-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GGvbeqtPkkLreEP/gtMVYNXbQkqUI/74zdlRBSjO5SQwDxd3BU+4/CIx52VFdCPs T0gyIQwLuXQZqIZ3GcG8jQ== 0000912057-96-017768.txt : 19960816 0000912057-96-017768.hdr.sgml : 19960816 ACCESSION NUMBER: 0000912057-96-017768 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDIA LOGIC INC CENTRAL INDEX KEY: 0000815185 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 042772354 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09605 FILM NUMBER: 96613068 BUSINESS ADDRESS: STREET 1: 310 SOUTH STREET STREET 2: P O BOX 2258 CITY: BOSTON STATE: MA ZIP: 02762 BUSINESS PHONE: 5086952006 MAIL ADDRESS: STREET 1: 310 SOUTH STREET STREET 2: P O BOX 2258 CITY: PLAINVILLE STATE: MA ZIP: 02762 10-Q 1 10-Q Form 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended: June 30, 1996 Commission File Number: 1-9605 Media Logic, Inc. (Exact name of registrant as specified in its charter) Massachusetts 04-2772354 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 310 South Street; P.O. Box 2258; Plainville, MA 02762 (Address of principal executive offices) (Zip Code) (508) 695-2006 (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 requirements for the past 90 days. X 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 $.01 par value -- 6,226,609 shares as of August 10, 1996 INDEX MEDIA LOGIC, INC. PART I. FINANCIAL INFORMATION Item 1. Consolidated financial statements (Unaudited) Consolidated condensed balance sheets -- June 30, 1996 and March 31, 1996 Consolidated condensed statements of operations -- three months ended June 30, 1996 and 1995. Consolidated condensed statements of cash flows -- three months ended June 30, 1996 and 1995. Notes to consolidated condensed financial statements -- June 30, 1996. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURES PART I. FINANCIAL INFORMATION MEDIA LOGIC, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) JUNE 30, MARCH 31, 1996 1996 -------- --------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 2,615,661 $ 3,545,477 Marketable securities --- --- Accounts receivable, net 978,349 998,403 Inventories (Note 2) 2,760,461 2,467,149 Refundable income taxes 24,873 27,658 Other current assets 57,491 73,397 ------------ ------------ TOTAL CURRENT ASSETS 6,436,835 7,112,084 PROPERTY AND EQUIPMENT - NET 641,333 793,038 Other Assets 136,759 59,870 ------------ ------------ $ 7,214,927 $ 7,964,992 ------------ ------------ ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 674,099 $ 343,873 Accrued expenses 606,039 605,453 Customer deposits --- --- ------------ ------------ TOTAL LIABILITIES $ 1,280,138 $ 949,326 STOCKHOLDERS' EQUITY: Common stock par value $.01 per share; authorized 20,000,000 shares, 6,226,609 and 6,213,809 outstanding as of June 30, 1996 and March 31, 1996, respectively 62,266 62,138 Additional paid-in capital 19,208,794 19,167,072 Retained deficit (13,336,271) (12,213,544) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 6,034,789 7,015,666 ------------ ------------ 7,214,927 7,964,992 ------------ ------------ ------------ ------------ SEE NOTES TO CONDENSED FINANCIAL STATEMENTS PART 1. FINANCIAL INFORMATION MEDIA LOGIC, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED JUNE 30, 1996 1995 ---- ---- NET SALES $ 848,549 $ 666,984 COSTS AND EXPENSES: Cost of products sold 447,092 567,131 Selling, general and administrative expenses 1,031,940 1,122,009 Research and development expenses 520,503 900,443 ----------- ----------- LOSS FROM OPERATIONS (1,150,986) (1,922,599) OTHER INCOME (EXPENSE): Interest income 40,559 20,939 Miscellaneous 2,430 3,191 ----------- ----------- LOSS BEFORE INCOME TAXES (1,107,997) (1,898,469) INCOME TAXES 14,730 -- ----------- ----------- NET LOSS $(1,122,727) $(1,898,469) ----------- ----------- ----------- ----------- NET LOSS PER SHARE (NOTE 3) $ (.18) $ (.38) ----------- ----------- ----------- ----------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 6,219,308 4,979,066 ----------- ----------- ----------- ----------- SEE NOTES TO CONDENSED FINANCIAL STATEMENTS MEDIA LOGIC, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED JUNE 30, 1996 1995 ---- ---- CASH USED BY OPERATING ACTIVITIES $(1,741,045) $(1,510,515) INVESTING ACTIVITIES: Sale of marketable securities 840,563 1,027,666 Sale (purchase) of property and equipment (29,334) 18,417 Other assets -- 4,086 ----------- ----------- Cash provided by investing activities 811,229 1,050,169 ----------- ----------- NET INCREASE (DECREASE) IN CASH (929,816) (460,346) CASH BALANCE, BEGINNING OF THE PERIOD 3,545,477 911,729 ----------- ----------- CASH BALANCE, END OF THE PERIOD $ 2,615,661 $ 451,383 ----------- ----------- ----------- ----------- SEE NOTES TO CONDENSED FINANCIAL STATEMENTS MEDIA LOGIC, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) June 30, 1996 (1) BASIS OF PRESENTATION As permitted by rules of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, these notes are condensed and do not contain all disclosures required by generally accepted accounting principles. Reference should be made to the consolidated financial statements and related notes included in the Company's Annual Report to shareholders on Form 10-K for the fiscal year ended March 31, 1996. In the opinion of the management of Media Logic, Inc., the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring items) necessary to present fairly the Company's financial position at June 30, 1996, and the results of its operations and its cash flows for the three months ended June 30, 1996 and June 30, 1995. (2) INVENTORIES JUNE 30, 1996 MARCH 31, 1996 ------------- -------------- Raw materials $1,866,394 $1,870,553 Work in process 408,485 139,265 Finished goods 485,582 457,331 ---------- ---------- $2,760,461 $2,467,149 ---------- ---------- ---------- ---------- (3) LOSS PER SHARE Net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Common stock equivalents were not considered in the determination of net loss per share, as their inclusion would be anti-dilutive. (4) MARKETABLE SECURITIES As of June 30, 1996, marketable securities consist of investments in state and local municipal obligations which are carried at their quoted market values. Such amounts did not differ materially from the amortized cost basis of the securities. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995 RESULTS OF OPERATIONS SALES: Sales for the three month period ended June 30, 1996 increased 27.2% to $848,459 from $666,984 for the three months ended June 30, 1995. Demand for certifiers, test equipment and duplication equipment, the Company's traditional products, remained low during the quarter. While diskette prices have experienced a modest increase, margins remain low for disk manufacturers and the Company does not expect these manufacturers to make significant investments in additional capital equipment. The Company is committed to achieving the maximum possible revenues from its current product lines. This includes not only the sale of new certification, test and duplication equipment but also upgrades, spare parts and maintenance for previously sold units. The Company is continuing its program to expand and upgrade its sales force to gain greater visibility and market penetration. The Company has not yet generated sales from its line of automated data library ("ADL") products currently under development. GROSS PROFIT: The Company's gross profit for the three months ended June 30, 1996 was $401,457 as compared with $99,583 for the three months ended June 30, 1995. The generation of a gross profit on low sales volume is reflective of the cost reduction measures which the Company has instituted. EXPENSES: Selling, General and Administrative (SG&A) expenses for the three months ended June 30, 1996 was $1,031,940 (121.6% of sales) as compared with $1,122,009 (108.2% of sales) for the three months ended June 30, 1995. SG&A expense related to the Company's current product lines was $612,619 for the three months ended June 30, 1996 as compared with $782,628 for the three months ended June 30, 1995. SG&A expenses related directly to a product line of automated data libraries being developed by the Company's MediaLogic ADL subsidiary were $419,327 in the three month period ended June 30, 1996 as compared with $339,381 in the three month period ended June 30, 1995. The Company expects that SG&A expenses related to ADL will continue to increase as product development is completed and ADL begins the process of selling the libraries. Research and Development expenses for the three month period ended June 30, 1996 were $520,503 (61.3% of sales) as compared to $900,443 (135.0% of sales) for the three month period ended June 30, 1995. Of the overall Company research and development expenditure, $433,603 or 83.3% for the period ended June 30, 1996 were related to the development of the ADL product line of automated data libraries. The Company has and will continue to devote a substantial portion of its resources to the development and introduction into manufacturing of the ADL product line. The Company believes that the ADL product line will provide a unique solution to the data storage and retrieval needs of a broad range of potential users. The Company further believes that the tape library market is large and growing and is the area in which the Company has the best opportunity for future growth. The Company expects the first shipment of libraries near the middle of fiscal year 1996. LIQUIDITY AND CAPITAL RESOURCES: At June 30, 1996, the Company had working capital of $5.2 million compared to $6.2 million at March 31, 1996. The current ratio was 5.0 to 1 as of June 30, 1996 and 7.5 to 1 at March 31, 1996. The decrease in working capital was principally due to significant operating losses and funding of the development of the ADL family of products. The Company has no debt nor does it have a line of credit or other committed source of additional financing. The Company's internal operating plan for fiscal 1996 shows cash resources will be available to fund operations if the plan is substantially achieved. Critical to achievement of the plan are the sale and shipment of automated data libraries by the middle of fiscal 1996 and the achievement of sales goals for the current certifier, evaluation and duplication products. Because of reliance on sales of ADL products which are unproven, there is substantial risk that the Company may not achieve the plan and therefore, the Company could be without sufficient funds to continue operations through fiscal 1996. The Company is exploring alternative sources of financing should there be a requirement for additional funding but has not yet received a commitment for such financing. There can be no assurance that the Company will have sufficient funds to complete the development of its ADL products or that, if required, the Company will be able to raise sufficient funds to do so. Further, if the Company is required to raise additional funds, there is no assurance that it will be able to do so in a timely manner or on favorable terms. In September, 1995, the Company received $5 million in a private placement which must be used exclusively in connection with the Company's Automated Data Library (ADL) business. The Company continually monitors the changing business conditions and takes whatever actions it deems necessary to protect and promote the Company's interests. UNCERTAINTIES The discussion in this report includes forward-looking statements based on management's current expectations. To the extent that any of the statements contained herein relating to the Company's products and its operations are forward looking, such statements are based on management's current expectations that involve a number of uncertainties and risks. Factors that could cause future results to differ materially from such expectations include, but are not limited to, the uncertainty surrounding the Company's change in product base from floppy disk/magnetic tape certifiers and evaluators to automated data libraries and the risk that the Company's new products may not be able to be marketed at acceptable prices or receive commercial acceptance in the markets that the Company expects to target; the loss of the services of one or more of the Company's key individuals, which could have a material adverse impact on the Company; the development of competing or superior technologies and products from manufacturers, many of which have substantially greater financial, technical and other resources than the Company; the cyclical nature of the computer industry; the availability of additional capital to fund expansion on acceptable terms, if at all; and general economic conditions in both the United States and overseas markets. As a result, the Company's future development efforts involve a high degree of risk. For further information, refer to the risks and uncertainties discussed in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996, as filed with the Securities and Exchange Commission. Actual results may differ materially from such expectations. PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS None Item 2. CHANGES IN SECURITIES None Item 3. DEFAULTS UPON SENIOR SECURITIES None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None Item 5. OTHER INFORMATION None Item 6. EXHIBITS AND REPORTS ON FORM 8-K None 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. MEDIA LOGIC, INC. Date: 8/13/96 ------------------- ----------------------------- Paul M. O'Brien, Vice-President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----