FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED APRIL 30, 1996
( ) 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 0-8174
Conolog Corporation
Exact name of registrant as specified in its charter)
Delaware 52-0853566
(State or other jurisdiction or (I.R.S. Employer ID No.)
organization)
5 Columbia Road, Somerville, NJ 08876
(Address of principal executive offices and zip code)
(908) 722-8081
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been
subject to such filing requirement for the past 90 days.
Yes x No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS.
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12,
13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Common Stock, par value $1.00 per share 1,032,639
(inclusive of Treasury Stock)
CONOLOG CORPORATION
BALANCE SHEETS
APRIL 30,1996 JULY 31,1995
(Unaudited)
ASSETS
Current Assets
Cash $ 299,801 $ 27,577
Accounts Receivable,
less allowances of $10,000 379,845 171,541
Inventories 2,855,501 2,598,127
Other Current Assets 33,750 25,683
Deferred Tax Asset 0 492,352
Deferred Offering Costs 0 86,154
Total Current Assets 3,568,897 3,401,434
Property, Plant and Equipment,
less accumulated depreciation
of $1,867,269 and $1,820,922
respectively 445,832 468,895
Other Assets 11,606 11,906
Total Assets $4,026,335 $ 3,882,235
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities
Note Payable - Bank $ 75,000 $ 3,798,000
Bridge Loan 0 200,000
Current maturities of
capitalized lease
obligations 34,100 54,660
Accounts Payable 206,272 287,630
Accrued Expenses - Interest 55,812 654,618
- Payroll. 60,024 499,761
- Other 33,640 135,936
Total Current Liabilities 464,848 5,630,605
Other Liabilities
Long-term debt,
less current maturities 937,500 0
Capitalized lease obligations,
less current maturities 12,353 34,103
Due to Officers 0 161,705
Total Other Liabilities 949,853 195,808
Total Liabilities 1,414,701 5,826,413
Stockholder's Equity (Deficiency)
Preferred Stock, par value
$.50; 77,500 77,500
Series A; 4% cumulative;
162,000 shares authorized,
155,000 shares issued and
outstanding.
Preferred Stock; par value $.50 895 10,661
Series B; $.90 cumulative;
50,000 shares authorized;
outstanding before offering
21,321; at April 30, 1996:1,790
Common Stock, par value
$1.00 1,032,639 52,239
($.01 pre-reverse split);
6,000,000 shares authorized;
issued 1,032,639 shares
after offering (52,239
pre-reverse-split), including
8,776 shares held in Treasury
Additional Paid-In Capital 4,392,198 952,994
Retained Earnings(Deficit) (2,759,864) (2,905,838)
Treasury shares at cost (131,734) (131,734)
Total Stockholders' Equity (Deficiency)
2,611,634 (1,944,178)
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY
$ 4,026,335 $ 3,882,235
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENT
CONOLOG CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
APRIL 30, APRIL 30,
1996 1995 1996 1995
TOTAL REVENUES $529,802 $570,953 $1,519,975$1,908,123
COST OF GOODS SOLD
OPERATIONS 183,536 275,312 957,435 1,174,337
OBSOLETE INVEN 656,248
GROSS MARGIN 346,266 295,641 562,540 77,538
SELLING, GENERAL AND
ADMIN. EXPENSE 214,019 172,970 653,571 577,985
OPERATING INCOME
(LOSS) 132,247 122,671 (91,031)(500,447)
INTEREST EXPENSE 35,000 0 118,371 169,742
INCOME/(LOSS) BEFORE TAXES ON INCOME
AND EXTRAORDINARY ITEMS
97,247 122,671 (209,402)(670,189)
PROVISION FOR INCOME TAX 100 50
INCOME/(LOSS) BEFORE
EXTRAORDINARY ITEMS 97,247 122,671 (209,502)(670,239)
EXTRAORDINARY ITEMS 0 0 740,376 0
(Net of Tax Benefit of $492,352)
NET INCOME/(LOSS) $97,247 $122,671 $ 530,874$(670,239)
EARNINGS/(LOSS) PER SHARE - PRIMARY
$ .10 $ .03 $ .51 $ (.15)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENT
FORM 10-Q
Summarized Financial Information for
CONOLOG CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE NINE MONTHS
ENDED APRIL 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 530,874 $ (670,239)
Adjustments to Net Income to Reconcile to
Net Cash Provided by Operating Activities:
Depreciation and amortization 46,347 53,983
(Increase)Decrease in Accounts
Receivable. (208,304) (163,492)
(Increase)Decrease in Inventories (257,374) 622,333
(Increase)Decrease in other
current assets ( 5,941) ( 4,561)
Increase(Decrease)in Accts Payable( 81,359) ( 11,552)
Increase(Decrease)in accrued
expenses and other liabilities (618,819) 264,420
Net Cash Used in Operating
Activities (594,576) 90,892
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant
and equipment ( 23,284) (79,236)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase from Public Stock
Offering 4,409,839 0
Increase(Decrease)in due to
officers (161,705) (5,207)
Change in Capital Lease Obligations 12,353 0
Proceeds from short-term borrowings 0 40,000
Repayments of Bridge Loans (200,000) 0
Repayments of long-term
borrowings (2,785,500) (45,951)
Dividends Paid ( 384,903) 0
Net Cash Provided by Financing
Activities 890,084 (11,158)
NET INCREASE(DECREASE) IN CASH 272,224 498
CASH AT BEGINNING OF YEAR 27,577 15,403
CASH AT END OF PERIOD $ 299,801 $ 15,901
Supplemental Disclosures of Cash Flow Information:
Cash Paid during the Period for:
Interest $ 9,564 $ 7,663
Income Taxes 0 50
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
CONOLOG CORPORATION
FORM 10Q
Computation of Earnings per Share:
For the Nine Months Ended
April 30,
1996 1995
Weighted Average Number of Shares
Outstanding:
1,032,639 4,346,274
COMMON STOCK
Reserve for Conversion:
Series A Preferred Stock *155,000 0 0
Series B Preferred Stock
(1 to 20 conversion factor) 1,790 426,420
Common Stock Equivalents (Warrants) 235,750 0
Total 1,270,179 4,772,694
Gain/Loss per Share:
Total Gain/Loss $ 530,874 $ (670,239)
Pro-rata Dividends on Preferred
Stock Series A and B 3,572 11,144
Net gain/loss available for
Common Stock 527,302 (681,383)
Average Number of Shares of
Common Stock 1,032,639 4,346,274
Gain/(Loss) Per Share $ .51 $ (.15)
*Each share of Series A Preferred Stock may be exchanged for
one share of Common Stock upon surrender of the Preferred
Stock and payment of $1200 per share in 1996, and $12 per
share in 1995. In view of the large difference between the
current market value of the stock and the conversion rate,
these shares have not been added to the total common
shares used in computing the net earnings per share.
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
Form 10-Q
Summarized Financial Information for
CONOLOG CORPORATION
Fully diluted earnings per share, assuming conversion of
Series A and Series B Preferred Stock, has not been
reflected as the effect would be anti-dilutive or not
material.
Long-Term Debt
On August 16, 1995, the Bank exchanged debt obligations for
(a) 250,000 cash; (b) $1,025,000 Five-year term loan and (c)
375,000 shares of Common Stock.
The five-year term loan of $1,025,000 bears interest at the
Bank's refinance rate, plus 1 1/4% to be amortized as
follows:
- - eight (8) quarterly payments of $12,500, beginning October
1995 through July 1997
- - eight (8) quarterly payments of $25,000, beginning October
1997 through July 1999,
- - three (3) quarterly payments of $28,125, beginning October
1999 and ending April 2000.
- - a balloon payment of $640,625, due July 2000.
As a result of the above transaction, the Company realized a
$1,232,728 gain on debt compromise. In addition, the Bank
released the existing guarantees of Messrs. Benou and Havasy
on the Closing Date.
The aggregate amounts of long-term debt maturities for the
four years following April 30, 1996 are:
1996 $ 75,000
1997 100,000
1998 837,500
$1,012,500
At April 30, 1996, the Company was in arrears by $25,000
Capitalized Lease Obligations
April 30, 1996 July 31, 1995
Leases Payable $ 34,100 $ 88,763
Less - Current Portion$ 12,353 $ 54,660
$ 21,747 $ 34,103
Maturities on Capitalized Leases, subsequent to April 30,
1996 are
1996 $ 12,353
1997 $ 21,747
Due to Officers
As of April 30, 1996, the monies advanced to the
Corporation have been repaid. Effective July 31, 1995,
Interest was accrued from inception of these advances at the
cumulative rate of 12% of the outstanding balances and is
currently being repaid.
Form 10-Q
Summarized Financial Information for
CONOLOG CORPORATION
At April 30, 1996, the Company has a net operating loss
carryforward of approximately $2,740,000 for financial
reporting purposes and approximately $2,334,400 for tax
purposes which is available to offset future Federal taxable
income. For Federal purposes, $1,129,300 of the carry
forward expires in 2002, and $1,205,100 expires in 2009.
For State purposes the carry forward is approximately
$1,555,600 of which $350,600 expires in 1998 and $1,205,000
in 2000. Also at April 30, 1996, the Company has unused tax
credits available of approximately $103,300 of which $12,100
expires in 2000, $26,300 in 2001 and $64,900 in 2002.
Taxable income differs from financial statement income due
to the effect of non-deductible permanent tax differences.
These permanent tax differences include officer's life
insurance premiums & non-deductible entertainment expenses.
At April 30, 1996 no deferred income taxes have been
provided for per SFAS No 109 - Accounting for Income Taxes
since management estimated that temporary differences due to
operating losses & tax credit carry forwards will not be
absorbed by future taxable income.
Form 10-Q
Part II - Other Information
CONOLOG CORPORATION
Management Discussion and Analysis of Quarterly Financial
Statements
On August 16, 1995, the Company offered 235,750 Units (the
Units) at a price of $10.00 per Unit. Each Unit consisted
of two (2) shares of Common Stock, par value $1.00 per share
(Common Stock), and one (1)Redeemable Class A Warrant for Common
Stock(Class A Warrant). The Common Stock and Class A Warrants
are detachable and trade separately. Each Class A Warrant
entitles the holder to purchase one share of the Company's Common
stock, at an exercise price of $6.00, subject to adjustment,
from August 17, 1996 through August 16, 1998. The Class A
Warrants (the Warrants) are subject to redemption by the Company
at anytime after August 17, 1996 on not less than 30 days notice
at $.05 per warrant, provided the average closing price of the
Common Stock for 20 consecutive trading days ending within 15
days prior to the notice exceeds $7.20 per share.
The costs of the offering were deducted from the proceeds
from the sale of stock.
On August 16, 1995, the Company effected a 100-to-1 reverse
stock split of its Common Stock on all shares of Common Stock
outstanding.
On August 16, 1995, holders of 19,360 shares of the Company's
Series B Preferred Stock (including Robert Benou and Arpad
J. Havasy, officers and directors of the Company) converted
their shares of Series B Preferred Stock into 387,200 (3,872
post-split) shares of Common Stock.
On August 16, 1995, $381,533 of the $420,179 of accrued
dividends on the Series B Preferred Stock at December 31, 1994
were converted into 76,307 shares of Common Stock (represents a
$5.00 per share assigned value of Common Stock) and the remaining
dividends due to such holders (including Messrs. Benou and
Havasy) were waived.
On August 16, 1995, accrued salaries through April 28, 1995
of $309,109 owed by the Company to Mr. Benou were converted
into 61,822 shares of Common Stock (represents a $5.00 per share
assigned value of Common Stock).
On August 16, 1995, in connection with the above offering,
the bank exchanged their existing loan agreement for the
following:
(a) $250,000 cash
(b) $1,025,000 five-year term loan
(c) 375,000 common shares of the Company
The debt forgiveness of $1,232,728 on restructuring of the
obligation less the tax benefit thereon is accounted for as
an extraordinary gain to the Company.
A summary of income, costs and expenses for the current
quarter and corresponding quarter of the previous year follows.
QUARTERS ENDED APRIL 30,
1996 1995
Sales and Revenues $ 529,802 $ 570,953
Costs and Expenses 432,555 448,282
Net income after taxes $ 97,247 $ 122,671
Revenues for the quarter ended April 30, 1996 totaled $529,802,
representing a decrease of $41,151 from $570,953 reported for
the same quarter a year ago.
Revenues for the nine months ended April 30, 1996 decreased
$388,148 to $1,519,975 from $1,908,123 for the nine months ended
April 30, 1995. Revenues declined as a result of a decline
in sales in the military sector. The Company completed a large
sale of switches to the military in the nine month period last
year and did not have a comparable sale for the same nine month
period this year.
Gross margins for the quarter and nine month period totaled
$346,266 and $562,540, respectively, representing 65.3% and
37.0% of revenues as compared to $295,641 and $77,538, represen-
ting 51.8% and 4.1% of revenues, respectively, for the quarter
and nine month period ended April 30, 1995. Gross margins were
higher in the 1996 quarter and nine month periods as compared to
the comparative periods last year due to the military sales com-
ponent that contained many parts that had previously been
written down to a zero value. Although overall revenues were
down, even with respect to the military sector, margins were
sharply higher for the quarter and nine months ended April 30,
1996.
Selling, general and administrative expenses increased
$41,049 and $75,586 for the quarter and nine months of 1996,
respectively, as compared to 1995. These expenses increased as a
result of an expansion of the employment base and an increase
in advertising and promotion costs.
Interest expense totaled $35,000 for the quarter and $118,371
for the nine months ended April 30, 1996, respectively, as
compared to no interest expense for the same quarter in 1995 and
$169,742 in interest expense for the nine months ended April 30,
1995. The Company reached a debt restructuring agreement with
the bank during 1995 that resulted in having no interest expense
for the quarter ended April 30, 1995.
As a result of the foregoing, the Company reported net income
of $97,247, or $.10 per share for the quarter and $530,874 in
net income, or $.51 per share for the nine months. The income
for the nine months ended April 30, 1996 was inclusive of a
debt compromise of $740,376, net of a tax benefit of $492,352.
This compares to a net income of $122,671, or $.03 per share
and a net loss of $670,239, or $.15 per share for the same
quarter and nine months period last year.
Liquidity and Financial Condition
Working capital at April 30, 1996 was $3,104,049 compared to
a deficit of $2,229,171 at year ended July 31, 1995. The change
in working capital from a deficit to a surplus was attributable
to restructuring of debt obligations and the proceeds from the
public stock offering.
Management Representation
The information furnished reflects all adjustments which
management considers necessary to a fair statement of the
results of the period.
As of April 30, 1996 Registrant's backlog of orders stands
at $4.6 million, a mix of military and commercial
telecommunication products. The company anticipates its
commercial shipments to grow as a percentage of total sales for
the foreseeable future.
Statement Regarding Present Operations
There was no material change in the nature of the operations
of Registrant during the nine months ended April 30, 1996 from
the information contained in the Registrant's annual report of
Form 10-K for the fiscal year ended July 31, 1995, except as
noted in Management Discussion and Analysis with respect to the
August 16, 1995 stock offering.
Form 10-Q
Part II - Other Information
CONOLOG CORPORATION
1. Legal Proceedings - No material proceedings pending
April 30, 1996
2. Changes in Securities - See Management's Discussion
3. Defaults upon Senior Securities - See note concerning
Long-term Debt
4. Submission of Matters to a Vote of Security Holders -
See
Prospectus filed in connection with Stock Offering
5. Other Materially Important Events - See Management's
Discussion
6. No reports or Exhibits on Form 8-K have been filed
during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Conolog Corporation
June 14, 1996 s/s Robert S. Benou
Robert S. Benou, President
(Duly authorized officer and
principal financial officer)