Microlytics Files to Terminate Registration with SEC.

PITTSFORD, N.Y.--(BUSINESS WIRE)--Oct. 25, 1995--Microlytics, Inc. announced today that it has filed with the Securities and Exchange Commission to terminate its registration under the Securities Exchange Act of 1934.

The effect of such a termination, if granted, would be a cessation of its obligation to file quarterly and Annual Reports; limitation of future trading to the "Pink Sheets" (an inter-dealer quotation publication) provided that the Company otherwise publicly disseminates the same type and kind of material information as would have been required by those reports; and loss of certain rights to holders of restricted stock to resell those restricted shares under certain exemptions from the registration requirement of the Securities Act of 1933. The Company noted that its shares had already been removed from the NASDAQ National Market for failure to meet "price" requirements and was now in fact only quoted in the Pink Sheets. It also noted that it has not yet filed the Form 10-K for the year ended March 31, 1996 and subsequent Forms 10-Q. The Company said the decision to deregister was motivated by the need to eliminate the substantial legal and accounting expense associated with filing the SEC reports.

Microlytics also announced today that it has been named as a defendant in an action brought in the Federal District Court for the Southern District of New York by Unterberg Harris Private Equity Partners LP, a venture capital firm in New York City for alleged securities fraud and breach of contract in connection with Unterberg's purchase of $2.5 million of the Company's securities in June of 1995. Xerox Corporation's Venture Capital division and certain of the Company's former Officers and Directors, Messrs. Haythorn and Riley, have also been sued for alleged violations of federal securities laws, breach of fiduciary duty, common law fraud and misrepresentation in connection with the same investment. The Company has not yet had an opportunity to review either the Complaint or the underlying facts in detail, but expects that if the allegations are true, it will "claim over" against Xerox and Messrs. Haythorn and Riley for any liability it might have to Unterberg Harris and, in addition, the Company may seek independent recovery from those other defendants for damage to the Company arising out of their alleged activities.

The Company also announced the previous resignations of Messrs. Donald Riley and Robert Harris as directors. The sole remaining director is Mr. Elroy G. Roelke. Mr. Roelke is a Vice President of Renaissance Capital which is a holder of 15% of the Company's Common Stock. Michael McCourt, a Vice President of the Company, is acting as General Manager for its day to day operations.

Mr. McCourt stated the Company's MicroPages proprietary full text retrieval product has been recently licensed to a "Baby Bell" for use in that corporation's proprietary "Internet Yellow Page" site. In addition the Company continues to support its strategic partners Seiko Instruments, Eurotronics and Fuji Xerox with compression and linguistics technology as well as provide electronic directory products to GTE and Rochester Telephone Corp.

Mr. McCourt stated that while its trade accounts are basically current, that it is developing a restructuring plan to handle its other debt obligations totaling $3.2 million, all of which are in substantial default, and to raise additional capital for its MicroPages business.

No date has been set for an annual meeting of shareholders, normally held in August of each year, pending identification of new directors and development of a plan for restructuring the Company.

CONTACT: Microlytics, Inc., Pittsford

Mike McCourt, VP and General Manager

Tel: [phone] ext. 300

Fax: [phone]

email: [e-mail]