets
In the emerging PMP market, the Company's competitors fall into two
general categories: (i) entities seeking to build subsystems for system
integrators; and (ii) module manufacturers interested in producing and selling
"high value-added" modules, such as solid state amplifiers and peripheral
equipment. Subsystem and module manufacturers with whom the Company competes
include Telaxis Communications Corporation and Quinstar Technology, Inc. The
Company expects that it may compete with certain major telecommunications
equipment manufacturers seeking to build subsystems for system integrators. A
number of the Company's competitors have significantly greater financial,
marketing and other resources than the Company. The Company does not believe
that the large system integrators currently intend to manufacture modules and
subsystems; however, these entities may pursue the small and medium-size LMDS
auction winners with respect to small system sales. Historically, the large
system integrators have not manufactured at the module level.
The Company believes that principal competitive factors in the PMP
markets include performance, delivery, price and reliability. The Company
believes that its wide range of experience with equipment currently available
and in operation for over five years in six countries gives it a distinct
competitive advantage in manufacturing both subsystems and "high value added"
modules.
TWTA Markets
At June 30, 1999, in the markets for TWTAs and other high-power
amplifiers, the Company competed with other manufacturers, including
Communications and Power Industries, Inc., Amplifier Research Corp. and Xicom
Technology, Inc., a number of which had significantly greater financial,
marketing and other resources than the Company. At June 30, 1999, the Company
believed that principal competitive factors in its respective markets include
performance, reliability, size, weight, delivery and price. The Company believed
that it competed effectively on all of these factors.
GOVERNMENT REGULATION
Growth in the Company's business is substantially dependent upon
government regulations implementing LMDS in the United States and other
countries. In March 1998, the FCC concluded an auction to award two licenses to
provide LMDS services in each of the 493 BTAs in the United States. Of the 986
available licenses, 864 were awarded in the auction. The remaining 122 licenses,
mostly in small and/or rural markets, went unclaimed. The FCC commenced a second
LMDS auction
14
<PAGE>
on April 27, 1999. In this auction, the FCC offered for sale a total of 161 LMDS
licenses, including the 122 licenses unclaimed in the initial auction and 39
additional licenses on which the winning bidder in the initial auction defaulted
on its payment obligation. The second LMDS auction was completed on May 12,
1999, with all 161 licenses claimed. Several foreign countries, including
Canada, the Philippines, Thailand and the Republic of Korea, have also reserved
spectrum for the provision of services substantially similar to LMDS, and the
Company expects other countries will do so in the near future. However, no
assurance can be given with respect to the existence or size of any market for
LMDS equipment that will develop as a result of any action by the FCC or any
other governmental authority. Nor can there be any assurance given as to when
any market will develop or that any developed market will be sustained.
The FCC's current LMDS rules specify that LMDS licensees may take up to
ten years from the grant of their authorization to provide "substantial service"
to subscribers. Accordingly, there can be no assurance that winning bidders in
the FCC auctions will purchase LMDS equipment, such as equipment manufactured by
the Company, promptly following completion of the auctions. In the event that
winning bidders and other participants in the LMDS market fail to purchase
equipment from the Company, such failure could have a material adverse effect on
the Company's business, financial condition and results of operations.
TRADEMARKS, PATENTS AND COPYRIGHTS
The Company relies on technological innovations, trade secrets and
expertise to develop and maintain its competitive position, and upon
confidentiality procedures, common law remedies and contractual provisions to
protect its proprietary rights. At this time, the Company does not own any
patents or trademarks relating to the technology and expertise involved in the
assembly, calibration and testing of its products. The basic technology used in
the design and manufacture of these products is not proprietary to the Company
and is available in the public domain. However, the Company believes that the
knowledge it has developed with respect to such products is proprietary and
cannot be readily duplicated by its competitors. Further, the Company believes
that certain of the subsystem architectures it has developed may benefit from
some form of intellectual property protection. There can be no assurance,
however, that patent protection is available for this technology or, if patents
do issue, that the claims allowed will be sufficiently broad to protect the
Company's proprietary rights or provide any competitive advantage. In addition,
there can be no assurance that subsequently issued patents or pending
applications, if any, will not be challenged or circumvented by competitors, or
that rights later granted will provide any competitive advantage to the Company.
Furthermore, it may be likely that the Company's competitors can obtain samples
of the Company's products and, through reverse engineering, obtain access to
proprietary knowledge regarding the Company's product designs.
The Company's success will depend in part on its ability to protect its
technology and preserve its trade secrets through common law and contractual
restrictions. There can be no assurance that measures taken to preserve trade
secrets, if any, trade secrecy or other measures taken by the Company will be
adequate to prevent misappropriation of its technology, or that competitors will
not be able to independently develop technologies having similar or better
functions or performance characteristics. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights to the same extent as
do the laws of the United States. There can be no assurance that the Company
will have adequate legal remedy to prevent or seek redress for future
misappropriation of the Company's technology.
EMPLOYEES
As of June 30, 1999, the Company had 79 full-time and 2 part-time
employees, of whom 50 were engaged in manufacturing, 15 were engaged in product
development activities and 16 were engaged in sales, service and general
administration. None of the Company's employees is represented by a union, and
the Company considers its relationships with its employees to be satisfactory.
RISK FACTORS
History of Losses; Cash Constraints
The Company sustained net losses of $5.4 million and $4.8 million for
the fiscal years ended June 30, 1999 and 1998, respectively, and had an
accumulated deficit of $17.3 million at June 30, 1999. In addition, the Company
used $1.8 million and $3.6 million of cash in operations during the fiscal years
ended June 30, 1999 and June 30, 1998, respectively, as a result of the
Company's net losses and the need for working capital. At June 30, 1999, the
Company had cash of $0.4 million. The Company's history of losses and its
failure to generate positive operating cash flow or to maintain other sources of
working capital have resulted in significant cash shortages from time to time.
There can be no assurance that the Company
15
<PAGE>
will ultimately be able to achieve or sustain profitable operations. While L-3
recently purchased Common Stock from the Company, if the Company is unable to
generate sufficient cash from its operations or other sources, the Company may
not be able to achieve its growth objectives.
Dependence on Emerging PMP Markets
The Company has only recently entered the PMP marketplace, which is
characterized by rapid technological change and significant and frequently
unanticipated shifts in customer preferences. Much of the future growth in the
Company's business is expected to come from the sale of new and existing
products to customers for use in the PMP market and the Company's future
profitability is substantially dependent on the Company's ability to market such
equipment successfully. There can be no assurance that the PMP market will grow
as the Company anticipates or that the Company will be able to capitalize on any
market development that does occur. Similarly, there can be no assurance that
any markets that do develop will be sustained.
Risks Related to Change in Business Strategy
The Company has shifted its business focus to PMP products. In
connection with this change in business strategy, the Company has sustained
losses as the Company has written off obsolete inventory, redirected its
marketing efforts and shifted management focus to these new markets. There can
be no assurance that the Company will be able to implement successfully its
strategic and operational objectives or that the attainment of those objectives
will result in the Company's achieving or sustaining a profitable level of
operations. The Company's failure to achieve its strategic and operational
objectives could have a material adverse effect on the Company's business,
financial condition and results of operations.
Dependence on and Effects of Government Regulation
Growth in the Company's business is substantially dependent upon
government regulations implementing LMDS and Ka-band satellite communications in
the United States and other countries. The FCC conducted an auction to award two
licenses to provide LMDS services in each of the 493 BTAs in the United States.
Of the 986 available licenses, 864 were awarded in the auction. The remaining
122 licenses, mostly in small and/or rural markets, went unclaimed. The FCC
commenced a second LMDS auction on April 27, 1999. In this auction, the FCC
offered for sale a total of 161 LMDS licenses, including the 122 licenses
unclaimed in the initial auction and 39 additional licenses on which the winning
bidder in the initial auction defaulted on its payment obligation. The second
LMDS auction was completed on May 12, 1999, with all 161 licenses claimed.
Several foreign countries, including Canada, the Philippines, Thailand and the
Republic of Korea, have also reserved spectrum for the provision of services
substantially similar to LMDS, and the Company expects other countries will do
so in the near future. However, no assurance can be given with respect to the
existence or size of any market for LMDS equipment that will develop as a result
of any action by the FCC or any other governmental authority. Nor can there be
any assurance given as to when any market will develop or that any developed
market will be sustained.
The FCC's current LMDS rules specify that LMDS licensees may take up to
ten years from the grant of their authorization to provide "substantial service"
to subscribers. Accordingly, there can be no assurance that winning bidders in
the FCC auction will purchase LMDS equipment, such as equipment manufactured by
the Company, promptly following completion of the auction. In the event that
winning bidders and other participants in the LMDS market fail to purchase
equipment from the Company, such failure could have a material adverse effect on
the Company's business, financial condition and results of operations.
Consequences of Technological Change
The markets in which the Company intends to compete are characterized
by rapid and significant technological change. The ability of the Company to
compete successfully in such markets will depend, in large part, on its ability
to develop or obtain advanced technologies, maintain a technically competent
staff, and to adapt to future technological changes and advances. There can be
no assurance that the Company will be able to keep pace with the technological
demands of the marketplace. In the event that the Company is unable to keep pace
with the technological demands of the marketplace, the Company's business,
results of operations, and financial condition would be materially and adversely
affected.
Dependence on New Product Development; Technological Advancement
The Company's success is dependent upon its ability to continue to
enhance its existing products and to develop and introduce in a timely manner
new products that incorporate technological advances, keep pace with evolving
industry standards and respond to changing customer requirements. If the Company
is unable to develop and introduce new products or enhancements in a timely
manner in response to changing market conditions or customer requirements, the
Company's business, financial condition and results of operations would be
materially and adversely affected.
16
<PAGE>
In addition, from time to time the Company or its present or potential
competitors may introduce new products, capabilities or technologies that have
the potential to replace, shorten the life spans of, or render obsolete the
Company's existing products. There can be no assurance that the Company will be
successful in convincing potential customers that its products are superior to
such other systems or products, that new products with comparable or greater
performance and lower prices will not be introduced, or that, if such products
are introduced, customers will not delay or cancel existing or future orders for
the Company's products. Announcements of currently planned or other new products
may cause customers to delay their purchasing decisions in anticipation of such
products. Such delays could have a material adverse effect on the Company's
business, financial condition and results of operations.
Dependence on Large Orders; Customer Concentrations
The Company's revenues have principally consisted, and the Company
believes its revenues in future periods may consist, of orders for equipment
from a limited number of customers. During fiscal 1999, approximately 31% of the
Company's consolidated revenues came from sales of modules to Nortel Wireless
Networks and during fiscal 1998, approximately 43% of the Company's consolidated
revenues came from sales of transmitters and related equipment to CT&T and its
licensees and affiliates. However, while the number and identity of the
Company's customers may vary from period to period, large orders from customers
will continue to account for a substantial portion of the Company's revenues for
the foreseeable future. There can be no assurance that the Company will obtain
such orders on a consistent basis. The Company's inability to obtain sufficient
large orders or to expand its customer base could have a material adverse effect
on the Company's business, financial condition and results of operations.
Dependence on Sales of Securities; Need for Additional Financing;
Liquidity Risks
Because of the Company's history of losses, the Company has not
generated sufficient cash to meet all of the Company's working capital
requirements. As a result, the Company has been dependent on private sales of
its debt and equity securities to finance its 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
public or private 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. Further, the
terms of any debt financing may contain restrictive covenants that significantly
restrict the Company's ability to take certain actions. If the Company is unable
to generate sufficient cash from its operations or other sources, the Company
may not be able to achieve its growth objectives.
As a result of the Company's history of losses and inability to
generate sufficient cash flow to satisfy its need for working capital, the
Company's business has been subjected to certain additional risks, including
supply and manufacturing disruptions, limitations on its research and
development activities, and the inability to exploit fully market opportunities.
While the Company has attempted to address its liquidity needs through, among
other things, the procurement of additional financing and the negotiation of
credit terms with its suppliers, the Company has continued to record losses and
has failed to generate sufficient cash to fund its cash flow needs.
Fluctuations in Operating Results
The Company's past operating results have been, and its future
operating results will be, subject to fluctuations resulting from a number of
factors, including: the timing and size of orders from, and shipments to, major
customers; budgeting and purchasing cycles of its customers; delays in product
shipments caused by customer requirements or the inability of customers to
accept shipments; the timing of enhancements to the Company's products or new
products introduced by the Company or its competitors; changes in pricing
policies by the Company, its competitors or suppliers, including possible
decreases in average selling prices of the Company's products in response to
competitive pressures; the proportion of revenues derived from competitive bid
processes; the mix between sales to domestic and international customers; market
acceptance of enhanced versions of the Company's products; the availability and
cost of key components; the availability of manufacturing capacity; and
fluctuations in general economic conditions. The Company also may choose to
reduce prices or to increase spending in response to competition or to pursue
new market opportunities, all of which may have a material adverse effect on the
Company's business, financial condition and results of operations. The Company's
revenues in any period are derived from sales of equipment and are generally
recognized upon shipment. As a result, variations in the number of orders or the
timing of shipments may cause the Company's quarterly and annual operating
results to vary substantially.
Competition
In the emerging PMP market, the Company's competitors fall into two
general categories: (i) larger entities seeking to build subsystems for system
integrators; and (ii) module manufacturers interested in producing and selling
"high value-added" modules, such as solid state amplifiers and peripheral
equipment. Subsystem and module manufacturers with whom
17
<PAGE>
the Company competes include Telaxis Communications Corporation and Quinstar
Technology, Inc. The Company expects that it may compete with certain major
telecommunications equipment manufacturers seeking to build subsystems for
system integrators. A number of the Company's competitors have significantly
greater financial, marketing and other resources than the Company. In the
markets for TWTAs and other high-power amplifiers, at June 30, 1999, the Company
competed with other manufacturers, including Communications and Power
Industries, Inc., Amplifier Research Corp. and Xicom Technology, Inc., a number
of which had significantly greater financial, marketing and other resources than
the Company. There can be no assurance that the Company will be able to compete
successfully with its competitors or be able to compete with new market entrants
or in new markets that may develop. The failure of the Company to successfully
compete in its markets would have a material adverse effect on the Company's
business, financial condition and results of operations.
Limited Proprietary Technology
The Company regards certain of its technology as proprietary and relies
on a combination of trade secret, copyright and trademark laws, license
agreements, nondisclosure and other contractual provisions, technical measures
and other methods to protect its proprietary rights in its products. There can
be no assurance that these protections will be adequate to protect its
proprietary rights or that the Company's competitors will not independently
develop products that are substantially equivalent or superior to the Company's
products. In addition, the laws of certain countries in which the Company's
products are or may be sold do not protect the Company's products and
intellectual property rights to the same extent as the laws of the United
States. Although the Company believes that its products, trademarks and other
proprietary rights do not infringe upon the proprietary rights of third parties,
there can be no assurance that third parties will not assert infringement claims
against the Company.
International Business; Risk of Change in Foreign Regulations;
Fluctuations in Exchange Rates
The Company markets its products to customers outside of the U.S. and,
accordingly, is exposed to the risks of international business operations,
including unexpected changes in foreign and domestic regulatory requirements,
possible foreign currency controls, uncertain ability to protect and utilize its
intellectual property in foreign jurisdictions, currency exchange rate
fluctuations or devaluations, tariffs or other barriers, difficulties in
obtaining and managing vendors and distributors and potentially negative tax
consequences. International sales are subject to certain inherent risks
including embargoes and other trade barriers, maintaining an international sales
distribution network and collecting accounts receivable. The Company is also
subject to risks associated with regulations relating to the import and export
of high technology products. The Company cannot predict whether quotas, duties,
taxes or other charges or restrictions upon the importation or exportation of
the Company's products in the future will be implemented by the U.S. or any
other country. There can be no assurance that any of these factors will not have
a material adverse effect on the Company's business, financial condition and
results of operations.
Although the Company's sales are all denominated in U.S. dollars,
fluctuations in currency exchange rates could cause the Company's products to
become relatively more expensive to customers in a particular country, leading
to fewer sales or reduced selling prices in that country which could adversely
affect the Company's profitability. As a result, the Company is exposed to a
certain degree of exchange rate risk. There can be no assurance that the Company
will not experience material losses in the future as a result of currency
fluctuations or that any such losses will not have a material adverse effect on
the Company's business, financial condition and results of operations.
Dependence on Independent Representatives
At June 30, 1999, the Company marketed and sold its products, in part,
through a network of independent sales representatives located in the U.S., Asia
and Europe. As a result, a substantial portion of the Company's revenues are
dependent upon the sales efforts of those representatives. There can be no
assurance that the Company's representatives, certain of which operate
relatively small businesses, have the financial stability to assure their
continuing presence in their markets.
Dependence on Limited Number of Suppliers
Certain key components used in the Company's products have been
designed by the Company to its specifications and are currently purchased from a
limited number of suppliers. The Company currently does not have long-term
agreements with these suppliers. Moreover, in view of the high cost of many of
these components, the Company does not maintain significant inventories of some
necessary components. If the Company's suppliers were to experience financial,
operational, production or quality assurance difficulties, the supply of
components to the Company would be reduced or interrupted. In the event that a
supplier were to cease operations, discontinue production of a component or
withhold supply for any reason, the Company might be unable to acquire certain
components from alternative sources, to find alternative third-party
manufacturers or sub-assemblers, or obtain sufficient quantities of certain
components, which could result in
18
<PAGE>
delays or interruptions in product shipments, and could have a material adverse
effect on the Company's business, financial condition and results of operations.
Retention of and Dependence on Key Personnel
The Company's success will depend, in part, on its ability to retain
the services of its key personnel, including management and technical employees,
who are and will continue to be instrumental in the development and management
of the Company's business. Although the Company has entered into employment
agreements with certain of its senior executives, the loss of the services of
one or more of the Company's key employees could have a material adverse effect
on the Company.
Warranty Claims
The Company generally provides a one-year parts and labor warranty on
its products. There can be no assurance that warranty claims will not increase
as the Company's sales increase, or as a result of other factors. Increased
warranty claims could have a material adverse effect on the Company's business,
financial condition and results of operations.
Potential Product Liability Insurance Limits
The Company currently maintains product liability insurance in the
amount of $3.0 million per occurrence. The Company's insurance policy covers
certain claims and the cost of legal fees involved in the defense of such
claims, which are either covered under the policy or alleged in such a manner so
as to invoke the insurer's duty to defend the Company. The Company believes
that, as it distributes more products into the marketplace and expands its
product lines, its exposure to potential product liability claims and litigation
may increase. While the Company periodically reviews all insurance coverage
limits, there can be no assurance that the Company's current level of insurance
will be sufficient to protect the business and assets of the Company from all
claims, nor can any assurance be given that the Company will be able to maintain
its existing coverage or obtain additional coverage at commercially reasonable
rates. Product liability losses in excess of insurance coverage could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Shares Eligible For Future Sale
As described above under "Recent Developments," pursuant to the terms
of the Registration Rights Agreement, L-3 has the right to require the Company
to register the shares of Common Stock acquired by L-3 for resale. In addition,
from and after the earlier to occur of (i) consummation of a Qualifying Public
Offering and (ii) March 31, 2001, the Existing Holders will have the right under
the Registration Rights Agreement to require the Company to register for resale
the shares of Common Stock held by them. The Company also is obligated to
register for resale additional shares of Common Stock issuable upon the exercise
or conversion of outstanding options, warrants and convertible securities.
Pursuant to Rule 144(k), a significant number of shares held by the Existing
Holders are eligible for resale without regard to the information, volume, and
manner of sale restrictions imposed by Rule 144. Further, a significant number
of shares of Common Stock will become available for resale under Rule 144 once
the Company becomes current in its Exchange Act reporting requirements. The
Company cannot predict the effect, if any, that sales of additional shares of
Common Stock or the availability of shares for future sale will have on the
market price of the Common Stock. Sales in the public market of substantial
amounts of Common Stock (including shares issued upon the exercise or conversion
of outstanding options, warrants and convertible securities), or the perception
that such sales might occur, could adversely affect prevailing market prices for
the Common Stock. Such sales also may make it more difficult for the Company to
sell equity securities or equity related securities in the future at a time and
price that the Company deems appropriate.
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ITEM 2. DESCRIPTION OF PROPERTY
At June 30, 1999, the Company did not own any real property and
conducted its operations at the following leased premises:
<TABLE>
<CAPTION>
Approximate
Square Annual Lease
Location Description of Facility Footage Lease Cost Expiration
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
50 Orville Drive (1) Corporate headquarters, manufacturing 14,000 $130,000 7/31/04
Bohemia, New York 11716 and assembly, sales, customer support
and research and development
20 Meridian Way Manufacturing 6,670 $ 55,100 3/31/00
Eatontown, New Jersey 07724
611 Industrial Way West (2) Manufacturing and assembly, 36,500 $206,000 12/31/03
Eatontown, New Jersey 07724 customer support, administration and
research and development
</TABLE>
----------------------------
(1) Following the Transaction, the Company relocated its headquarters
to a facility owned by L-3 in Hauppauge, New York.
(2) The Company began to occupy this space in January 1999 and expects to
complete the move of its PMP business from 20 Meridian Way to 611 Industrial Way
West during calendar 2000. The Company expects to continue to occupy the 20
Meridian Way location on a month-to-month basis until this relocation is
effected.
The Company believes that its existing facilities are in good condition
(ordinary wear and tear excepted) and will be sufficient to meet the Company's
needs for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is subject to routine claims incidental
to the operation of its business. In addition, as a result of the Company's lack
of cash resources, from time to time the Company has been subject to claims from
its creditors for non-payment of outstanding invoices.
In addition to such claims, in January 2000, SpeedUSNY.com, L.P.
("Speed USNY") filed an action against the Company in the New Jersey Superior
Court for Monmouth County, captioned Speed USNY.com, L.P. v. LogiMetrics, Inc.
(Docket No. L-537-00). In this action, Speed USNY, the successor to CVNY, (a
major customer of the Company during the fiscal year ended June 30, 1998),
asserts claims against the Company for fraudulent inducement, breach of contract
and breach of warranty in connection with the sale of certain equipment and
seeks money damages in excess of $5 million. The Company believes Speed USNY's
claims are without merit and that the Company has meritorious defenses and/or
counterclaims against Speed USNY. The Company intends to contest this action
vigorously. Although there is inherent uncertainty in the outcome of
litigation, the Company believes the ultimate outcome of this matter will not
have a material adverse effect on the Company's financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information:
At June 30, 1999, the Common Stock was traded in the over-the-counter
market under the symbol "LGMTA." There is no established trading market for any
of the Company's outstanding warrants. The following table sets forth, for the
periods indicated, the high and low bid quotations for the Common Stock as
reported on the OTC Bulletin Board. Such quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commissions and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
For the Quarter Ended High Low
--------------------- ---- ----
<S> <C> <C>
Fiscal 1998
September 30, 1997 $ 1.3750 $ .8000
December 31, 1997 1.0000 .3750
March 31, 1998 1.0000 .3125
June 30, 1998 .8750 .5625
Fiscal 1999
September 30, 1998 $.6900 $.2500
December 31, 1998 .5313 .2500
March 31, 1999 .4000 .2100
June 30, 1999 .7188 .2500
</TABLE>
Effective in January 2000, the OTC Bulletin Board ceased reporting
quotations on the Common Stock. Trading in the Common Stock is conducted in the
over-the-counter market in the so-called "pink sheets".
Holders:
On July 28, 2000, there were approximately 500 holders of record of the
Common Stock.
Dividends:
The Company has never declared or paid cash dividends on its Common
Stock. The Board of Directors currently intends to retain future earnings to
support its business and does not anticipate paying dividends in the foreseeable
future. Payment of future dividends, if any, will be at the discretion of the
Board of Directors after taking into account various factors, including the
Company's financial condition, results of operations, current and anticipated
cash needs and plans for expansion. The Company is prohibited from paying
dividends under the terms of its indebtedness for borrowed money.
Recent Sales of Unregistered Securities:
In connection with a Purchase Agreement dated July 29, 1997, on August
6, 1998, the Company issued $416,667 of its Class A Debentures (convertible into
Common Stock at a conversion price of $0.41666667 per share, subject to
adjustment in certain circumstances), Common Stock Purchase Warrants, Series G
(the "Series G Warrants") to purchase an aggregate of 1,000,000 shares of Common
Stock at an exercise price of $.50 per share subject to adjustment in certain
circumstances, Common Stock Purchase Warrants, Series H (the "Series H
Warrants") to purchase an aggregate of 166,666 shares of Common Stock at an
exercise price of $.60 per share subject to adjustment in certain circumstances
and Common Stock Purchase Warrants , Series I (the "Series I Warrants") to
purchase an aggregate of 83,333 shares of Common Stock at an exercise price of
$1.125 per share subject to adjustment in certain circumstances to private
investors. The Class A Debentures, the Series G Warrants, the Series H Warrants,
the Series I Warrants or the shares of Common Stock issuable upon the conversion
of the Class A Debentures and the exercise of the Series G Warrants, the Series
H Warrants or the Series I Warrants were not registered under the Securities Act
in reliance upon the exemption provided by Section 4(2) of the Securities Act.
There were no underwriters for this issuance. All the Class A Debentures were
converted in connection with and prior to the Closing of the transaction with
L-3 (certain of those holders party to the Stockholders Agreement converted
their Class A Debentures at an amended conversion price of $0.3451 per share).
All the Series G Warrants, the Series H Warrants and the Series I Warrants were
exchanged in an exchange offer by the Company in connection with and prior to
the Closing of the transaction with L-3. See "Description of Business--Recent
Events" in Item 1 of Part I of this Annual Report On Form 10-KSB.
Pursuant to the terms of a Stock Purchase Agreement, dated October 21,
1998 (the "Stock Purchase Agreement"), Mr. Charles S. Brand sold 2,000,000
shares of Common Stock to a group of institutional investors (the "Investors")
for a cash purchase price of $500,000, or $0.25 per share. The sale was made as
a condition to the transactions contemplated by a Purchase Agreement, dated
October 21, 1998 (the "Class C Debenture Purchase Agreement"), among the Company
and the purchasers party thereto (including the Investors). Pursuant to the
Class C Debenture Purchase Agreement, the Company issued and sold $2.7 million
in aggregate face amount of its Class C Debentures for an aggregate purchase
price of $2.0 million. As required by the Investors, Mr. Brand used the proceeds
of the sale of Common Stock pursuant to the Stock
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<PAGE>
Purchase Agreement to acquire $667,000 in face amount of the Class C Debentures
pursuant to the Class C Debenture Purchase Agreement for a cash purchase price
of $500,000. The Class C Debentures are non-callable and were convertible into
shares of Common Stock at a conversion price of $0.31 per share, subject to
adjustment in certain circumstances. The Class C Debentures or the shares of
Common Stock issuable upon the conversion of the Class C Debentures were not
registered under the Securities Act in reliance upon the exemption provided by
Section 4(2) of the Securities Act. There were no underwriters for this
issuance. All the Class C Debentures were converted in connection with and
prior to the Closing of the transaction with L-3.
At various times between July 1, 1998 and June 30, 1999, the Company
granted stock options to certain directors and employees covering an aggregate
of 420,000 shares of Common Stock. These grants were exempt from registration
pursuant to Securities Act Release No. 33-6188 (February 1, 1980). No
underwriter was involved in these grants. Each option grant was based on the
fair market value of the Common Stock on the date of grant, expire between one
to ten years and have an exercise price between $0.52 to $0.55 per share.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Unless otherwise indicated, all references to the Company in the
Management's Discussion and Analysis or Plan of Operation include mmTech and all
references to LogiMetrics mean the Company excluding mmTech.
FISCAL YEAR ENDED JUNE 30, 1999 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1998
Revenues. For the fiscal year ended June 30, 1999, net revenues
increased by $2.9 million, or 32.6%, to $11.8 million from $8.9 million for the
fiscal year ended June 30, 1998, primarily due to increases in sales of
traveling wave tube amplifiers, the Company's traditional products. As described
in Note 11 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 PMP equipment to CT&T and certain of its
affiliates.
Gross Profit. For the fiscal year ended June 30, 1999, gross profit
increased by $1.4 million to $3.1 million from $1.7 million for the fiscal year
ended June 30, 1998. As a percentage of net revenues, gross profit increased to
26.2% for the 1999 fiscal year from 19.7% for the 1998 fiscal year. The increase
in gross profit percentage was primarily attributable to a favorable shift in
product mix.
Selling, General and Administrative. For the fiscal year ended June 30,
1999, selling, general and administrative expenses increased by $0.2 million, or
2.6%, to $5.4 million from $5.2 million for the fiscal year ended June 30, 1998.
Selling, general and administrative expenses increased during fiscal 1999
primarily as a result of increased amortization costs associated with the
issuance of the Company's Class C Debentures, increased staffing expenses
resulting from increased orders for its PMP equipment and increased commissions
based on higher sales levels. The increase in these expenses was offset in part
by a decrease in professional fees.
Research and Development. For the fiscal year ended June 30, 1999,
research and development expenses increased by $0.8 million, or 135.1%, to $1.4
million from $0.6 million for the fiscal year ended June 30, 1998. The increase
was due primarily to a shift in personnel from production to design and
development activities. Research and development expenses for the fiscal year
ended June 30, 1999 related to both new product development as well as
enhancements of the Company's existing PMP product line.
Interest Expense. For the fiscal year ended June 30, 1999, interest
expense increased by $0.6 million, or 61.2%, to $1.7 million from $1.1 million
for the fiscal year ended June 30, 1998. Interest expense increased primarily as
a result of increased borrowings used to finance the Company's working capital
requirements.
Income Taxes. In the fiscal year ended June 30, 1999, the Company had
an income tax benefit of $19,000, compared to an income tax benefit of $0.4
million for the fiscal year ended June 30, 1998. LogiMetrics and mmTech
currently file separate federal and state income tax returns. The tax benefit
recorded in 1999 relates to pre-tax losses generated by mmTech.
Net Loss. For the reasons discussed above, the Company recorded a net
loss of $5.4 million for the fiscal year ended June 30, 1999, compared to a net
loss of $4.8 million for the fiscal year ended June 30, 1998.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company had cash of $0.4 million. As of such
date, the Company had total current assets of $3.5 million and total current
liabilities of $6.7 million.
Net cash used in operating activities was $1.8 million for the 1999
fiscal year, compared to $3.6 million in fiscal 1998. Net cash used in operating
activities during fiscal 1999 resulted primarily from the Company's net loss of
$5.4 million,
22
<PAGE>
offset in part by a decrease in inventories and an increase in accrued interest
expense. Net cash used in operating activities during fiscal 1998 resulted
primarily from the Company's net loss of $4.8 million, offset in part by
decreases in costs and estimated earnings in excess of billings on uncompleted
contracts.
Net cash used in investing activities was $0.5 million for the 1999
fiscal year and $0.1 million for the 1998 fiscal year. Net cash used in
investing activities in each fiscal year resulted from the purchase of equipment
to support the Company's operations.
Net cash provided by financing activities was $2.3 million for the 1999
fiscal year and $3.7 million for the 1998 fiscal year. Net cash provided by
financing activities during both fiscal 1999 and 1998 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, 1997 to June 30, 1999, the Company raised $6.4 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 from operations 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.
In addition to the sale of securities described above, in December
1997, the Company sold without recourse a note receivable to an unrelated party
in the face amount of $2.6 million for $2.4 million. The proceeds of the note
sale were used for working capital purposes.
At June 30, 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 exist. At June 30, 1999, the Company had $0.3
million 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
June 30, 1999, the Bank's prime rate was 8.0%. At June 30, 1999, the Company was
in violation of two covenants contained in the Revolver 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"). 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"). 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 forbear, until December 31,
1999, from declaring any event of default or from exercising any remedies under
the Revolver. Pursuant to the terms of the Consent Letter (as defined below),
the Revolver matured on June 30, 2000. The Company is seeking an extension of
the Revolver from the Bank. No assurance can be given that the Revolver will be
extended or as to the terms of any such extension.
In addition to the Revolver, at June 30, 1999, the Company had issued
and outstanding $4.7 million of its Class A Debentures, $2.0 million of its
Class B Debentures and $2.7 million of its Class C Debentures. The Class A
Debentures and the Class B Debentures contained financial covenants identical to
those contained in the Revolver. Accordingly, at June 30, 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 June 30, 1999, the holders of the
Class A Debentures and the Class B Debentures had waived compliance with the Net
Income Covenant and 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 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 June 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 "Description of Business -- Compliance With
Section 16(a) of the Exchange Act" of Item 1 of Part I of this Annual Report
on Form 10-KSB and "Market For Common Equity and Related Stockholder
Matters -- Recent Sales of Unregistered Securities" of Item 5 of Part II of
this Annual Report on Form 10-KSB, for a discussion on the conversion of such
indebtedness in connection with and prior to the closing of the Transaction
with L-3.
Subsequent to June 30, 1999, the Company continued to incur
indebtedness as necessary to fund its working capital needs. As described under
Item 1. Description of Business - Recent Developments, pursuant to the terms of
the Signal Letter of Intent, Signal loaned $2,000,000 and certain existing
investors in the Company also loaned the Company
23
<PAGE>
$1,000,000 for working capital and other purposes.
The Company and Signal also entered into the Management Agreement
pursuant to which, Signal, through its Keltec division, assumed the management
and operation of the Company's 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 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 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, (iii) to pay all past due amounts outstanding under the Revolver, 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 Revolver matured on June 30, 2000. The Company is seeking an
extension of the Revolver from the Bank. No assurance can be given that the
Revolver will be extended or as to the terms of any such extension.
As described under Item 1. Description of Business - Recent Events, the
Signal Letter of Intent was terminated in connection with the Transaction and
the Signal Loan and the Investor Loans were repaid with a portion of the
proceeds of the Transaction. Pursuant to the Management Agreement, Signal has
advised the Company that it has exercised its right to return the New York
Business to the Company. Under the Management Agreement, the Company is required
to reimburse Signal for certain expenses incurred by it in connection with its
operation of the New York Business. The Company and Signal are discussing the
status of the New York Business and any amounts that may be payable to Signal
in respect of its operation thereof.
In connection with and prior to the Closing, the holders of 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 Preferred Stock converted the Series A Preferred
Stock into an aggregate of 2,358,500 shares of Common Stock. 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. See
Item 1. Description of Business - Recent Events.
NET OPERATING LOSS CARRY FORWARD
LogiMetrics and mmTech currently file separate federal and state income
tax returns. As of June 30, 1999, LogiMetrics had net operating loss
carry-forwards of $11.2 million available to be used to offset future income.
Such loss carry-forwards expire between 2011 and 2014.
INFLATION
Inflation was not a material factor in either the sales or the
operating expenses of the Company during the periods presented herein.
RECENT PRONOUNCEMENTS OF THE FINANCIAL ACCOUNTING STANDARDS BOARD ("FASB")
In June 1997, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which requires disclosure of reportable operating segments
and became effective for financial statements issued for fiscal years beginning
after December 15, 1997. The Company adopted SFAS No. 131 during fiscal 1999.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which was subsequently amended by SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of SFAS No. 133." SFAS No 133 establishes accounting and
reporting standards for derivative instruments. SFAS No. 133, as amended by SFAS
No. 137, is effective for all fiscal quarters in fiscal years beginning after
June 15, 2000. The Company does not believe this accounting pronouncement will
have a material effect on the consolidated financial statements.
FORWARD-LOOKING STATEMENTS
24
<PAGE>
This Annual Report on Form 10-KSB 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
Annual Report, 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
Company's failure to generate sufficient cash flow from operations to meet its
working capital needs; 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 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. Certain of these factors are described under Item
1. Description of Business - Risk Factors. 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.
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 Annual Report on Form 10-KSB.
25
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 7. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report 27
Consolidated Balance Sheet - June 30, 1999 28
Consolidated Statements of Operations
Years ended June 30, 1999 and 1998 29
Consolidated Statements of Stockholders' Deficiency
Years ended June 30, 1999 and 1998 30
Consolidated Statements of Cash Flows
Years ended June 30, 1999 and 1998 32
Notes to Financial Statements 33
</TABLE>
26
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
LogiMetrics, Inc. and Subsidiaries
Bohemia, New York
We have audited the accompanying consolidated balance sheet of
LogiMetrics, Inc. and Subsidiaries (the "Company") as of June 30, 1999 and the
related consolidated statements of operations, stockholders' deficiency and cash
flows for each of the two years in the period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of the Company as of June 30,
1999, and the results of their operations and their cash flows for each of the
two years in the period ended June 30, 1999 in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Jericho, New York
May 4, 2000 (August 1, 2000 as to Note 16)
27
<PAGE>
LOGIMETRICS, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
<TABLE>
<S> <C>
ASSETS
Current Assets
Cash $ 400,760
Accounts receivable, less allowance
for doubtful accounts of $335,000 1,208,053
Inventories (Note 2) 1,852,991
Prepaid expenses and other current assets 26,659
--------------
Total current assets 3,488,463
Equipment and fixtures, net (Note 4) 1,327,700
Other assets 73,188
--------------
TOTAL ASSETS $ 4,889,351
==============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Accounts payable and other accrued expenses (Note 5) $ 4,374,515
Current portion of long-term debt (Note 6) 2,208,827
Advance payments 121,579
--------------
Total current liabilities 6,704,921
Long-term debt (Note 6) 10,356,995
--------------
TOTAL LIABILITIES 17,061,916
--------------
Commitments and contingencies (Note 10)
Stockholders' deficiency (Note 8)
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 4,104,014
Accumulated deficit (17,298,377)
Stock subscriptions receivable (Note 8) (189,450)
--------------
TOTAL STOCKHOLDERS' DEFICIENCY (12,172,565)
--------------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY $ 4,889,351
==============
</TABLE>
See Notes to Consolidated Financial Statements
28
<PAGE>
LOGIMETRICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------
1999 1998
------------------ -----------------
<S> <C> <C>
Revenues (Note 11) $ 11,760,878 $ 8,872,105
Costs and expenses:
Cost of revenues 8,685,578 7,122,954
Selling, general and
administrative expenses 5,385,586 5,248,583
Research and development 1,384,239 588,743
------------------ -----------------
Loss from operations (3,694,525) (4,088,175)
Interest expense 1,741,433 1,080,526
------------------ -----------------
Loss before income taxes (5,435,958) (5,168,701)
Income tax benefit (Note 7) (19,497) (396,867)
------------------ -----------------
Net loss (5,416,461) (4,771,834)
Preferred stock dividends 238,000 218,575
------------------ -----------------
Net loss attributable
to common stockholders $(5,654,461) $(4,990,409)
================== =================
Basic and diluted loss per common
share (Note 9) $ (0.20) $ (0.19)
================== =================
Basic and diluted weighted average number
of common shares (Note 9) 28,519,663 25,728,703
================== =================
</TABLE>
See Notes to Consolidated Financial Statements
29
<PAGE>
LOGIMETRICS, INC.
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
Common Additional Stock
Preferred Stock Paid-in Accumulated Subscriptions
Stock (Par Value) Capital Deficit Receivable Total
----- ---------- ------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1997 $990,564 $223,914 $2,376,447 ($7,110,082) ($162,950) ($3,682,107)
Grants of common stock 3,272 133,475 136,747
Exercise of options 2,000 18,000 20,000
Issuance of Series G Warrants,
Series H Warrants and Series I Warrants 685,832 685,832
Sale of common stock 12,900 699,612 712,512
Exercise of Series A Warrants 4,000 96,000 100,000
Exercise of Series D Warrants 24,056 24,056
Conversion of preferred stock
to common stock (66,039) 1,887 64,152 --
Conversion of subordinated debentures
to common stock 12,000 288,000 300,000
Receipt of stock
subscription payments 8,500 8,500
Stock subscriptions receivable (35,000) (35,000)
Preferred stock dividends (218,575) (218,575)
Net loss and comprehensive loss -- -- -- (4,771,834) -- (4,771,834)
-------- -------- ---------- ------------- ---------- -------------
Balance, June 30, 1998 $924,525 $284,029 $4,142,943 ($11,881,916) ($189,450) ($6,719,869)
Grants of common stock 2,094 101,338 103,432
Exercise of Series A Warrants 600 14,400 15,000
Issuance of Series G Warrants,
Series H Warrants and Series I 83,333 83,333
Preferred stock dividends (238,000) (238,000)
Net loss and comprehensive loss -- -- -- (5,416,461) -- (5,416,461)
-------- -------- ---------- ------------- ---------- -------------
Balance, June 30, 1999 $924,525 $286,723 $4,104,014 ($17,298,377) ($189,450) ($12,172,565)
======== ======== ========== ============= ========== =============
</TABLE>
See Notes to Consolidated Financial Statements
30
<PAGE>
LOGIMETRICS, INC.
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' DEFICIENCY (CONTINUED)
<TABLE>
<CAPTION>
Preferred
Stock Common Stock
----- ------------
<S> <C> <C>
Shares Outstanding
------------------
Balance at July 1, 1997 30 22,391,434
Grants of common stock -- 327,191
Exercise of options -- 200,000
Sale of common stock -- 1,290,000
Exercise of Series A Warrants -- 400,000
Exercise of Series D Warrants -- 2,405,670
Conversion of preferred stock to
common stock (2) 188,680
Conversion of subordinated debentures to
common stock -- 1,200,000
--- ----------
Balance at June 30, 1998 28 28,402,975
Grants of common stock -- 209,270
Exercise of Series A Warrants -- 60,000
--- ----------
Balance at June 30, 1999 28 28,672,245
=== ==========
</TABLE>
See Notes to Consolidated Financial Statements
31
<PAGE>
LOGIMETRICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------
1999 1998
----------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,416,461) $ (4,771,834)
------------- -------------
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 954,769 458,712
Allowance for doubtful accounts 214,398 472,568
Accrued interest expense 1,339,329 620,881
Stock compensation expense 42,873 182,201
Satisfaction of stock subscriptions receivable -- 675,000
Increase (decrease) in cash from:
Accounts receivable 239,663 21,782
Costs and estimated earnings
in excess of billings on
Uncompleted contracts -- 785,013
Inventories 1,005,917 490,128
Customer advances (495,626) (508,702)
Prepaid expenses and other
Current assets 16,761 22,026
Accounts payable and accrued expenses 321,340 (1,607,729)
Other assets/liabilities (56,333) (394,976)
Total adjustments 3,583,091 1,216,904
------------ ----------
Net cash used in operating activities (1,833,370) (3,554,930)
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and fixtures
(478,750) (103,151)
--------- ---------
Net cash used in investing activities
(478,750) (103,151)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt issuance 2,416,667 3,166,668
Proceeds from warrant issuance 83,333 650,832
Proceeds from sale of stock -- 37,511
Loans from stockholders 387,346 32,312
Repayment of loans from stockholders (152,678) (210,000)
Proceeds from exercise of options and warrants 15,000 144,056
Decrease in stock subscriptions receivable -- 8,500
Repayment of debt (469,038) (107,875)
Net cash provided by financing activities 2,280,630 3,722,004
------------ ----------
NET (DECREASE) INCREASE IN CASH (31,490) 63,923
CASH, beginning of period
432,250 368,327
------- -------
CASH, end of period $ 400,760 $ 432,250
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
32
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999 AND 1998
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
LogiMetrics, Inc. ("LogiMetrics") and its wholly owned subsidiaries,
mmTech, Inc. ("mmTech") and LogiMetrics FSC, Inc. (collectively, the "Company")
designs, manufactures and markets solid state, broadband wireless communications
infrastructure equipment, subsystems and modules used to provide
point-to-multipoint ("PMP") terrestrial and satellite-based distribution
services in frequency bands from 24 gigahertz ("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 Local
Multipoint Distribution Service ("LMDS"), local loop services and Ka-band
satellite communications.
In addition to the Company's broadband products, at June 30, 1999, the
Company designed, manufactured and marketed a wide range of high power
amplifiers, including traveling wave tube amplifiers ("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.
a. Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of LogiMetrics and its wholly owned subsidiaries, mmTech and LogiMetrics FSC,
Inc. All intercompany balances and transactions have been eliminated.
b. Revenue Recognition
Revenues related to standard manufactured products are recognized when
such products are shipped. The Company reports revenues from the sale of
customized manufactured products related to long-term contracts on the
percentage-of-completion method for financial reporting purposes. Revenues under
these contracts are recognized based on the proportion of contract costs
incurred to total estimated contract costs. Contract costs include all direct
material and labor costs and those indirect costs related to contract
performance, such as indirect labor, supplies, tools, repairs, and depreciation
costs. Selling, general, and administrative costs are charged to expense as
incurred. Provisions for estimated losses on uncompleted contracts are made in
the period in which such losses are determined. The net sales value of partially
completed contracts in excess of billings, if any, would be included in current
assets.
c. Inventories
Inventories are stated at the lower of cost (first-in, first-out
method) or market.
d. Equipment and Fixtures
Equipment and fixtures are recorded at cost and include equipment under
capital leases. Depreciation and amortization are provided by the straight-line
method over an estimated useful life of five or ten years and, in the case of
leasehold improvements, the remaining lease term.
e. Income Taxes
The Company accounts for income taxes pursuant to Statement of
Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes."
Under this method, deferred tax assets are determined based on differences
between the financial reporting and tax bases of assets and liabilities, and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
f. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
33
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
g. Long-Lived Assets
The Company reviews its long-lived assets, including equipment and
fixtures, whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable. To determine recoverability of its
long-lived assets, the Company evaluates the probability that future
undiscounted net cash flows will be less than the carrying amount of the related
assets. Impairment costs, if any, are measured by comparing the carrying amount
of the related assets to their fair value.
h. Fair Value of Financial Instruments
At June 30, 1999, the carrying amount of the Company's financial
instruments, including cash, accounts receivable, accounts payable, accrued
liabilities and notes payable, approximated fair value because of their
short-term maturities. Long-term borrowings bear interest at variable rates,
which approximate market.
i. Comprehensive Income
The Company's financial statements do not include a statement of
comprehensive income because the Company had no items of other comprehensive
income other than the net losses for all periods presented.
j. Recent Accounting Pronouncements
In June 1997, the Financial Accounting Shareholders Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
requires disclosure of reportable operating segments and became effective for
financial statements issued for fiscal years beginning after December 15, 1997.
The Company adopted SFAS No. 131 during fiscal 1999.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which was subsequently amended by SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of SFAS No. 133." SFAS No 133 establishes accounting and
reporting standards for derivative instruments. SFAS No. 133, as amended by SFAS
No. 137, is effective for all fiscal quarters in fiscal years beginning after
June 15, 2000. The Company does not believe this accounting pronouncement will
have a material effect on the consolidated financial statements.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial
Statements. This SAB must now be adopted by the quarter ending
September 30, 2000. The Company is currently evaluating the effect of SAB
No. 101 on its revenue recognition accounting policies and the related impact on
its results of operations and financial position.
j. Reclassifications
Certain amounts in the 1998 financial statements have been reclassified
to conform with 1999 presentation.
2. INVENTORIES
Inventories consist of the following at June 30, 1999:
<TABLE>
<S> <C>
Raw material and components........................$ 834,697
Work-in-progress................................... 1,018,294
----------
$1,852,991
==========
</TABLE>
3. SUPPLEMENTARY INFORMATION - STATEMENT OF CASH FLOWS
Cash paid during the period for:
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998
---- ----
<S> <C> <C>
Interest $247,658 $570,820
Income taxes $-0- $ -0-
</TABLE>
Non-cash investing and financing activities during the period for:
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998
---- ----
<S> <C> <C>
Machinery and equipment
purchased under capital lease $723,796 $-0-
Conversion of subordinated
indebtedness to common stock $-0- $300,000
Preferred stock dividends $238,000 $218,575
</TABLE>
34
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. EQUIPMENT AND FIXTURES
Equipment and fixtures, at cost, are summarized as follows at June
30, 1999:
<TABLE>
<S> <C>
Machinery and equipment ................................ $3,403,372
Furniture and fixtures ................................. 168,893
Leasehold improvements ................................. 337,786
----------
3,910,051
Less: accumulated depreciation and amortization......... (2,582,351)
----------
$1,327,700
==========
</TABLE>
Depreciation expense totaled $273,561 and $174,085 for the fiscal years
ended June 30, 1999 and 1998, respectively.
5. ACCOUNTS PAYABLE AND OTHER ACCRUED EXPENSES
Accounts payable and other accrued expenses consists of the following
at June 30, 1999:
<TABLE>
<S> <C>
Accounts payable.................................... $2,447,636
Preferred stock dividends payable................... 747,945
Accrued professional fees........................... 287,990
Other accrued expenses.............................. 890,944
----------
$4,374,515
==========
</TABLE>
35
<PAGE>
6. LONG-TERM DEBT
Long-term debt consists of the following at June 30, 1999:
<TABLE>
<S> <C>
Notes payable to Bank ................. $ 1,940,962
Class A Debentures .................... 4,724,473
Class B Debentures .................... 2,036,167
Less: Discount at issuance ..... (457,628)
Plus: Amortization of discount . 450,482
Class C Debentures .................... 2,666,667
Less: Discount at issuance ... (666,667)
Plus: Amortization of discount 489,340
Notes payable - officers (Note 14) .... 719,340
Capital lease obligations ............. 662,686
------------
12,565,822
Less: current portion ................ 2,208,827
------------
$ 10,356,995
============
</TABLE>
NORTH FORK BANK CREDIT FACILITIES
On December 31, 1998, the Restated and Amended Term Loan Note, dated as
of April 25, 1997, was repaid in accordance with its terms.
At June 30, 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 exist. At June 30, 1999, the Company had $0.3 million
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 June
30, 1999, the Bank's prime rate was 8.0%. At June 30, 1999, the Company was in
violation of two covenants contained in the Revolver 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"). 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"). Pursuant to the terms of the Replacement Note, the
amount available for borrowing under the Revolver was reduced to $1.94 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 forbear, until December 31, 1999, from declaring
any event of
36
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
default or from exercising any remedies under the Revolver. See Note 16.
SENIOR DEBENTURES
In connection with a Purchase Agreement dated July 29, 1997, on August
6, 1998, the Company issued $416,667 of its Class A 13% Convertible Senior
Subordinated Pay-in-Kind Debentures, due July 29, 1999 (the "Class A
Debentures"), Common Stock Purchase Warrants, Series G (the "Series G Warrants")
to purchase an aggregate of 1,000,000 shares of Common Stock, Common Stock
Purchase Warrants, Series H (the "Series H Warrants") to purchase an aggregate
of 166,666 shares of Common Stock and Common Stock Purchase Warrants, Series I
(the "Series I Warrants") to purchase an aggregate of 83,333 shares of the
Company's common stock, par value $0.01 per share (the "Common Stock") to
private investors.
Pursuant to the terms of a Stock Purchase Agreement, dated October 21,
1998 (the "Stock Purchase Agreement"), Mr. Charles S. Brand sold 2,000,000
shares of Common Stock to a group of institutional investors (the "Investors")
for a cash purchase price of $500,000, or $0.25 per share. The sale was made as
a condition to the transactions contemplated by a Purchase Agreement, dated
October 21, 1998 (the "Class C Debenture Purchase Agreement"), among the Company
and the purchasers party thereto (including the Investors). Pursuant to the
Class C Debenture Purchase Agreement, 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. As required by the Investors, Mr. Brand used the proceeds of the
sale of Common Stock pursuant to the Stock Purchase Agreement to acquire
$667,000 in face amount of the Class C Debentures pursuant to the Class C
Debenture Purchase Agreement for a cash purchase price of $500,000. The Class C
Debentures are non-callable and were convertible into shares of Common Stock at
a conversion price of $0.31 per share, subject to adjustment in certain
circumstances. All of the Class A Debentures and the Class C Debentures were
converted into shares of the Company's Common Stock subsequent to June 30, 1999.
See Note 16.
In addition to the Revolver, at June 30, 1999, the Company had issued
and outstanding $4.7 million of its Class A Debentures, $2.0 million of its
Amended and Restated 13% Senior Subordinated Convertible Pay-in-Kind Debentures
due July 29, 1999 (the "Class B Debentures"), and $2.7 million of its Class C
Debentures. The Class A Debentures and the Class B Debentures contained
financial covenants identical to those contained in the Revolver. Accordingly,
at June 30, 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
June 30, 1999, the holders of the Senior Subordinated Indebtedness had waived
compliance with the Net Income Covenant and 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 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 June 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. All of the Class B Debentures were
converted into shares of the Company's Common Stock subsequent to June 30, 1999.
See Note 16.
At June 30, 1999, principal payments due on all long-term debt consist of
the following:
<TABLE>
<S> <C>
Fiscal year ending June 30, 2000 $ 2,208,827
Fiscal year ending June 30, 2001 10,382,019
Fiscal year ending June 30, 2002 154,051
Fiscal year ending June 30, 2003 5,398
------------
$ 12,750,295
============
</TABLE>
See Note 16.
37
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES
The provision for (benefit from) income taxes consists of the
following:
<TABLE>
<CAPTION>
Year Ended June 30, 1999 Federal State Total
------- ----- -----
<S> <C> <C> <C>
Current $ -- $ (19,497) $ (19,497)
Deferred 1,651,000 381,000 2,032,000
Valuation allowance (1,651,000) (381,000) (2,032,000)
----------- ---------- ------------
$ -- $ (19,497) $ (19,497)
=========== ========== ============
<CAPTION>
Year Ended June 30, 1998 Federal State Total
------- ----- -----
<S> <C> <C> <C>
Current $ (304,064) $ (92,803) $ (396,867)
Deferred 1,184,000 273,000 1,457,000
Valuation allowance (1,184,000) (273,000) (1,457,000)
----------- ---------- ------------
$ (304,064) $ (92,803) $ (396,867)
=========== ========== ============
</TABLE>
The following is a summary of deferred tax assets as of June 30, 1999:
<TABLE>
<S> <C>
Current Deferred Taxes:
Inventory $ 642,726
Accounts receivable 150,624
Accrued expenses 160,101
-------
953,451
-------
Non-Current Deferred Taxes:
Depreciation 16,036
NOL carry-forward 4,638,593
---------
Total non-current 4,654,629
---------
Total deferred tax assets 5,608,080
Valuation allowance (5,608,080)
-----------
Net deferred tax assets $ --
===========
</TABLE>
The increase in the valuation allowance is primarily related to an increase
in net operating loss carry-forwards.
38
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A reconciliation of the federal statutory rate to the Company's
effective tax rate is as follows:
<TABLE>
<CAPTION>
% of Pretax Earnings
Years Ended June 30,
1999 1998
---- ----
<S> <C> <C>
Federal statutory tax rate (34.0)% (34.0)%
Permanent difference -- 4.0
Net operating loss not producing
a current tax benefit 34.0 20.3
Federal and state taxes
related to the earnings
of mmTech:
State -- --
Federal -- --
Other (0.4) 2.1
----- ------
Final provision (0.4)% (7.6)%
====== ======
</TABLE>
8. STOCKHOLDERS' DEFICIENCY
a. Common and Preferred Stock
At June 30, 1999, the Company had outstanding 28,672,245 shares of
Common Stock and 28 shares of its Series A 12% Cumulative Convertible Redeemable
Preferred Stock, stated value $50,000 per share (the "Preferred Stock"). In
addition, as of June 30, 1999, the Company had 46,067,947 shares of Common Stock
reserved for issuance pursuant to stock options, warrants and convertible
securities outstanding as of that date.
Dividends on the Preferred Stock are payable quarterly. With respect
to all the dividend payments due, the Board of Directors has elected to defer
payment. Pursuant to the terms of the Preferred Stock, the Company is required
to effect the registration for resale of, among other things, the shares of
Common Stock issuable upon the conversion of the Preferred Stock. The Company
has not yet effected such registration.
The accumulated amount of dividends due on the Preferred Stock as of
June 30, 1999 is $748,000. As a result of the Company's failure to effect the
registration rights of the holders of the Preferred Stock, the dividend rate on
the Preferred Stock increased to 17% per annum effective March 4, 1997. Until
the Company complies with its registration obligations, the dividend rate will
remain at 17% per annum. All of the Preferred Stock was converted in shares of
the Company's Common Stock subsequent to June 30, 1999. See Note 16.
b. Stock Options
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option plans. Accordingly, no compensation cost has
been recognized for the fixed portion of its stock option plans. Had
compensation cost for the Company's fixed stock options been determined based on
fair value at the grant dates consistent with Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation to Employees," the
Company's net loss attributable to common stockholders and net loss per share
would have increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998
---- ----
As Pro As Pro
Reported Forma Reported Forma
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Net loss attributable to
common stockholders $(5,654,461) $(5,976,478) $(4,990,409) $(5,226,588)
Net loss per share $ (0.20) $ (0.21) $ (0.19) $ (0.20)
</TABLE>
39
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions used for grants. The weighted average fair value of options granted
using the Black-Scholes option pricing model during fiscal 1999 and 1998 was
$0.33 and $0.27 per share, respectively.
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Dividend yield 0% 0%
Expected volatility 45.8% 46.1%
Risk-free interest rate 5.2% 5.6%
Expected option lives, in years 9.4 8.7
</TABLE>
In May 1997, the Company adopted the LogiMetrics, Inc. 1997 Stock
Compensation Program (the "Stock Compensation Program") which authorizes the
granting of incentive stock options, non-qualified supplementary options, stock
appreciation rights, performance shares and stock bonus awards to employees and
consultants of the Company (the "Employee Plans"). The Stock Compensation
Program also authorizes automatic option grants to directors who are not
otherwise employed by the Company (the "Independent Director Plan"). A total of
7,500,000 shares of Common Stock are reserved for issuance in connection with
the Stock Compensation Program, of which up to 7,350,000 shares may be issued
under the Employee Plans and up to 150,000 shares may be issued under the
Independent Director Plan. See Note 16.
In the event that an option or award granted under the Stock
Compensation Program expires, is terminated or forfeited or certain performance
objectives with respect thereto are not met prior to exercise or vesting, then
the number of shares of Common Stock covered thereby will again become eligible
for grant under the Stock Compensation Program.
A summary of the status of the Stock Compensation Program at June 30,
1999 and June 30, 1998 is presented below:
<TABLE>
<CAPTION>
1999 1998
---- ----
Weighted Weighted
Weighted Average Weighted Average
Shares Average Remaining Shares Average Remaining
Underlying Exercise Contractual Underlying Exercise Contractual
Options Price Life Options Price Life
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 2,766,800 $ 0.55 8 Years 2,798,800 $ 0.55 9 Years
Granted 420,000 $ 0.53 10 Years 320,000 0.56 10 Years
Exercised -- -- -- -- -- --
Forfeited 210,800 $ 0.55 8 Years 352,000 0.55 9 Years
--------- -------
Outstanding at end of year 2,976,000 $ 0.55 2,766,800 $ 0.55
========= =========
Exercisable at end of year 2,580,600 $ 0.55 8 Years 1,857,266 $ 0.55 9 Years
========= =========
</TABLE>
c. Warrants
As of June 30, 1999, the Company had outstanding several series of
warrants. The fair value of each warrant was estimated on the date of issuance
using the Black-Scholes option pricing model. The significant assumptions used
to value each warrant and the resulting fair value are set forth below.
The Common Stock Purchase Warrants, Series A (as amended, the "Series A
Warrants") were issued in July 1995 in connection with the issuance of the
Company's Amended and Restated 12% Convertible Subordinated Debentures (the
"Subordinated Debentures") and as of June 30, 1999 were exercisable for an
aggregate of 140,000 shares of Common Stock at an exercise price of $.25 per
share (subject to adjustment in certain circumstances). The Series A Warrants
expire on July 15, 2002. The significant assumptions used to value the Series A
Warrants included a risk free rate of 6.0%, an annualized variability of daily
return of 40.0% and a fair value of the Common Stock underlying the Series A
Warrants of $0.10. These assumptions resulted in an aggregate fair value of
$12,000 for the Series A Warrants.
40
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Common Stock Purchase Warrants, Series B (as amended, the "Series B
Warrants") were issued in July 1995 in connection with the issuance of the
Subordinated Debentures and as of June 30, 1999 were exercisable for an
aggregate of 1,500,000 shares of Common Stock at an exercise price of $.25 per
share (subject to adjustment in certain circumstances). The Series B Warrants
expire on July 15, 2002. The significant assumptions used to value the Series B
Warrants included a risk free rate of 6.0%, an annualized variability of daily
return of 40.0% and a fair value of the Common Stock underlying the Series B
Warrants of $0.10. These assumptions resulted in an aggregate fair value of
$30,000 for the Series B Warrants. The Company recorded compensation expense of
$30,000 upon the issuance of the Series B Warrants.
The Common Stock Purchase Warrants, Series C (the "Series C Warrants")
were issued in March 1996 in connection with the issuance of the Class B
Debentures and as of June 30, 1999 were exercisable for an aggregate of
2,542,380 shares of Common Stock at an exercise price of $.01 per share
(subject to adjustment in certain circumstances). The Series C Warrants expire
on March 7, 2003. The significant assumptions used to value the Series C
Warrants included a risk free rate of 6.0%, an annualized variability of daily
return of 40.0% and a fair value of the Common Stock underlying the Series C
Warrants of $0.20. These assumptions resulted in an aggregate fair value of
$457,628 for the Series C Warrants.
The Common Stock Purchase Warrants, Series D (the "Series D Warrants")
were issued in March 1996 in connection with the issuance of the Preferred
Stock and as of June 30, 1999 were exercisable for an aggregate of 141,510
shares of Common Stock at an exercise price of $.01 per share (subject to
adjustment in certain circumstances). The Series D Warrants expire on March 7,
2003. The significant assumptions used to value the Series D Warrants included
a risk free rate of 6.0%, an annualized variability of daily return of 40.0%
and a fair value of the Common Stock underlying the Series D Warrants of $0.20.
These assumptions resulted in an aggregate fair value of $509,436 for the
Series D Warrants.
The Common Stock Purchase Warrants, Series E (the "Series E Warrants")
were issued in March 1996 in connection with a consulting agreement and as of
June 30, 1999 were exercisable for an aggregate of 1,000,000 shares of Common
Stock at an exercise price of $.40 per share (subject to adjustment in certain
circumstances). The Series E Warrants expire on March 7, 2003. The significant
assumptions used to value the Series E Warrants included a risk free rate of
5.85%, an annualized variability of daily return of 40.0% and a fair value of
the Common Stock underlying the Series E Warrants of $0.10. These assumptions
resulted in an aggregate fair value of $10,000 for the Series E Warrants. The
Company recorded compensation expense of $10,000 upon the issuance of the Series
E Warrants.
The Common Stock Purchase Warrants, Series F (the "Series F Warrants")
were issued in May 1996 to certain directors, officers and other related
parties as compensation for services performed and as of June 30, 1999 were
exercisable for an aggregate of 667,040 shares of Common Stock at an exercise
price of $.50 per share (subject to adjustment in certain circumstances). The
Series F Warrants expire on March 7, 2003. The significant assumptions used to
value the Series F Warrants included a risk free rate of 5.85%, an annualized
variability of daily return of 40.0% and a fair value of the Common Stock
underlying the Series F Warrants of $0.10. These assumptions resulted in an
aggregate fair value of $6,670 for the Series F Warrants. The Company recorded
compensation expense of $6,670 upon the issuance of the Series F Warrants.
Series G Warrants were issued in July 1997, May 1998 and August 1998 in
connection with the issuance of Class A Debentures and as of June 30, 1999 were
exercisable for an aggregate of 9,350,000 shares of Common Stock at an exercise
price of $.50 per share (subject to adjustment in certain circumstances). The
Series G Warrants expire on July 29, 2004.
Series H Warrants were issued in July 1997, May 1998 and August 1998 in
connection with the issuance of Class A Debentures and as of June 30, 1999 were
exercisable for an aggregate of 1,433,333 shares of Common Stock at an exercise
price of $.60 per share (subject to adjustment in certain circumstances). The
Series H Warrants expire on July 29, 2004.
Series I Warrants were issued in July 1997, May 1998 and August 1998 in
connection with the issuance of Class A Debentures and as of June 30, 1999 were
exercisable for an aggregate of 716,667 shares of Common Stock at an exercise
price of $1.125 per share (subject to adjustment in certain circumstances). The
Series I Warrants expire on July 29, 2004.
The significant assumptions used to value the Series G Warrants,
Series H Warrants and the Series I Warrants included a risk free rate of 6.3%,
an annualized variability of daily return of 40.0% and a fair value of the
Common Stock underlying each series of warrants of $0.24. These assumptions
resulted in an aggregate fair value of $514,500 for the Series G Warrants,
$66,000 for the Series H Warrants and $22,000 for the Series I Warrants.
41
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Common Stock Purchase Warrants, Series J (as amended, the "Series J
Warrants") were issued in October 1998 in connection with the renewal and
extension of the Company's Revolver with the Bank and as of June 30, 1999 were
exercisable for an aggregate of 100,000 shares of Common Stock at an exercise
price of $0.55 per share (subject to adjustment in certain circumstances). The
Series J Warrants expired on July 1, 1999. The fair value of the Series J
Warrants was estimated using the Black-Scholes option pricing model. The
significant assumptions used to value the Series J Warrants included a risk free
rate of 6.48%, an annualized variability of daily return of 40.0% and a fair
value of the Common Stock underlying the Series J Warrants of $0.3125. These
assumptions resulted in an aggregate fair value of $0 for the Series J Warrants,
therefore, no compensation expense has been recorded. See Note 16.
The Series A Warrants, Series B Warrants, Series C Warrants, Series D
Warrants, Series E Warrants, Series F Warrants, Series G Warrants, Series H
Warrants and Series I Warrants are referred to herein collectively as the
"Warrants". Pursuant to the terms of the Warrants, the Company is required to
effect the registration for resale of, among other things, the shares of Common
Stock issuable upon the exercise of the Warrants. The Company has not yet
effected such registration. See Note 16.
d. Stock Subscriptions Receivable
As of June 30, 1999, two former officers of the Company owed the
Company $97,850 and $56,600 for Common Stock purchased from the Company. By
agreement, such amounts are payable at the rate of $.25 per common share as
shares are sold. Also, as of June 30, 1999, an entity controlled by a director
of the Company owed the Company $35,000 for Series G Warrants purchased from the
Company. By agreement, such amount is payable upon the occurrence of certain
events, including the disposition of the Series G Warrants.
e. Registration Rights
Under the terms of the Class A Debentures, the Class B Debentures, the
Preferred Stock, the Warrants, and the options granted to a former officer of
the Company, the Company was obligated to effect the respective holders'
registration rights within 90 days after issuance. Certain of these registration
rights were waived subsequent to June 30, 1999. See Note 16.
9. LOSS PER SHARE
The Company accounts for earnings per share in accordance with SFAS No.
128, "Earnings Per Share." SFAS No. 128 requires presentation of basic and
diluted earnings per share. Basic earnings per share excludes dilution and is
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted 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 years presented.
The loss per share calculations for 1999 and 1998 do not give effect to common
stock equivalents because they would have an antidilutive effect.
10. COMMITMENTS AND CONTINGENCIES
a. Lease Agreements
The Company is obligated under several non-cancelable leases for office
space and equipment rentals. Annual minimum lease payments under non-cancelable
operating leases as of June 30, 1999 were as follows:
<TABLE>
<S> <C>
Fiscal year ending June 30, 2000 $ 440,250
Fiscal year ending June 30, 2001 359,917
Fiscal year ending June 30, 2002 387,537
Fiscal year ending June 30, 2003 385,255
Fiscal year ending June 30, 2004 265,443
Thereafter 2,817
</TABLE>
Rent expense for the fiscal years ended June 30, 1999 and 1998
approximated $308,000 and $175,000, respectively.
42
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
b. Employment Agreements
In connection with the merger with mmTech in April 1997, the Company
entered into five-year employment agreements with two officers of the Company,
pursuant to which those officers were entitled to receive aggregate base
compensation of $350,000 during fiscal year 1999. The agreements provide for
periodic increases at the discretion of the Company's Board of Directors. The
agreements also provide for certain life insurance and severance benefits. These
agreements were superseded subsequent to June 30, 1999. See Note 16.
c. Legal Proceedings
From time to time, the Company is subject to routine claims incidental
to the operation of its business. In addition, as a result of the Company's
lack of cash resources, from time to time the Company has been subject to
claims from its creditors for non-payment of outstanding invoices.
In addition to such claims, in January 2000, SpeedUSNY.com, L.P.
("Speed USNY") filed an action against the Company in the New Jersey Superior
Court for Monmouth County, captioned Speed USNY.com, L.P. v. LogiMetrics, Inc.
(Docket No. L-537-00). In this action, Speed USNY, the successor to
CellularVision of New York, L.P. ("CVNY"), asserts claims against the Company
for fraudulent inducement, breach of contract and breach of warranty in
connection with the sale of certain equipment and seeks money damages in excess
of $5 million. The Company believes Speed USNY's claims are without merit and
that the Company has meritorious defenses and/or counterclaims against Speed
USNY. The Company intends to contest this action vigorously. Although there
is inherent uncertainty in the outcome of litigation, the Company believes the
ultimate outcome of this matter will not have a material adverse effect on the
Company's financial position or results of operations.
11. REVENUE RECOGNITION
In December 1997, 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 debt assumed by CVNY
related 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 had assumed ownership rights and risk of loss.
CVNY had committed to accept delivery of all such equipment by June 30, 1998. As
of December 28, 1997, CVNY had paid $49,500 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 Company recorded
approximately $3.0 million of sales during the fiscal quarter ended December 31,
1997 related to these transactions.
12. MAJOR CUSTOMERS
One customer accounted for 31% of revenues for the year ended June 30,
1999. Another customer accounted for 43% of revenues for the year ended June 30,
1998.
Sales to foreign customers by geographic location, as a percentage of
net revenues, were as follows:
<TABLE>
<CAPTION>
Years ended June 30, 1999 1998
-------------------- ---- ----
<S> <C> <C>
Asia 10% 7%
Canada 32 5
Europe 4 4
--- ---
46% 16%
=== ===
</TABLE>
43
<PAGE>
13. PENSION PLAN
The Company had two separate defined contribution plans covering
eligible full-time employees as of June 30, 1999. Participation in each plan is
voluntary and participants may contribute up to 15% of their compensation,
subject to federal limitations. The Company, at its discretion, can make
matching contributions to the LogiMetrics, Inc. Employees 401(k) Savings Plan
(the "LogiMetrics Plan"). For the years ended June 30, 1999 and 1998, the
Company has made no matching contribution to the LogiMetrics Plan. The mmTech,
Inc. 401(k) Plan and Trust (the "mmTech Plan") provides for a Company match of
5% of participant contributions, and a discretionary amount based on
profitability. Discretionary Company contributions are vested ratably over a
six-year period. Company contributions for the years ended June 30, 1999 and
1998 totaled $3,825 and $3,154, respectively, under the mmTech Plan. The
Company made no discretionary contributions to the mmTech Plan in the fiscal
years ended June 30, 1999 and 1998. The LogiMetrics Plan was terminated
subsequent to June 30, 1999.
44
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Dr. Frank A. Brand, a director of the Company, and the uncle of
Charles S. Brand, the Company's Chairman, had a consulting agreement with the
Company, which expired on April 30, 1999. The agreement called for quarterly
payments of 36,363 shares of Common Stock. During the fiscal years ended June
30, 1999 and 1998, Dr. Brand was entitled to receive 121,210 shares and 254,542
shares of Common Stock, respectively, with an aggregate value of $42,873 for
fiscal 1999 and $110,226 for fiscal 1998 for consulting services provided,
representing the fair market value of the shares on the dates of issuance. Such
amounts were recorded as compensation expense in the accompanying Consolidated
Statements of Operations for the fiscal years ended June 30, 1999 and 1998.
There was no reduction to the amounts recorded as compensation expense for lack
of market liquidity and other discount considerations.
Kenneth C. Thompson, a former director of the Company, had a consulting
agreement with the Company which expired effective November 15, 1999. In
connection with the consulting agreement, Mr. Thompson received 108,000 shares
of Common Stock, with an aggregate value of $54,000 for consulting services
provided, representing the fair market value of the shares on the date of
issuance. Such amount was recorded as compensation expense in the accompanying
Consolidated Statements of Operations for the fiscal year ended June 30, 1998.
In December 1998, Mr. Thompson loaned the Company $25,000 (the "Thompson Loan").
The Thompson Loan was unsecured, bore interest at a weighted average rate of
9.01% per annum and matured on December 31, 1999. On such date, the Thompson
Loan was repaid in full.
In July 1997, Norman M. Phipps, the Company's President and Chief
Operating Officer, purchased 850,000 shares of Common Stock from the Company
for $467,500, or $0.55 per share. In connection with the purchase, $8,500 was
paid in cash from the proceeds of a one-time bonus paid to Mr. Phipps and the
remainder was paid in the form of a non-recourse secured promissory note (the
"Phipps Note"). Also in July 1997, Michael L. Gaffney, an employee of the
Company purchased 400,000 shares of Common Stock from the Company for $220,000,
or $0.55 per share. In connection with Mr. Gaffney's purchase, $4,000 was paid
in cash from the proceeds of a one-time bonus paid to Mr. Gaffney and the
remainder was paid in the form of a non-recourse secured promissory note (the
"Gaffney Note"). The Phipps Note and the Gaffney Note do not bear interest,
have no fixed maturity date, and are each secured by a pledge of the shares of
Common Stock purchased by Messrs. Phipps and Gaffney, respectively. The sale of
the Class C Debentures as described in Note 7 above resulted in a "Change in
Control Event" under the terms of the Phipps Note and the Gaffney Note. The
Phipps Note and the Gaffney Note were each satisfied upon the occurrence of
such "Change in Control Event." The Company recorded a non-cash charge to
account for these transactions in the aggregate amount of $675,000 at
June 30, 1998.
MBF Capital Corporation ("MBF"), an entity controlled by Mark B.
Fisher, a director of the Company, paid $35,000 of the purchase price payable
by it in connection with its July 1997 purchase of the Series G Warrants in the
form of a non-recourse secured promissory note (the "MBF Note"). The MBF Note
matured on July 29, 2000 and bore interest (compounded annually) at a rate of
6.07% per annum, which was payable at maturity. The MBF Note was secured by a
pledge of the Series G Warrants purchased by MBF. The MBF Note became
immediately due and payable upon the closing of the Transaction described in
footnote 16 which constituted a Company Sale (as defined in the Stockholders
Agreement entered into in connection with the issuance of the Class A
Debentures).
Prior to its acquisition by the Company, Charles S. Brand, the
Company's Chairman and Chief Technical Officer, lent certain amounts to
mmTechon on an as-needed basis to fund a portion of mmTech's working capital
requirements. The maximum amount advanced by Mr. Brand was $714,551, and
$694,340 was outstanding at June 30, 1999. Pursuant to an agreement between
Mr. Brand and the Company, the Company has agreed to pay interest on the unpaid
advances (which previously had been interest-free) at a rate of seven percent
per annum.
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 net amounts of
$40,990 during the fiscal year ended June 30, 1999 and $268,883 during the
fiscal year ended June 30, 1998.
15. OPERATING SEGMENTS
In 1998, the Company adopted SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information," which changed the way the Company
reports information about its operating segments.
45
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company has 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 June 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.
Segment information for the years ended June 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 $ 3,854,919 $ 7,905,959 $ -- $ 11,760,878
Operating loss (1) 2,474,666 1,219,859 3,694,525
Interest expense 89,877 1,651,556 1,741,433
Total assets 2,205,251 5,169,232 (2,485,132) 4,889,351
Capital expenditures 456,896 21,854 478,750
Depreciation and amortization 168,921 785,848 954,769
1998
Net sales from external customers $ 3,533,418 $ 5,338,687 $ -- $ 8,872,105
Operating loss (1) 1,000,512 3,087,663 4,088,175
Interest expense 35,740 1,044,786 1,080,526
Total assets 1,287,422 4,579,630 (213,182) 5,653,870
Capital expenditures 60,071 43,080 103,151
Depreciation and amortization 80,416 378,296 458,712
</TABLE>
(1) Includes depreciation and amortization.
46
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. SUBSEQUENT EVENTS
As of September 1, 1999, the Company entered into the Replacement Note
and 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 forbear, until December 31,
1999, from declaring any event of default or from exercising any remedies under
the Revolver.
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 Revolver and senior to
the Class A Debentures, the Class B Debentures and 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 Common Stock owned by him.
From time to time subsequent to September 1, 1999, the Company has
received advances from certain of the Company's other investors. Such advances
have been made on the same terms and conditions as the Bridge Notes, but rank
senior to the Bridge Notes.
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.
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, par value $.01 per share
(the "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, on the first
business day following the 30th day after the Closing so that the L-3 Shares
will, following such adjustment, constitute 53.5% of the Company's outstanding
Common Stock (determined after giving effect to the dilutive effects 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
47
<PAGE>
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) until the
60th day 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.
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.
48
<PAGE>
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.
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.
In addition, pursuant to the terms of the Stockholders Agreement, until
compliance by the Company with the requirements of Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder, the Company agreed to operate its
business in the ordinary course and to refrain from taking certain actions
without L-3's consent.
The Stockholders Agreement terminates upon the earliest to occur of (i)
the consummation of a Qualifying Offering,
49
<PAGE>
(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.
<TABLE>
<S> <C>
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
</TABLE>
In connection with and prior to the Closing, the holders of the
Company's outstanding Class A 13% Senior Subordinated Convertible Pay-in-Kind
Debentures due July 29, 1999 (the "Class A Debentures"), Amended and Restated
Class B 13% Convertible Senior Subordinated Pay-in-Kind Debentures due 1999 (the
"Class B Debentures") and Class C 13% Convertible Senior Subordinated Debentures
due September 30, 1999 (the "Class C Debentures" and, collectively with the
Class A Debentures and the Class B Debentures, 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 this Annual Report on Form 10-KSB.
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.
50
<PAGE>
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 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, Mr. Meckstroth received options to acquire 740,000 shares of Common
Stock and Mr. Kruger received options to acquire 400,000 shares of Common Stock.
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.
51
<PAGE>
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. Pursuant to the Management
Agreement, Signal has advised the Company that it has exercised its right to
return the New York Business to the Company. Under the Management Agreement, the
Company is required to reimburse Signal for certain expenses incurred by it in
connection with its operation of the New York Business. The Company and Signal
are discussing the status of the New York Business and any amounts that may be
payable to Signal in respect of its operation thereof.
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 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, (iii) to pay all past due amounts outstanding under the Revolver, 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 Revolver matured on June 30, 2000. The Company is seeking an
extension of the Revolver from the Bank. No assurance can be given that the
Revolver will be extended or as to the terms of any such extension.
52
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
The following table sets forth certain information as of July 28, 2000
regarding the Company's executive officers and directors as of June 30, 1999.
<TABLE>
<CAPTION>
NAME AGE FORMER POSITION WITH THE COMPANY
---- --- --------------------------------
<S> <C> <C>
Charles S. Brand (1) 60 Chairman of the Board and Chief Technical Officer
Kenneth C. Thompson (2) 53 Chief Executive Officer and Director
Norman M. Phipps (1) 40 President, Chief Operating Officer, Interim Chief
Financial Officer and Director
James R. Meckstroth 50 Senior Vice President - Operations
Erik S. Kruger 39 Vice President - Finance and Administration and Secretary
Frank A. Brand (3)(4) 76 Director
Jean-Francois Carreras (3)(4) 50 Director
Mark B. Fisher (5) 41 Director
Francisco A. Garcia (6) 48 Director
</TABLE>
(1) Member of Executive Committee during the fiscal year ended June 30,
1999. Mr. Brand resigned as a director in July, 2000.
(2) Mr. Thompson resigned as the Company's Chief Executive Officer and as a
director in November 1999.
(3) Member of Audit Committee during the fiscal year ended June 30, 1999.
Dr. Brand resigned as a director in July, 2000.
(4) Member of Compensation Committee during the fiscal year ended June 30,
1999.
(5) Mr. Fisher resigned as a director in July, 2000.
(6) Mr. Garcia resigned as a director of the Company in November 1999.
CHARLES S. BRAND. Prior to the consummation of the Transaction,
Mr. Brand served as the Company's Chairman of the Board and Chief Technical
Officer since March 1998. From April 1997 to March 1998, Mr. Brand was the
Chairman and Chief Executive Officer of the Company. From February 1994 to
April 1997, Mr. Brand was the President of mmTech (which subsequently became
a wholly owned subsidiary of the Company). Prior to founding mmTech, Mr. Brand
was the founder and President of Trontech, Inc., a manufacturer of solid
state amplifiers used in military applications and wireless equipment for the
cellular and PCS markets, which was subsequently sold in December 1986 to
Dynatech Corporation. Mr. Brand has been involved in the development of LMDS
systems for over ten years. Mr. Brand is the nephew of Dr. Frank A. Brand.
KENNETH C. THOMPSON. From March 1998 until November 1999, Mr. Thompson
was the Chief Executive Officer of the Company. From April 1997 until March
1998, Mr. Thompson was a private investor and consultant. Prior to April 1997,
Mr. Thompson held several senior management positions with Glenayre Electronics,
Inc., including Executive Vice President - Sales and Marketing (from February
1993 to February 1994), President of the Voice and Data Technologies Group (from
February 1994 to September 1996), and most recently, from September 1996 to
April 1997, Executive Vice President - Business Operations. In his last position
with Glenayre, Mr. Thompson was a member of a three-person management committee
responsible for the day-to-day operations of Glenayre.
NORMAN M. PHIPPS. Prior to the consummation of the Transaction, Mr.
Phipps served as the President and Chief Operating Officer of the Company since
April 1997, and also as interim Chief Financial Officer since March 1998. From
May 1996 to April 1997, Mr. Phipps served as Chairman of the Board and Acting
President of the Company. Mr. Phipps continues to serve as a director of the
Company following the consummation of the Transaction and is one of the three
Existing Holder Designees. Mr. Phipps has served as a principal of two private
investment firms, Phipps, Teman & Company, L.L.C. (from January 1994 to December
1997) and CP Capital Partners (from January 1991 to December 1993). Mr. Phipps
is a director of Avery Communications, Inc., a company primarily involved in the
provision of software and services addressing the customer relationship and
billing/operational support system needs of telecommunications and Internet
service providers.
JAMES R. MECKSTROTH. Mr. Meckstroth has served as the Company's Senior
Vice President -- Operations since December 1998. Mr. Meckstroth acted as a
consultant to the Company from July 1998 to December 1998. From August 1997 to
July 1998, Mr. Meckstroth served as Senior Vice President -- Global Operations
for Glenayre Electronics, Inc. From July 1994 to August 1997, Mr. Meckstroth was
Vice President of Engineering for Glenayre's Wireless Messaging Group. From July
1992 to July 1994, Mr. Meckstroth was the Director of Operations/Research and
Development at PPG Biomedical Systems
53
<PAGE>
Division.
ERIK S. KRUGER. Mr. Kruger has served as Vice President -- Finance and
Administration of the Company since February 1998 and continues to serve in such
capacity following the consummation of the Transaction. Mr. Kruger served as
Secretary of the Company from February 1998 until the consummation of the
Transaction. From March 1996 to January 1998, Mr. Kruger was the Chief Financial
Officer of CellularVision of New York, L.P. From September 1990 to February
1996, Mr. Kruger was employed by Coopers & Lybrand L.L.P., specializing in the
telecommunications and entertainment industries. Mr. Kruger is a Certified
Public Accountant.
DR. FRANK A. BRAND. Dr. Brand has been a director of the Company since
April 1997. Since 1991, Dr. Brand has been a private investor and consultant.
Prior to his retirement in 1991, Dr. Brand held several senior management
positions with M/A-COM, Inc., a major manufacturer of telecommunications
products and systems, including Chief Technical Officer, Chief Operating Officer
and Acting Chief Executive Officer. Dr. Brand is a Life-Fellow of the Institute
of Electrical and Electronic Engineers, a Fellow of Polytechnic University and a
member of the Engineering Dean's Council at UCLA.
JEAN-FRANCOIS CARRERAS. Mr. Carreras has been a director of the Company
since April 1997, and continues to serve in such capacity following the
consummation of the Transaction and is one of the three Existing Holder
Designees. Since October 1994, Mr. Carreras has been a partner in the Paris law
firm of Sokolow, Dunaud, Mercadier and Carreras. From October 1994 to July 1995,
Mr. Carreras was also a partner in the law firm of Arent, Fox, Kintner, Plotkin
& Kahn. Prior thereto, until October 1994, Mr. Carreras was a partner in the law
firm of Coudert Brothers. Mr. Carreras is a French citizen.
MARK B. FISHER. Mr. Fisher is the President of MBF Capital Corporation,
Inc. ("MBF"), a firm that invests in and advises technology driven companies.
From 1990 to 1996, Mr. Fisher served as a Principal of Alex. Brown & Sons, Inc.
FRANCISCO A. GARCIA. Mr. Garcia was a director of the Company from July
1997 to November 1999. Since January 2000, Mr. Garcia has been associated with
the investment advisor to Easton Hunt Capital Partners, an investment fund. From
January 1999 to December 1999, Mr. Garcia was the Director of Corporate Finance
for Cramer Rosenthal McGlynn, LLC, an investment management firm. From 1987 to
December 1997, Mr. Garcia served as Chairman of the Board of Neptune Management
Company, Inc., a manager of funds and accounts investing in distressed
securities, obligations and consumer receivables. From 1991 until December 1998,
Mr. Garcia served as President of Nethuns, Inc., a firm engaged in financial
advisory, consumer finance and investment activities. Mr. Garcia is a Spanish
citizen.
As indicated above, effective as of the closing of the Transaction, 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. At the Effective
Time, the Board was further reconstituted to consist of seven directors, and
Frank C. Lanza, Robert V. LaPenta, Christopher C. Cambria, and John S. Mega were
appointed as new directors (subject to their consent and acceptance) to fill the
vacancies created by the increase in the number of directors (the "L-3
Designees"). After the Effective Time, Norman M. Phipps, Jean-Francois Carreras
and Jay B. Langner continued as directors. Certain information regarding Messrs.
Langner, Lanza, LaPenta, Cambria and Mega is set forth below. Such information
is as of July 28, 2000. Mr. Langner's business address is P.O. Box 355, Great
Neck, New York 11022 and the business address of each of the L-3 Designees is
c/o L-3 Communications Corporation, 600 Third Avenue, New York, NY 10016.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
MATERIAL POSITIONS HELD DURING
NAME AGE THE PAST FIVE YEARS
---- --- -------------------
<S> <C> <C>
Jay B. Langner...................... 70 Mr. Langner has been the Honorary Chairman of Hudson
General Corporation (an aviation services company) since
April 1999. From 1961 to 1999, Mr. Langner served in
various capacities for Hudson General, including Chairman
and Chief Executive Officer. Mr. Langner has been the
Chairman of Montefiore Medical Center since 1986 and is a
director of the Gregorian University Foundation and a
trustee of the Orpheus Chamber Orchestra. Mr. Langner also
serves as a director of Petroquest Energy, Inc.
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
WITH L-3/ MATERIAL POSITIONS HELD DURING
NAME AGE THE PAST FIVE YEARS
---- --- -------------------
<S> <C> <C>
Frank C. Lanza...................... 68 Chairman and Chief Executive Officer and Director of
L-3 since April 1997. From April 1996, when Loral was
acquired by Lockheed Martin, until April 1997, Mr. Lanza
was Executive Vice President of Lockheed Martin, a member
of Lockheed Martin's Executive Council and Board of
Directors and President and Chief Operating Officer of
Lockheed Martin's command, control, communications and
intelligence ("C3I") and Systems Integration Sector, which
comprised many of the businesses Lockheed Martin acquired
from Loral. Prior to the April 1996 acquisition of Loral,
Mr. Lanza was President and Chief Operating Officer of
Loral, a position he held since 1981.
Robert V. LaPenta................... 54 President and Chief Financial Officer and Director of
L-3 since April 1997. From April 1996 until April 1997,
Mr. LaPenta was a Vice President of Lockheed Martin and
was Vice President and Chief Financial Officer of Lockheed
Martin's C3I and Systems Integration Sector. Prior to the
April 1996 acquisition of Loral, he was Loral's Senior
Vice President and Controller, a position he held since
1981. Mr. LaPenta is on the Board of Trustees of Iona
College and The American College of Greece.
Christopher C. Cambria.............. 42 Vice President and Secretary and General Counsel of L-3
since June 1997. From 1994 until joining L-3, Mr. Cambria
was an associate with Fried, Frank, Harris, Shriver &
Jacobson. From 1986 until 1993, he was an associate with
Cravath, Swaine & Moore.
John S. Mega........................ 47 Vice President of L-3 and President of L-3's Microwave
Group since April 1997. From April 1996, when Loral was
acquired by Lockheed Martin, until April 1997, Mr. Mega
was a Vice President and Chief Financial Officer of
Lockheed Martin's Tactical Defense Systems business. Prior
to the April 1996 acquisition of Loral, Mr. Mega was a
Corporate Group Controller for Loral.
</TABLE>
Effective upon the closing of the Transaction, the following persons
were elected to hold the offices set forth after their names.
<TABLE>
<S> <C>
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
</TABLE>
Each director serves until the next annual meeting of stockholders or
until his successor is duly elected and qualified.
Pursuant to the terms of the Stockholders Agreement, from and after the
Effective Time, the number of directors comprising the Board was set at seven.
The Existing Holders have the right to designate three directors so long as they
continue beneficially to 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 they 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. 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). The
Existing Holders have the right, in their sole discretion, to remove any of
the directors appointed by them, with or without cause. L-3 has the right to
remove any of the directors appointed by it. The Existing Holders or L-3, as
the case may be, will vote their shares to effect such removal at a meeting of
the stockholders or pursuant to a written consent.
The Board directs the management of the business and affairs of the
Company, as provided by Delaware law, and conducts its business through meetings
of the Board and three standing committees: the Audit Committee, Compensation
Committee, and Executive Committee. In addition, from time to time, special
committees may be established under the direction of the Board when necessary to
address specific issues. The Company does not have a separate, standing
nominating committee; however, the Board performs the functions of such
committee.
The Board held three meetings during fiscal year 1999. In addition to
its regularly scheduled meetings, the Board took action on eight occasions by
unanimous written consent. Each director attended 75% or more of the aggregate
of (i)
55
<PAGE>
meetings of the Board held during the period for which he served as a director
and (ii) meetings of all committees held during the period for which he served
on those committees.
The three standing committees of the Board are described below:
Audit Committee. During the fiscal year ended June 30, 1999, the Audit
Committee consisted of Dr. Frank Brand, Mr. Jean-Francois Carreras and Francisco
A. Garcia. Mr. Garcia resigned as a director in November 1999. The Audit
Committee makes recommendations to the Board of Directors with respect to the
independent auditors of the Company's financial statements, reviews the scope of
the annual audit and meets periodically with the Company's independent auditors
to review their findings and recommendations, reviews quarterly financial
information and earnings releases prior to public dissemination, approves major
accounting policies and changes thereto and periodically reviews the Company's
principal internal accounting controls to assure that the Company maintains an
appropriate system of financial control. The Audit Committee did not meet during
fiscal 1999.
Compensation Committee. During the fiscal year ended June 30, 1999, the
Compensation Committee consisted of Dr. Frank Brand and Messrs. Carreras and
Garcia. The Compensation Committee periodically reviews and determines the
amount and form of compensation and benefits payable to the Company's principal
executive officers and certain other management personnel. The Compensation
Committee also administers certain of the Company's employee benefit plans. The
Compensation Committee did not meet during fiscal 1999.
Executive Committee. During the fiscal year ended June 30, 1999, the
Executive Committee consisted of Mr. Charles Brand and Mr. Phipps. The Executive
Committee exercises such authority as is delegated to it from time to time by
the full Board. The Executive Committee did not meet during fiscal 1999.
The Company anticipates that the composition of the three standing
committees of the Board will change to include one or more of the L-3 Designees.
The Company currently does not regularly compensate directors for their
service to the Company. However, directors are reimbursed for out-of-pocket
expenses incurred in their capacity as directors of the Company.
Prior to their resignations, Dr. Brand and Mr. Fisher provided certain
consulting services to the Company. See "Employment Agreements and Compensation
Arrangements."
Pursuant to the terms of the LogiMetrics, Inc. 1997 Stock Compensation
Program (the "Stock Compensation Program"), each director who has not been a
full-time employee of the Company or any subsidiary for at least the prior 12
months receives an option to purchase 20,000 shares of Common Stock each year on
the earlier of (i) the date of the Company's annual meeting of stockholders, or
(ii) June 1. Options granted to such directors under the Stock Compensation
Program have an exercise price equal to the fair market value of the underlying
shares of Common Stock on the date of grant. See "Stock Compensation Program."
PRIOR AGREEMENTS; PRIOR RIGHT TO DESIGNATE DIRECTORS; CHANGES IN CONTROL
In July 1997, the Company entered into a purchase agreement (the "1997
Agreement") with a group of institutional investors (the "Investors"), including
certain entities affiliated with Mark B. Fisher, a former director of the
Company. Pursuant to the terms of the 1997 Agreement, the Company issued and
sold to the Investors an aggregate of $3,588,333 in aggregate principal amount
of the Company's Class A Debentures and warrants to acquire an aggregate of
11,500,000 shares of Common Stock for a total purchase price of $4,352,500.
In connection with the transactions contemplated by the 1997 Agreement,
the Investors, the Company, and Charles S. Brand entered into a Stockholders
Agreement (the "1997 Stockholders Agreement") pursuant to which, among other
things, Mr. Brand agreed to certain restrictions on his ability to sell his
shares of Common Stock. Pursuant to the terms of the 1997 Stockholders
Agreement, the Investors received certain rights to appoint members of the
Board. Under the terms of the 1997 Stockholders Agreement, the holders of a
majority of the shares of Common Stock beneficially owned by the Investors had
the right, subject to certain limitations, to cause the Company to enter into a
"Company Sale" (as defined in the 1997 Stockholders Agreement).
In March 1996, the Company entered into a Unit Purchase Agreement (the
"Unit Purchase Agreement") with Cerberus pursuant to which the Company issued
and sold to Cerberus an aggregate of $1,042,372 of convertible senior
subordinated debentures which were subsequently exchanged for the Class B
Debentures, and warrants to acquire an aggregate of 2,542,380 shares of Common
Stock for a total purchase price of $1,500,000. Pursuant to the terms of the
Unit Purchase Agreement, Cerberus received the right to appoint one member of
the Board.
56
<PAGE>
STOCKHOLDERS AGREEMENT
Pursuant to the terms of the Stockholders Agreement, the 1997
Stockholders Agreement and the provisions of the Unit Purchase Agreement giving
Cerberus the right to appoint a director were terminated.
Pursuant to the terms of the Stockholders Agreement, from and after the
Effective Time, the number of directors comprising the Board was set at seven.
The Existing Holders have the right to designate three directors so long as they
continue beneficially to 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 they 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. 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 their Convertible Debt and
warrants, 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.
In addition, pursuant to the terms of the Stockholders Agreement, until
compliance by the Company with the requirements of Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder, the Company agreed to operate its
business in the ordinary course and to refrain from taking certain actions
without L-3's consent.
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, (iii) the consummation of a "Company Sale"
(as defined in the Stockholders Agreement) approved by a Special Director
Majority or a Special Stockholder Majority in accordance with the Purchase
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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1999, the Company's Compensation
Committee was comprised of Dr. Brand and Messrs. Carreras and Garcia. Mr. Garcia
resigned as a director in November 1999.
The Company previously was a party to a consulting agreement with Dr.
Brand pursuant to which Dr. Brand provided strategic, technological and other
services to the Company for up to 90 days in any calendar year. Under the
consulting agreement, which expired April 30, 1999, Dr. Brand received a
quarterly payment of 36,363 shares of Common Stock. In the consulting agreement,
Dr. Brand agreed to certain confidentiality, non-competition and intellectual
property covenants.
No executive officer of the Company and no member of the Compensation
Committee is a member of any other business entity that has an executive officer
that sits on the Company's Board or on the Compensation Committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended,
the Company's directors and executive officers and persons holding more than 10%
of a registered class of the Company's equity securities are required to file
with the SEC and to provide the Company with initial reports of ownership,
reports of changes in ownership and annual reports of ownership of common stock
and other equity securities of the Company. Based solely upon a review of such
reports and any amendments thereto which have been furnished to the Company, the
Company believes that all of such reporting persons complied with all applicable
Section 16(a) filing requirements in respect of the fiscal year ended June 30,
1999, except that James R. Meckstroth inadvertently failed to timely file a Form
3 upon becoming an executive officer of the
57
<PAGE>
Company and each of Gerald B. Cramer, Cramer Rosenthal McGlynn LLC and AC Israel
Enterprises, Inc. inadvertently failed to timely file their Form 3s upon
becoming beneficial owners of more than 10% of the Common Stock.
58
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain compensation paid to the
Company's Chief Executive Officer and each other executive officer of the
Company as of June 30, 1999 (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE(1)
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
OTHER ANNUAL SECURITIES ALL OTHER
SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION FISCAL YEAR $ $ $ OPTIONS/SARS(#) ($)
--------------------------- ----------- - - - --------------- ---
<S> <C> <C> <C> <C> <C> <C>
Kenneth C. Thompson(2) ....... 1999 $ 126,000 -- * --
Chief Executive Officer 1998 $ 171,100(3)(4) -- * --
Charles S. Brand(5) .......... 1999 $ 100,000(6) -- * --
Chairman of the Board & Chief 1998 $ 200,000 -- * --
Technical Officer 1997 $ 162,500 -- * 20,000
Norman M. Phipps ............. 1999 $ 150,000 -- * -- $ 1,775(7)
President, Chief Operating 1998 $ 150,000 -- * -- $ 1,775(7)
Officer and Interim Chief 1997 $ 153,395(8) -- * 825,000
Financial Officer
James R. Meckstroth .......... 1999 $ 102,327(9) -- * 260,000
Senior Vice
President-Operations
Erik S. Kruger ............... 1999 $ 116,858 -- * --
Vice President-Finance & 1998 $ 37,596(10) -- * 200,000
Administration
</TABLE>
---------
* Represents less than the lesser of $50,000 or 10% of salary and bonus
for each Named Executive Officer.
(1) The Company did not grant any stock appreciation rights or
restricted stock and did not make any long-term incentive payments
during the period covered by the Summary Compensation Table.
(2) Mr. Thompson resigned as the Company's Chief Executive Officer and
as a director in November 1999.
(3) Includes consulting fees paid to Mr. Thompson prior to his
becoming Chief Executive Officer of the Company in March 1998.
(4) Pursuant to the terms of his consulting agreement, a portion of
Mr. Thompson's consulting fee was paid in the form of 108,000
shares of Common Stock with a fair market value of $54,000. See
"Employment Agreements and Compensation Arrangements."
(5) Mr. Brand served as the Company's Chief Executive Officer from
April 1997 until March 1998.
(6) During fiscal 1999, Mr. Brand deferred $100,000 of his salary.
(7) Represents life insurance premiums paid on behalf of Mr. Phipps.
(8) Includes consulting fees paid to Mr. Phipps prior to his
employment by the Company in April 1997.
(9) Includes consulting fees paid to Mr. Meckstroth prior to his
employment by the Company in December 1998.
(10) Mr. Kruger joined the Company in February 1998.
59
<PAGE>
FISCAL YEAR-END OPTION GRANTS
The following table summarizes certain information relating to the
grant of options to purchase Common Stock to each of the Named Executive
Officers during the fiscal year ended June 30, 1999:
OPTION/SAR GRANTS IN
LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL OPTIONS/SARS EXERCISE OR
OPTIONS/SARS GRANTED TO EMPLOYEES IN BASE EXPIRATION
NAME GRANTED (#) FISCAL YEAR PRICE ($/SHARE) DATE
---- ----------- ----------- --------------- ----
<S> <C> <C> <C> <C>
James R. Meckstroth......... 260,000(2) 100.0% $ 0.52 12/11/08
</TABLE>
---------
(1) The Company did not grant any stock appreciation rights during the
fiscal year ended June 30, 1999.
(2) The vesting period for the above grant was 35,000 upon the date of
grant, 75,000 one year after the date of grant, 75,000 two years after
date of grant and 75,000 upon the Company's successful completion of
the private or public sale of its securities resulting in net proceeds
of at least $10 million.
FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the Named
Executive Officers concerning unexercised options held by such Named Executive
Officers as of June 30, 1999. No stock options were exercised during the fiscal
year ended June 30, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT FISCAL VALUE OF UNEXERCISED
YEAR-END (#) IN-THE-MONEY
NAME EXERCISABLE/UNEXERCISABLE OPTIONS AT FISCAL YEAR-END ($)(1)
---- -------------------------------- ---------------------------------
<S> <C> <C>
Charles S. Brand.................... 13,333/6,667 $ 1,933/$967
Norman M. Phipps.................... 820,000/5,000 $164,000/$1,000
James R. Meckstroth................. 35,000/225,000 $ 8,050/$51,750
Erik S. Kruger...................... 133,334/66,666 $ 26,667/$13,333
</TABLE>
---------
(1) Based on an estimated market value of $0.75 per share for the Common
Stock on June 30, 1999.
EMPLOYMENT AGREEMENTS AND COMPENSATION ARRANGEMENTS
In April 1997, Mr. Charles Brand and Mr. Phipps entered into five-year
employment agreements with the Company. Pursuant to such agreements, Mr. Brand
was entitled to receive an annual base salary of $200,000 and Mr. Phipps
received an annual base salary of $150,000 for the fiscal year ended June 30,
1999. These agreements were subject to periodic increases at the discretion of
the Board. Mr. Brand and Mr. Phipps were entitled to participate in all
compensation and employee benefit plans, including such bonuses as may be
authorized by the Board from time to time. The Company also agreed to provide
and maintain a $1,000,000 term-life insurance policy for the benefit of each of
Mr. Brand and Mr. Phipps. 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 each agreement)), 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, or (ii)
twelve months from the effective date of termination. Each of Mr. Brand and Mr.
Phipps also agreed to certain non-competition, confidentiality and intellectual
property ownership covenants. These employment agreements were terminated in
connection with the Transaction and replaced by the New Employment Agreements.
In August 1998, the Company entered into a three-year employment
agreement with Mr. 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
60
<PAGE>
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 (subject to adjustment in
certain circumstances) (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.
In addition, the Company had previously entered into a consulting
agreement with Dr. Brand. See "Compensation Committee Interlocks and Insider
Participation."
In connection with the Transaction, the Company entered into the New
Employment Agreements with Messrs. Brand and Phipps. 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 the New Employment Agreements, 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 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.
STOCK COMPENSATION PROGRAM
In May 1997, the Company adopted the Stock Compensation Program in
order to promote the interests of the Company, its direct and indirect present
and future subsidiaries and its stockholders by providing eligible persons with
the opportunity to acquire an ownership interest, or to increase their ownership
interest, in the Company as an incentive to remain in the service of the
Company. The Stock Compensation Program authorizes the granting of incentive
stock options, non-qualified stock options, stock appreciation rights,
performance shares and stock bonus awards to employees and consultants of the
Company and its subsidiaries, including those employees serving as officers or
directors of the Company (the "Employee Plans"). The Stock Compensation Program
also authorizes automatic option grants to directors who are not otherwise
employed by the Company (the "Independent Director Plan"). In connection with
the Transaction, the number of shares of Common Stock reserved for issuance
under the Stock Compensation Program was increased to 12,665,308, of which up to
12,515,308 shares may be issued under the Employee Plans and up to 150,000
shares may be issued under the Independent Director Plan. The Stock Compensation
Program is administered by the Compensation Committee of the Board (the
"Administrator").
Options and awards granted under the Stock Compensation Program may
have an exercise or payment price as established by the Compensation Committee,
provided that the exercise price of incentive stock options granted under the
Employee Plans may not be less than the fair market value of the underlying
shares on the date of grant. Options granted under the Independent Director Plan
must have an exercise price equal to the fair market value of the underlying
shares on the date of grant.
Unless otherwise provided at the date of grant, no option or award may
vest within one year of the date of grant and no option or award may be
exercised more than 10 years from the date of grant. Options granted under the
Independent Director Plan vest one year following the date of grant and expire
if not exercised on or before the fifth anniversary thereof. Unless otherwise
specified by the Compensation Committee, options and awards (other than pursuant
to the Independent Director Plan) vest in four equal installments on the first,
second, third and fourth anniversaries of the date of grant. Vesting of any
option or award granted under the Stock Compensation Program may be accelerated
in certain circumstances, including upon the occurrence of a "Change in Control
Event" (as defined in the Stock Compensation Program).
Options and awards granted under the Stock Compensation Program are
nontransferable, except by will or by the laws of descent and distribution.
However, the Compensation Committee may permit the recipient of a non-incentive
stock option granted under the Employee Plans and options granted under the
Independent Director Plan to transfer the option to a
61
<PAGE>
family member or a trust created for the benefit of family members. During the
lifetime of a participant, an option may be exercised only by the participant or
a permitted transferee. In the event that a participant's employment or service
terminates as a result of death, all vested awards will be paid to the
participant's estate by the Company and the participant's estate or any
permitted transferee will have the right to exercise vested options for a period
ending on the earlier of the expiration dates of such options or one year from
the date of death. If the participant's employment or service terminates as a
result of retirement or a "disability" (as set forth in the Stock Compensation
Program), all vested awards will be paid to the participant by the Company and
the participant or any permitted transferee will have the right to exercise
vested options for a period ending on the earlier of the expiration dates of
such options or one year from the date of termination. If the participant's
employment or service terminates for cause, all options and awards will expire
automatically upon termination. If the participant's employment or service
terminates other than as a result of death, disability, retirement, or
termination for cause, the participant will have the right to collect all vested
awards immediately and the participant or any permitted transferee will have the
right to exercise vested options for a period ending on the earlier of the
expiration dates of such options or awards or 30 days from the date of
termination, subject to extension at the discretion of the Administrator, or
three months from the date of termination in the case of options granted
pursuant to the Independent Director Plan. In all cases, any unvested options or
awards will terminate as of the date of termination of employment or service.
The Stock Compensation Program will terminate on April 30, 2007, unless
earlier terminated by the Board. No options or awards may be granted under the
Stock Compensation Program after its termination; however, termination of the
Stock Compensation Program will not affect the status of any option or award
outstanding on the date of termination.
TRANSACTION OPTION GRANTS
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. 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 under "Employment Agreements and
Compensation Arrangements," 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. 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, Mr.
Meckstroth received options to acquire 740,000 shares of Common Stock and Mr.
Kruger received options to acquire 400,000 shares of Common Stock.
In addition, pursuant to the Transaction, the Founder Options to
purchase an aggregate of 12,665,308 shares of Common Stock were granted to L-3,
CRM and Cerberus (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.
62
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Management. The following table sets forth information as of June 30,
1999 with respect to beneficial ownership of the Common Stock by (i) each
person serving as a director on June 30, 1999, (ii) each Named Executive
Officer, and (iii) all executive officers and directors as of June 30, 1999 as
a group. The mailing address of each such person as of June 30, 1999 was c/o
LogiMetrics, Inc., 50 Orville Drive, Bohemia, New York 11716.
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address of Beneficial Percent of
Beneficial Owner Ownership (1) Class
<S> <C> <C> <C>
Charles S. Brand 16,531,672 (2) 53.6%
Kenneth C. Thompson 199,667 *
Norman M. Phipps 2,214,784 (3) 7.4%
James R. Meckstroth 35,000 (4) *
Erik S. Kruger 173,334 (5) *
Frank A. Brand 330,905 (6) 1.2%
Jean-Francois Carreras 72,500 (7) *
Mark B. Fisher 5,067,416 (8) 15.1%
Francisco A. Garcia 106,667 (9) *
All Executive Officers 24,731,945 66.3%
and Directors as a (2, 3, 4, 5, 6, 7, 8, 9)
group (9 persons)
</TABLE>
* Less than 1%
(1) Each stockholder possesses sole voting and investment power with respect to
the shares listed, except as otherwise indicated. Includes shares of Common
Stock, which the individual has the right to acquire within 60 days of June
30, 1999.
(2) Includes (i) 2,150,539 shares of Common Stock issuable upon the conversion
of Class C Debentures held by Mr. Brand, and (ii) 13,333 shares of Common
Stock issuable upon the exercise of stock options exercisable within 60
days of June 30, 1999.
(3) Includes (i) 296,042 shares of Common Stock issuable upon the exercise of
Common Stock Purchase Warrants, Series E (the "Series E Warrants") held by
Mr. Phipps, (ii) 134,906 shares of Common Stock issuable upon the exercise
of Common Stock Purchase Warrants, Series F (the "Series F Warrants") held
by Mr. Phipps, (iii) 23,585 shares of Common Stock issuable upon the
conversion of one-quarter share of the Company's Series A 12% Cumulative
Convertible Redeemable Preferred Stock, stated value $50,000 per share (the
"Preferred Stock") held by Mr. Phipps, and (iv) 820,000 shares of Common
Stock issuable upon the exercise of stock options exercisable within 60
days of June 30, 1999.
(4) Includes 35,000 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of June 30, 1999.
(5) Includes 133,334 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of June 30, 1999.
63
<PAGE>
(6) Includes 40,000 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of June 30, 1999.
(7) Consists of (i) 20,000 shares of Common Stock issuable upon the exercise of
Series E Warrants held by Mr. Carreras, (ii) 12,500 shares of Common Stock
issuable upon the exercise of Series F Warrants held by Mr. Carreras, and
(iii) 40,000 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of June 30, 1999.
(8) Includes (i) 347,785 shares of Common Stock issuable upon the conversion of
Class A Debentures held by Mr. Fisher, (ii) 520,000 shares of Common Stock
issuable upon the exercise of Amended and Restated Common Stock Purchase
Warrants, Series B (the "Series B Warrants") held by Mr. Fisher, (iii)
241,935 shares of Common Stock issuable upon the exercise of Series G
Warrants held by Mr. Fisher, (iv) 12,943 shares of Common Stock issuable
upon the exercise of Series H Warrants held by Mr. Fisher, (v) 6,472 shares
of Common Stock issuable upon the exercise of Series I Warrants held by Mr.
Fisher, and (vi) 40,000 shares of Common Stock issuable upon the exercise
of stock options exercisable within 60 days of June 30, 1999. Also includes
(A) 500,000 shares of Common Stock issuable to MBF Capital Corporation
("MBF") upon the exercise of Series G Warrants held by MBF, (B) 695,579
shares of Common Stock issuable upon the conversion of Class A Debentures
held by Broadband Systems, L.P. ("Broadband Systems"), (C) 483,871 shares
of Common Stock issuable upon the exercise of Series G Warrants held by
Broadband Systems, (D) 25,886 shares of Common Stock issuable upon the
exercise of Series H Warrants held by Broadband Systems, (E) 12,943 shares
of Common Stock issuable upon the exercise of Series I Warrants held by
Broadband Systems, (F) 500,000 shares of Common Stock issuable upon the
exercise of Series G Warrants held by Phineas Broadband Systems, L.P.
("Phineas"), (G) 1,000,000 shares of Common Stock issuable upon the
exercise of Series H Warrants held by Phineas and (H) 500,000 shares of
Common Stock issuable upon the exercise of Series I Warrants held by
Phineas. Mr. Fisher is the sole officer, director and shareholder of MBF
and MBF Broadband Systems, Inc., and the general partner of both Broadband
Systems and Phineas. Accordingly, Mr. Fisher is deemed to be the beneficial
owner of all shares of Common Stock beneficially owned by each of MBF,
Broadband Systems and Phineas.
(9) Includes 40,000 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of June 30, 1999.
Other Beneficial Owners: The following table provides information, as
of June 30, 1999, regarding the beneficial ownership of more than five percent
(5%) of the Company's Common Stock held as of June 30, 1999 by persons who are
not listed in the preceding table. Certain information contained herein has been
derived solely from filings made by such persons with the SEC.
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of of Beneficial Percent of
Beneficial Owner Ownership Class
---------------- --------- -----
<S> <C> <C>
Gregory Manocherian 7,412,364 (1) 21.5%
3 New York Plaza
18th Floor
New York, NY 10004
Stephen Feinberg 5,984,617 (2) 17.3%
450 Park Avenue
New York, NY 10022
Gerald B. Cramer 3,765,745 (3) 11.8%
c/o Cramer Rosenthal
McGlynn, Inc.
520 Madison Avenue
New York, NY 10022
A.C. Israel
Enterprises, Inc. 3,765,745 (4) 11.8%
c/o Cramer Rosenthal
McGlynn, Inc.
520 Madison Avenue
New York, NY 10022
</TABLE>
64
<PAGE>
<TABLE>
<S> <C> <C>
CRM 1998 Enterprise
Fund, LLC 2,722,897 (5) 8.8%
c/o Cramer Rosenthal
McGlynn, Inc.
520 Madison Avenue
New York, NY 10022
CRM 1997 Enterprise
Fund, LLC 2,584,279 (6) 8.4%
c/o Cramer Rosenthal
McGlynn, Inc.
520 Madison Avenue
New York, NY 10022
CRM Partners, LP 2,209,800 (7) 7.2%
c/o Cramer Rosenthal
McGlynn, Inc.
520 Madison Avenue
New York, NY 10022
</TABLE>
(1) Includes 47,170 shares of Common Stock issuable upon the conversion of
one-half share of Preferred Stock held by Mr. Manocherian. Also includes
(i) 139,116 shares of Common Stock issuable upon the conversion of Class A
Debentures held by Kabuki Partners ADP, GP ("Kabuki"), (ii) 96,774 shares
of Common Stock issuable upon the exercise of Series G Warrants held by
Kabuki, (iii) 5,177 shares of Common Stock issuable upon the exercise of
Series H Warrants held by Kabuki, (iv) 2,589 shares of Common Stock
issuable upon the exercise of Series I Warrants held by Kabuki, (v) 483,871
shares of Common Stock issuable upon the conversion of Class C Debentures
held by Kabuki, (vi) 673,637 shares of Common Stock issuable upon the
conversion of Class A Debentures held by Whitehall Properties LLC
("Whitehall"), (vii) 500,494 shares of Common Stock issuable upon the
exercise of Series G Warrants held by Whitehall, (viii) 25,886 shares of
Common Stock issuable upon the exercise of Series H Warrants held by
Whitehall, (ix) 12,943 shares of Common Stock issuable upon the exercise of
Series I Warrants held by Whitehall, (x) 596,774 shares of Common Stock
issuable upon the conversion of Class C Debentures held by Whitehall, (xi)
1,347,278 shares of Common Stock issuable upon the conversion of Class A
Debentures held by Pamela Equities Corp. ("PEC"), (xii) 1,000,988 shares of
Common Stock issuable upon the exercise of Series G Warrants held by PEC,
(xiii) 51,773 shares of Common Stock issuable upon the exercise of Series H
Warrants held by PEC, (xiv) 25,886 shares of Common Stock issuable upon the
exercise of Series I Warrants held by PEC, and (xv) 854,839 shares of
Common Stock issuable upon the conversion of Class C Debentures held by
PEC. Mr. Manocherian is (A) the controlling general partner of Kabuki, (B)
a member of Whitehall, and (C) an officer of PEC. Accordingly, Mr.
Manocherian may be deemed to be the beneficial owner of all shares of
Common Stock beneficially owned by each of Kabuki, Whitehall and PEC.
(2) Consists of (i) 3,442,237 shares of Common Stock issuable upon the
conversion of Class B Debentures held by Cerberus, and (ii) 2,542,380
shares of Common Stock issuable upon the exercise of Series C Warrants held
by Cerberus. Mr. Feinberg is the Managing Member of Cerberus Associates,
L.L.C., the general partner of Cerberus and, accordingly, is deemed to be
the beneficial owner of all shares of Common Stock beneficially owned by
Cerberus.
(3) Includes (i) 1,374,281 shares of Common Stock issuable upon the conversion
of Class A Debentures held by Mr. Cramer, (ii) 967,742 shares of Common
Stock issuable upon the exercise of Series G Warrants held by Mr. Cramer,
(iii) 51,772 shares of Common Stock issuable upon the exercise of Series H
Warrants held by Mr. Cramer, (iv) 25,886 shares of Common Stock issuable
upon the exercise of Series I Warrants held by Mr. Cramer and (v) 782,692
shares of Common Stock issuable upon the conversion of Class C Debentures
held by Mr. Cramer.
(4) Includes (i) 1,374,281 shares of Common Stock issuable upon the conversion
of Class A Debentures held by A.C. Israel Enterprises, Inc. ("ACIE"), (ii)
967,742 shares of Common Stock issuable upon the exercise of Series G
Warrants held by ACIE, (iii) 51,772 shares of Common Stock issuable upon
the exercise of Series H Warrants held by ACIE, (iv) 25,886 shares of
Common Stock issuable upon the exercise of Series I Warrants held by ACIE
and (v) 782,692 shares of Common Stock issuable upon the conversion of
Class C Debentures held by ACIE.
(5) Includes 2,128,925 shares of Common Stock issuable upon the conversion of
Class C Debentures held by CRM 1998 Enterprise Fund, L.L.C.
(6) Includes (i) 1,244,208 shares of Common Stock issuable upon the conversion
of Class A Debentures held by CRM 1997 Enterprise Fund, L.L.C. ("CRM
Enterprise Fund"), (ii) 923,930 shares of Common Stock issuable upon the
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exercise of Series G Warrants held by CRM Enterprise Fund, (iii) 49,428
shares of Common Stock issuable upon the exercise of Series H Warrants held
by CRM Enterprise Fund, and (iv) 24,713 shares of Common Stock issuable
upon the exercise of Series I Warrants held by CRM Enterprise Fund.
(7) Includes (i) 1,073,237 shares of Common Stock issuable upon the conversion
of Class A Debentures held by CRM 1997 Partners, L.P. ("CRM Partners"),
(ii) 758,245 shares of Common Stock issuable upon the exercise of Series G
Warrants held by CRM Partners, (iii) 40,565 shares of Common Stock issuable
upon the exercise of Series H Warrants held by CRM Partners, and (iv)
20,282 shares of Common Stock issuable upon the exercise of Series I
Warrants held by CRM Partners.
See Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange Act -- Prior Agreements;
Prior Right to Designate Directors; Changes in Control.
-----------------------
The following table sets forth certain information known by the Company
regarding the beneficial ownership of the Company's Common Stock, as of July 28,
2000, by each beneficial owner of more than five percent of the outstanding
Common Stock (calculated in accordance with Section 13(d) of the Exchange Act
and the rules promulgated thereunder), by each of the Company's directors
immediately following the closing of the Transaction, by each executive officer
named in the Summary Compensation Table (presented below) and by all of such
directors and the executive officers of the Company as a group. This information
gives effect to (i) the issuance of the Purchaser Shares, (ii) the resignations
of Charles S. Brand, Frank A. Brand and Mark B. Fisher as directors of the
Company, (iii) the conversion of the Convertible Debt into an aggregate of
30,612,420 shares of Common Stock, (iv) the conversion of the Preferred Stock
into an aggregate of 2,358,500 shares of Common Stock, and (v) the Warrant
Exercise. Except as otherwise indicated, the persons or entities listed below
have sole voting and investing power with respect to all shares of Common Stock
beneficially owned by them, except to the extent such power may be shared with a
spouse or with a parent company. Unless otherwise specified, the business
address of each such person is c/o LogiMetrics, Inc., 50 Orville Drive, Bohemia,
New York 11716.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
OF BENEFICIAL OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP (1) CLASS
------------------------------------ --------- --- -----
<S> <C> <C> <C>
L-3 Communications Corporation ...................... 108,901,622 (2) 59.0%
600 Third Avenue
New York, NY 10016
L-3 Communications Holdings, Inc. ................... 108,901,622 (2) 59.0%
600 Third Avenue
New York, NY 10016
John S. Mega......................................... -- -- --
Christopher C. Cambria............................... -- -- --
Charles S. Brand..................................... 17,026,810 (3) 10.1%
Norman M. Phipps..................................... 3,361,065 (4) 2.0%
James R. Meckstroth.................................. 189,000 (5) *
Erik S. Kruger....................................... 240,000 (6) *
Jean-Francois Carreras............................... 222,500 (7) *
Jay B. Langner....................................... 8,000 *
All Executive Officers and Directors as a group (8
persons)........................................... 21,047,375 12.4%
</TABLE>
---------
* Less than 1%
(1) Each stockholder possesses sole voting and investment power with respect to
the shares listed, except as otherwise indicated. Includes shares of Common
Stock, which the individual has the right to acquire within 60 days of July
28, 2000.
(2) Includes (i) 3,333,333 shares of Common Stock issuable upon the exercise by
L-3 of its right to acquire the Additional Shares, (ii) 5,555,555 issuable
upon the exercise of the L-3 Option, and (iii) 6,775,940 shares of Common
Stock issuable upon the exercise of stock options granted to L-3 pursuant
to the Option Grants which are exercisable within 60 days of July 28, 2000.
L-3 is a wholly owned subsidiary of Holdings. L-3 and Holdings share voting
and investment power with respect to such shares.
(3) Includes 20,000 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of July 28, 2000.
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<PAGE>
(4) Includes 825,000 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of July 28, 2000.
(5) Includes 185,000 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of July 28, 2000.
(6) Includes 200,000 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of July 28, 2000.
(7) Consists of (i) 32,500 shares of Common Stock issuable upon the exercise of
warrants held by Mr. Carreras, and (ii) 190,000 shares of Common Stock
issuable upon the exercise of stock options exercisable within 60 days of
July 28, 2000.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN RELATED PARTY TRANSACTIONS
Directors and Officers
In July 1997, Norman M. Phipps, a director of the Company, purchased
850,000 shares of Common Stock from the Company for $467,500, or $0.55 per
share. In connection with the purchase, $8,500 was paid in cash from the
proceeds of a one-time bonus paid to Mr. Phipps, and the remainder was paid in
the form of a non-recourse secured promissory note (the "Phipps Note"). Also in
July 1997, Michael L. Gaffney, an employee of the Company, purchased 400,000
shares of Common Stock from the Company for $220,000, or $0.55 per share. In
connection with Mr. Gaffney's purchase, $4,000 was paid in cash from the
proceeds of a one-time bonus paid to Mr. Gaffney and the remainder was paid in
the form of a non-recourse secured promissory note (the "Gaffney Note"). The
Phipps Note and the Gaffney Note did not bear interest, had no fixed maturity
date, and were each secured by a pledge of the shares of Common Stock purchased
by Messrs. Phipps and Gaffney, respectively. The sale of the Class C Debentures
as described below resulted in a "Change in Control Event" under the terms of
the Phipps Note and the Gaffney Note. The Phipps Note and the Gaffney Note were
each satisfied upon the occurrence of such "Change in Control Event." The
Company recorded a non-cash charge to account for these transactions in the
aggregate amount of $675,000 at June 30, 1998.
MBF, an entity controlled by Mark B. Fisher, a director of the Company
prior to the Transaction, paid $35,000 of the purchase price payable by it in
connection with its July 1997 purchase of Series G Warrants, in the form of a
non-recourse secured promissory note (the "MBF Note"). The MBF Note matures on
July 29, 2000 and bears interest compounded annually at a rate of 6.07% per
annum, which is payable at maturity. The MBF Note is secured by a pledge of
warrants purchased by MBF. The MBF Note has become immediately due and payable
upon the occurrence of the Transaction which constituted a Company Sale (as
defined in the 1997 Stockholders Agreement).
Prior to its acquisition by the Company, Mr. Brand, the Company's
former Chairman and Chief Executive Officer, lent certain amounts to the
Company's subsidiary, mmTech, on an as-needed basis to fund a portion of
mmTech's working capital requirements. The amount advanced by Mr. Brand was
$996,761 at July 12, 2000. Pursuant to an agreement between Mr. Brand and the
Company, the Company has agreed to pay interest on the unpaid advances (which
previously had been interest-free) at a rate of seven percent per annum.
Mr. Brand's advances were repaid out of the proceeds of the Transaction.
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 net amounts of
$40,990 during the fiscal year ended June 30, 1999 and $268,883 during the
fiscal year ended June 30, 1998.
Pursuant to the terms of a Stock Purchase Agreement, dated October 21,
1998 (the "Stock Purchase Agreement"), Mr. Brand sold 2,000,000 shares of Common
Stock to a group of institutional investors (the "1998 Investors") for a cash
purchase price of $500,000, or $0.25 per share. The sale was made as a condition
to the transactions contemplated by a Purchase Agreement, dated October 21, 1998
(the "1998 Purchase Agreement"), among the Company and the purchasers party
thereto (including the 1998 Investors). Pursuant to the 1998 Purchase Agreement,
the Company issued and sold $2.7 million in aggregate face amount of its Class C
Debentures for an aggregate purchase price of $2.0 million. As required by the
1998 Investors, Mr. Brand used the proceeds of the sale of Common Stock pursuant
to the Stock Purchase Agreement to
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acquire $667,000 in face amount of the Class C Debentures pursuant to the 1998
Purchase Agreement for a cash purchase price of $500,000.
In connection with the issuance by the Company of its Class A
Debentures in July 1997, the Company granted to the Investors the right, at any
time prior to August 15, 1998, to purchase an additional $833,333 in aggregate
principal amount of the Class A Debentures and warrants to purchase an
aggregate of 2,500,000 shares of Common Stock for a total purchase price of
$1,000,000 (the "Purchase Option"). On May 1, 1998, the Investors exercised
their respective rights to purchase $500,000 of the Purchase Option. On
August 6, 1998, the Investors exercised their respective rights to purchase
the remaining $500,000 of the Purchase Option.
In April 2000, Norman M. Phipps, a director of the Company, purchased
1,250,000 shares of Common Stock from the Company for $812,500, or $0.65 per
share. In connection with the purchase, $12,500 was paid in cash from the
proceeds of a one-time bonus paid to Mr. Phipps and the remainder was paid in
the form of a non-recourse secured promissory note (the "New Phipps Note"). The
New Phipps Note did not bear interest, had no fixed maturity date, and was
secured by a pledge of the shares of Common Stock purchased by Mr. Phipps. The
New Phipps Note would have been satisfied automatically upon the occurrence of
the Transaction which would have constituted a "Change in Control Event" (as
defined in the New Phipps Note). In connection with the Transaction, the Company
and Mr. Phipps agreed to rescind the purchase of these shares and agreed that
the New Phipps Note would be deemed to be canceled and of no further force or
effect. Mr. Phipps also agreed to forego certain payments that would have been
owed to him by the Company in connection with the satisfaction of the New Phipps
Note. The Company has been advised that, in connection with the Transaction, Mr.
Phipps and CRM, acting as agent for certain of its affiliates, clients and other
related persons, entered into a stock purchase and nominee agreement pursuant to
which Mr. Phipps purchased 1,250,000 shares of Common Stock from CRM and certain
related entities for an aggregate purchase price of $100,000 which was paid in
the form of a full recourse promissory note (the "CRM Note"). The Company has
been advised that the CRM Note bears interest at a rate of 5% per annum and
matures on December 31, 2003, subject to earlier acceleration upon the
occurrence of certain events. The Company also has been advised that the CRM
Note would be deemed satisfied by CRM upon the occurrence of a Recovery Event
(defined in the CRM Note as the recovery by CRM and certain related entities of
one-half or more of the amounts invested by such entities in the Company).
Stockholders Agreement
Pursuant to the terms of the Stockholders Agreement, the 1997
Stockholders Agreement and the provisions of the Unit Purchase Agreement giving
Cerberus the right to appoint a director were terminated.
Pursuant to the terms of the Stockholders Agreement, from and after the
Effective Time, the number of directors comprising the Board was set at seven.
The Existing Holders have the right to designate three directors so long as they
continue beneficially to 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 they 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. 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 therein) of
(i) 10% or more of the Common Stock Equivalents, 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 their Convertible Debt and
warrants, 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.
In addition, pursuant to the terms of the Stockholders Agreement, until
compliance by the Company with the requirements of Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder, the Company agreed to operate its
business in the ordinary course and to refrain from taking certain actions
without L-3's consent.
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, (iii) the consummation of a "Company Sale"
(as defined in the Stockholders Agreement) approved by a Special Director
Majority or a Special Stockholder Majority in accordance with the Purchase
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.
Registration Rights Agreement
In connection with the Transaction, the Company, L-3 and the Existing
Holders entered into a Registration Rights Agreement (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
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(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 have elapsed since such effective date.
If the Company furnishes to the persons requesting registration a
certificate signed by the chief executive or chief
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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 50% 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.
For a description of certain other transactions between the Company and
certain of its directors, executive officers and major stockholders, see Item 9.
Directors, Executive Officers, Promoters and Control Persons; Compliance With
Section 16(a) of the Exchange Act -- Prior Agreements; Prior Right to Designate
Directors; Changes in Control.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this Form 10-KSB:
<TABLE>
<CAPTION>
Number Description
<S> <C>
3.1 Certificate of Incorporation of the Company, as amended.
3.2 By-laws of the Company, as amended.
4.1 Form of Class A 13% Senior Subordinated Convertible Pay-in-Kind
Debenture due July 29, 1999 (previously filed as Exhibit 4.1 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended June
30, 1997 (file no. 0-10696) and incorporated herein by reference).
4.2 Form of Amended and Restated Class B 13% Senior Subordinated
Convertible Pay-in-Kind Debenture due July 29, 1999 (previously filed
as Exhibit 4.2 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1997 (file no. 0-10696) and incorporated
herein by reference).
4.3 Form of Class C 13% Convertible Senior Subordinated Debenture due
September 30, 1999 (previously filed as Exhibit 4.3 to the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 1998
(file no. 0-10696) and incorporated herein by reference).
4.4 Form of Amended and Restated Series A Warrant (previously filed as
Exhibit 7 to the Company's Current Report on Form 8-K, dated March 7,
1996 (file no. 0-10696) and incorporated herein by reference).
4.5 Form of Amended and Restated Series B Warrant (previously filed as
Exhibit 8 to the Company's Current Report on Form 8-K, dated March 7,
1996 (file no. 0-10696) and incorporated herein by reference).
4.6 Form of Series C Warrant (previously filed as Exhibit 2 to the
Company's Current Report on Form 8-K, dated March 7, 1996 (file no.
0-10696) and incorporated herein by reference).
4.7 Form of Series D Warrant (previously filed as Exhibit 4 to the
Company's Current Report on Form 8-K, dated March 7, 1996 (file no.
0-10696) and incorporated herein by reference).
4.8 Form of Series E Warrant (previously filed as Exhibit 5 to the
Company's Current Report on Form 8-K, dated March 7, 1996 (file no.
0-10696) and incorporated herein by reference).
</TABLE>
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<TABLE>
<S> <C>
4.9 Form of Series F Warrant (previously filed as Exhibit 10.9 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended June
30, 1996 (file no. 0-10696) and incorporated herein by reference).
4.10 Form of Series G Warrant (previously filed as part of Exhibit 10.4 to
the Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997 (file no. 0-10696) and incorporated herein by reference).
4.11 Form of Series H Warrant (previously filed as part of Exhibit 10.4 to
the Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997 (file no. 0-10696) and incorporated herein by reference).
4.12 Form of Series I Warrant (previously filed as part of Exhibit 10.4 to
the Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997 (file no. 0-10696) and incorporated herein by reference).
4.13 Form of Series J Warrant, as amended (previously filed as Exhibit 4.13
to the Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1998 (file no. 0-10696) and incorporated herein by reference).
4.14 Form of Certificate of the Designations, Powers, Preferences and Rights
of the Company's Series A 12% Cumulative Convertible Redeemable
Preferred Stock, stated value $50,000 per share (previously filed as
Exhibit 10.6 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1996 (file no. 0-10696) and incorporated
herein by reference).
4.15 Form of Certificate of Amendment of Certificate of Designations,
Powers, Preferences and Rights of the Company's Series A 12% Cumulative
Convertible Redeemable Preferred Stock (previously filed as Exhibit
4.15 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1998 (file no. 0-10696) and incorporated herein by
reference).
10.1 Purchase Agreement, dated July 10, 2000, by and between the Company and
L-3 Communications Corporation ("L-3") (previously filed as Exhibit
99.1 to the Company's Current Report on Form 8-K, dated July 11, 2000
(file no. 0-10696) and incorporated herein by reference).
10.2 Secured Promissory Note, dated July 10, 2000, issued by L-3 in favor of
the Company (previously filed as Exhibit 99.2 to the Company's Current
Report on Form 8-K, dated July 11, 2000 (file no. 0-10696) and
incorporated herein by reference).
10.3 Stock Pledge Agreement, dated July 10, 2000, executed by L-3 in favor
of the Company (previously filed as Exhibit 99.3 to the Company's
Current Report on Form 8-K, dated July 11, 2000 (file no. 0-10696) and
incorporated herein by reference).
10.4 Stockholders Agreement, dated July 10, 2000, by and among the Company,
L-3 and certain other parties thereto.
10.5 Registration Rights Agreement, dated July 10, 2000, by and among the
Company, L-3 and certain other parties thereto.
10.6 Non-Qualified Stock Option Agreement, dated July 10, 2000 by and
between the Company and L-3.
10.7 Letter of Intent, dated February 17, 2000, by and between the Company
and Signal Technology Corporation ("Signal") (previously filed as
Exhibit 10.1 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1998 (file no. 0-10696) and incorporated
herein by reference).*
10.8 Loan Agreement, dated February 17, 2000, by and between the Company and
Signal (previously filed as Exhibit 10.2 to the Company's Annual Report
on Form 10-KSB for the fiscal year ended June 30, 1998 (file no.
0-10696) and incorporated herein by reference).
10.9 Negotiable Secured Senior Subordinated Promissory Note, dated February
17, 2000, in favor of Signal (previously filed as Exhibit 10.3 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended June
30, 1998 (file no. 0-10696) and incorporated herein by reference).
10.10 Management Agreement, dated February 17, 2000, by and between the
Company and Signal (previously filed as Exhibit 10.4 to the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 1998
(file no. 0-10696) and incorporated herein by reference).
</TABLE>
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<TABLE>
<S> <C>
10.11 Letter Agreement, dated February 17, 2000, by and between the Company
and Signal (previously filed as Exhibit 10.5 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended June 30, 1998 (file no.
0-10696) and incorporated herein by reference).
10.12 Consent Letter, dated February 16, 2000, by and between the Company and
North Fork Bank (the "Bank") (previously filed as Exhibit 10.6 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended June
30, 1998 (file no. 0-10696) and incorporated herein by reference).
10.13 Second Amended and Restated Security Agreement, Intercreditor
Agreement, Waiver and Consent dated March 7, 1996, as amended and
restated on July 29, 1997 and August 31, 1999 and as further amended by
Amendments No. 1 and No. 2 dated December 2, 1999 and February 17,
2000, respectively, among the Company, Cramer Rosenthal McGlynn, LLC,
as agent, and the other parties thereto (previously filed as Exhibit
10.7 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1998 (file no. 0-10696) and incorporated herein by
reference).
10.14 Modified Note, dated as of February 17, 2000, in favor of the Bank in
the principal amount of $1,785,576.
10.15 Modified General Security Agreement, dated as of April 30, 1998, in
favor of the Bank (previously filed as Exhibit 10.9 to the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 1998
(file no. 0-10696) and incorporated herein by reference).
10.16 Form of Substitute Negotiable Secured Senior Subordinated Promissory
Note due July 1, 2000 (previously filed as Exhibit 10.10 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended June
30, 1998 (file no. 0-10696) and incorporated herein by reference).
10.17 Acknowledgment, Consent and Waiver, dated as of March 7, 2000, among
the Company and the other parties thereto (previously filed as Exhibit
10.11 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1998 (file no. 0-10696) and incorporated herein by
reference).
10.18 Purchase Agreement, dated as of October 21, 1998, among the Company and
the purchasers party thereto (previously filed as Exhibit 10.12 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended June
30, 1998 (file no. 0-10696) and incorporated herein by reference).
10.19 Stock Purchase Agreement, dated as of October 21, 1998, among Charles
S. Brand and the purchasers party thereto (previously filed as Exhibit
10.13 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1998 (file no. 0-10696) and incorporated herein by
reference).
10.20 Registration Rights Agreement, dated as of October 21, 1998, among the
Company and the holders party thereto (previously filed as Exhibit
10.14 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1998 (file no. 0-10696) and incorporated herein by
reference).
10.21 Purchase Agreement, dated as of July 29, 1997, among the Company and
the purchasers party thereto (previously filed as Exhibit 10.4 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended June
30, 1997 (file no. 0-10696) and incorporated herein by reference).
10.22 Stockholders Agreement, dated as of July 29, 1997, among the Company,
Charles S. Brand and the purchasers party thereto (previously filed as
Exhibit 10.5 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1997 (file no. 0-10696) and incorporated
herein by reference).
10.23 Unit Purchase Agreement, dated as of March 7, 1996, by and between the
Company and Cerberus Partners, L.P. (previously filed as Exhibit 10.6
to the Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997 (file no. 0-10696) and incorporated herein by reference).
10.24 Agreement of Lease, dated as of April 22, 1997, by and between the
Company and Reckson FS Limited Partnership (previously filed as Exhibit
10.12 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1997 (file no. 0-10696) and incorporated herein by
reference).
10.25 Lease, dated January 24, 1994, by and between Mid Atlantic Industrial
Co. and mmTech, as amended, (previously filed as Exhibit 10.13 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended June
30, 1997 (file no. 0-10696) and incorporated herein by reference).
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10.26 Lease, dated November 30, 1998, by and between 611 Industrial Way,
L.L.C. and the Company (previously filed as Exhibit 10.24 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended June
30, 1998 (file no. 0-10696) and incorporated herein by reference).
10.27 Consulting Agreement, dated March 4, 1998, by and between the Company
and Kenneth C. Thompson (previously filed as Exhibit 10.25 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended June
30, 1998 (file no. 0-10696) and incorporated herein by reference).
10.28 Employment Agreement, dated August 6, 1998, by and between the Company
and Kenneth C. Thompson (previously filed as Exhibit 10.26 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended June
30, 1998 (file no. 0-10696) and incorporated herein by reference).
10.29 Stock Option Agreement, dated February 22, 2000, by and between the
Company and Kenneth C. Thompson (previously filed as Exhibit 10.27 to
the Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1998 (file no. 0-10696) and incorporated herein by reference).
10.30 Separation Agreement, dated February 22, 2000, by and between the
Company and Kenneth C. Thompson (previously filed as Exhibit 10.28 to
the Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1998 (file no. 0-10696) and incorporated herein by reference).
10.31 Employment Agreement, dated as of July 10, 2000, by and between the
Company and Charles S. Brand (previously filed as Exhibit 99.6 to the
Company's Current Report on Form 8-K, dated July 11, 2000 (file no.
0-10696) and incorporated herein by reference).
10.32 Employment Agreement, dated as of July 10, 2000, by and between the
Company and Norman M. Phipps.
10.33 Non-Qualified Stock Option Agreement, dated as of July 10, 2000, by and
between the Company and Norman M. Phipps.
10.34 Non-Qualified Stock Option Agreement, dated as of July 10, 2000, by and
between the Company and Dr. Frank A. Brand.
10.35 Non-Qualified Stock Option Agreement, dated as of July 10, 2000, by and
between the Company and Jean-Francois Carrerras.
10.36 Non-Qualified Stock Option Agreement, dated as of July 10, 2000, by and
between the Company and Mark B. Fisher.
10.37 Consulting Agreement, dated as of July 29, 1997, by and between the
Company and MBF Capital Corp. (previously filed as Exhibit 10.16 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended June
30, 1997 (file no. 0-10696) and incorporated herein by reference).
10.38 Non-Recourse Secured Promissory Note, dated July 29, 1997, made by MBF
Capital Corp. in favor of the Company (previously filed as Exhibit
10.20 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1997 (file no. 0-10696) and incorporated herein by
reference).
10.39 Pledge Agreement, dated July 29, 1997, between the Company and MBF
Capital Corp. (previously filed as Exhibit 10.21 to the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 1997
(file no. 0-10696) and incorporated herein by reference).
10.40 Non-Recourse Secured Promissory Note, dated July 22, 1997, made by
Norman M. Phipps in favor of the Company (previously filed as Exhibit
10.17 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1997 (file no. 0-10696) and incorporated herein by
reference).
10.41 Pledge Agreement, dated July 22, 1997, by and between the Company and
Norman M. Phipps (previously filed as Exhibit 10.18 to the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 1997
(file no. 0-10696) and incorporated herein by reference).
10.42 Consulting Agreement, dated January 20, 1998, by and between the
Company and Dr. Frank A. Brand (previously filed as Exhibit 10.25 to
the Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997 (file
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no. 0-10696) and incorporated herein by reference).
10.43 LogiMetrics, Inc. 1997 Stock Compensation Program, as amended.
10.44 Form of Indemnification Agreement for Directors (previously filed as
Exhibit 10.24 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1997 (file no. 0-10696) and incorporated
herein by reference).
20.1 The Company's Information Statement pursuant to Section 14(f) of the
Securities Exchange Act of 1934 and Rule 14f-1 promulgated thereunder,
filed with the Securities and Exchange Commission on July 20, 2000
(previously filed as Exhibit 20.1 to the Company's Current Report on
Form 8-K, dated July 11, 2000 (file no. 0-10696) and incorporated
herein by reference).
21.1 List of the Company's Subsidiaries (previously filed as Exhibit 21.1 to
the Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997 (file no. 0-10696) and incorporated herein by reference).
27.1 Financial Data Schedule.
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* Certain portions of this exhibit have been omitted based upon a request for
confidential treatment. The omitted portions of this exhibit have been
separately filed with the Securities and Exchange Commission.
(b) Reports on Form 8-K: None.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, the Company has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LOGIMETRICS, INC.
Date: August 18, 2000 By: /s/ Norman M. Phipps
---------------------------------------
Norman M. Phipps
Senior Vice President of Administration
In accordance with the requirements of the Securities and Exchange Act of
1934, as amended, this report has been signed below by the following persons on
behalf of the Company and in the capacities and on the dates indicated.
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Date: August 18, 2000 By: /s/ John S. Mega
---------------------------------------
John S. Mega
Acting President
(Principal Executive Officer)
Date: August 18, 2000 By: /s/ Norman M. Phipps
---------------------------------------
Norman M. Phipps
Senior Vice President of Administration and Director
(Principal Financial Officer)
Date: August 18, 2000 By: /s/ Erik S. Kruger
---------------------------------------
Erik S. Kruger
Vice President - Finance and Administration
(Principal Accounting Officer)
Date: August 18, 2000 By: /s/ Jean-Francois Carreras
---------------------------------------
Jean-Francois Carreras, Director
Date: August 18, 2000 By: /s/ Jay B. Langner
---------------------------------------
Jay B. Langner, Director
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75
