Conolog Corp. has a market cap of $11.1 million; its shares were traded at around $1.66 with and P/S ratio of 44.3.
Highlight of Business Operations:Product revenues for the three months ended October 31, 2009 totaled $468,096, representing an increase of 3% from $456,681 for the same three month period last year. The Company attributes this three month increase to more timely order releases from utilities. Product Cost (Material and Direct Labor) for the three months ended October 31, 2009 and 2008 totaled $196,883 and $104,305 respectively. Gross Profit for the three months ended October 31, 2009 and 2008 amounted to $271,213 or 58% and $352,376 or 77% respectively. Selling, general and administrative expenses for the three months ended October 31, 2009 amounted to $953,290, an increase of $434,146 from the same period last year. The Company attributes this primarily to an increase of $62,334 for professional fees and services and the amortization of $336,366 for the annual stock grant program. Non-cash non-operating expenses for the three-month period totaled $72,192 and consisted primarily of expenses related to the induced conversion cost of $31,208 and $35,411 for amortization of deferred financing fees. As a result of the foregoing, the Company reported a net loss from operations of ($754,269) or ($0.35) per share compared to a loss of ($559,853) or ($0.18) per share for the three months ended October 31, 2009 and 2008, respectively.
Inventories from the Companys product segment decreased from $1,395,452 at July 31, 2009 to $1,392,106 for the three months ended October 31, 2009, a decrease of $3,346. Accounts Receivable-trade decreased to $233,634 for the three months ended October 31, 2009 from $245,980 as of July 31, 2009. The Company expects to meet its cash requirements for the next twelve months through existing cash balances and cash generated from operations. However, we anticipate that we may require additional financing to expand our operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds: During the quarter ended October 31, 2009, two Note Holders exercised conversion rights to convert $259,206 principal and $6,433 of interest to 338,363 unregistered shares of common stock. In connection with the foregoing, the Company relied upon the exemption from securities registration afforded by Rule 506 of Regulation D as promulgated by the SEC under the Securities Act of 1933, as amended (the Securities Act) an/or Section 4(2) of the Securities Act. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, and transfer was restricted by the Company in accordance with the requirements of the Securities Act of 1933.
At a Special Meeting of Shareholders held on September 24, 2009, the Shareholder Approval was obtained. As a result, the Escrowed Funds related to the August 3rd Subscription Agreement were released and after the payment of fees in the amount of $50,000 to Garden State Securities, Inc., the placement agent for the transaction, the Company received net proceeds of $450,000 (prior to the deduction of other fees and expenses related to the Offering).
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