-----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, LPDdo3Fpr/+BFpMrwyFlOLE4Wbe1dMLvceG4ZMr9eXBM3l1FHx5bBAneS4NE0LO5 Cx/sDLP7vkVwaeKTkcSixw== 0001005477-97-002116.txt : 19970815 0001005477-97-002116.hdr.sgml : 19970815 ACCESSION NUMBER: 0001005477-97-002116 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDIA LOGIC INC CENTRAL INDEX KEY: 0000815185 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] 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: 97663137 BUSINESS ADDRESS: STREET 1: 310 SOUTH ST STREET 2: P O BOX 2258 CITY: PLAINVILLE STATE: MA ZIP: 02762 BUSINESS PHONE: 5086952006 MAIL ADDRESS: STREET 1: 310 SOUTH ST STREET 2: P O BOX 2258 CITY: PLAINVILLE STATE: MA ZIP: 02762 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended: June 30, 1997 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 Identification No.) incorporation or organization) 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 - 6,613,029 shares as of August 12, 1997 INDEX MEDIA LOGIC, INC. PART I. FINANCIAL INFORMATION Item 1. Consolidated condensed financial statements (Unaudited) Consolidated condensed balance sheets - June 30, 1997 and March 31, 1997 Consolidated condensed statements of operations - three months ended June 30, 1997 and 1996 Consolidated condensed statements of cash flows - three months ended June 30, 1997 and 1996 Notes to consolidated condensed financial statements - June 30, 1997 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, 1997 1997 ------------------ ------------------ ASSETS CURRENT ASSETS:: Cash and cash equivalents $ 1,177,479 $2,382,875 Accounts receivable, net 473,394 813,993 Inventories 3,422,570 3,563,482 Prepaid expenses and other current assets 1,000 1,000 ------------------ ------------------ Total current assets 5,074,443 6,761,350 PROPERTY AND EQUIPMENT, net 397,526 469,080 DEFERRED FINANCING COSTS 1,569,176 1,711,829 OTHER ASSETS 18,641 30,696 ------------------ ------------------ $7,059,786 $8,972,955 ================== ================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES:: Accounts payable $416,150 $1,107,732 Accrued expenses 350,507 293,238 ------------------ ------------------ Total current liabilities 766,657 1,400,970 CONVERTIBLE SUBORDINATED DEBENTURES 3,288,608 3,266,663 STOCKHOLDERS' EQUITY: Common stock, par value $.01 per share; 20,000,000 shares authorized; 6,321,509 and 6,320,909 shares issued and outstanding as of June 30, 1997 and March 31, 1997, respectively 63,215 63,209 Additional paid-in capital 20,579,138 20,577,945 Accumulated deficit (17,637,832) (16,335,832) ------------------ ------------------ Total stockholders' equity 3,004,521 4,305,322 ------------------ ------------------ $7,059,786 $8,972,955 ================== ==================
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS PART I. FINANCIAL INFORMATION MEDIA LOGIC, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended June 30, 1997 1996 ---------------- ---------------- NET SALES $332,569 $848,549 COSTS AND EXPENSES: Cost of products sold 245,441 447,092 Selling, general and administrative expenses 746,927 1,031,940 Research and development expenses 429,682 520,503 ---------------- ---------------- LOSS FROM OPERATIONS (1,089,481) (1,150,986) OTHER INCOME (EXPENSE): Interest income 12,713 40,559 Interest expense-convertible debentures (226,372) - Other 1,140 2,430 ---------------- ---------------- LOSS BEFORE INCOME TAXES (1,302,000) (1,107,997) PROVISION FOR INCOME TAXES - 14,730 ---------------- ---------------- NET LOSS $(1,302,000) $(1,122,727) ================ ================ NET LOSS PER SHARE $(.21) $(.18) ================ ================ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 6,321,067 6,219,308 ================ ================
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS PART I. FINANCIAL INFORMATION MEDIA LOGIC, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED JUNE 30, 1997 1996 --------------- --------------- CASH USED BY OPERATING ACTIVITIES $ (1,218,651) $(1,741,045) --------------- --------------- CASH PROVIDED (USED) BY INVESTING ACTIVITIES: Sale of marketable securities - 840,563 Sale (purchase) of property and equipment, net - (29,334) Decrease in other assets 12,055 - --------------- --------------- 12,055 811,229 --------------- --------------- CASH PROVIDED BY FINANCING ACTIVITIES: Exercise of stock options 1,200 - --------------- --------------- 1,200 - --------------- --------------- NET INCREASE (DECREASE) IN CASH (1,205,396) (929,816) CASH BALANCE, BEGINNING OF PERIOD 2,382,875 3,545,477 --------------- --------------- CASH BALANCE, END OF PERIOD $ 1,177,479 $2,615,661 =============== ===============
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS PART I. FINANCIAL INFORMATION MEDIA LOGIC, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) June 30, 1997 (1) Operations and Basis of Presentation Media Logic, Inc. (the "Company") designs and manufactures tape-based data storage libraries targeted at the information needs of small to mid-sized businesses. The Company also supplies evaluation equipment for flexible computer disks and tape, and manufactures and sells industrial duplication equipment for high volume and high reliability applications. 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, 1997. In the opinion of the management of Media Logic, Inc., the accompanying consolidated condensed financial statements contain all adjustments (consisting of only normal recurring items) necessary to present fairly the Company's financial position at June 30, 1997, and the results of its operations and its cash flows for the three months ended June 30, 1997 and June 30, 1996. (2) Inventories June 30, 1997 March 31, 1997 ------------------ ------------------ Raw materials $1,751,150 $1,808,917 Work in process 159,166 168,762 Finished goods 1,512,254 1,585,803 ================== ================== $3,422,570 $3,563,482 ================== ================== (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) Convertible Subordinated Debentures On March 24, 1997, the Company issued 7% convertible subordinated debentures (the "Debentures") with gross proceeds of $3,530,000. Each debenture has a face amount of $10,000 and bears interest at 7% per annum. Interest is payable upon conversion or redemption of the Debentures and is payable in either cash or shares of common stock at the average market price of common stock over the five days preceding the conversion dates, at the option of the Company. The Debentures are convertible at the option of the holder into common stock of the Company. The conversion price is equal to the lower of (x) 120% of the average closing bid price of the common stock for the five trading-day period ending on the trading day prior to the subscription date (March 24, 1997) or (y) 80% of the average closing bid price for five days immediately preceding the conversion date. As of the subscription date, the conversion price was $2.805. The Debentures mature on March 24, 2000 and automatically convert on that date at the then current conversion price. In connection with the issuance of the Debentures, The Company issued warrants to purchase 1,550,870 shares of common stock at $3.00 per share and 151,016 shares of common stock at $3.51 per share. The warrants are exercisable at the option of the warrantholder at any time on or after September 24, 1997 and March 24, 1998 for warrants priced at $3.00 per share and $3.51 per share, respectively. All warrants expire on March 25, 2002. The Company recognized the estimated fair value of the warrants based on the Black-Scholes valuation model and the guaranteed return conversion feature attributable to the Debentures as deferred financing costs with an increase to additional paid-in capital. These amounted to $1,228,000 along with actual cash financing costs of approximately $484,000. Deferred financing costs are being amortized over three years, the stated term of the Debentures, and are included in "Interest expense-convertible debentures" in the accompanying Consolidated Condensed Statements of Operations. To the extent that the Debentures are converted, any unamortized deferred financing costs will be charged against additional paid-in capital. 5) New Accounting Standard In March 1997, The Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share. SFAS No. 128 establishes standards for computing and presenting earnings per share and applies to entities with publicly held common stock or potential common stock. This statement is effective for fiscal years ending after December 15, 1997 and early adoption is not permitted. When adopted, the statement will require restatement of prior years' earnings per share. The Company will adopt this statement for its fiscal year ended March 31, 1998. The Company believes that adoption of SFAS No. 128 will not have a material effect on its financial statements. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996 Results of operations Sales: Sales for the three month period ended June 30, 1997 were $332,569 as compared with $848,549 for the three months ended June 30, 1996. Sales for the three month period ended June 30, 1997 decreased 60.8% as compared with the three month period ended June 30, 1996. Demand for the Company's traditional products continued to decline, and sales of the Company's Automated Data Library ("ADL") line were not a significant source of operating revenues. The Company is continuing to pursue its traditional 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 also is continuing the market introduction of its ADL products. Gross Profit: Gross profit for the three months ended June 30, 1997 was $87,128 as compared with $401,457 for the three months ended June 30, 1996. 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, 1997 were $746,927 (224.6% of sales) as compared with $1,031,940 (121.6% of sales) for the three months ended June 30, 1996. SG&A expenses related to the Company's traditional product lines were $451,225 for the three months ended June 30, 1997 as compared with $612,619 for the three months ended June 30, 1996. SG&A expenses related directly to the ADL product line were $295,702 for the three month period ended June 30, 1997 as compared with $419,321 for the three month period ended June 30, 1996. The Company's cost reduction measures have significantly reduced total SG&A expenses, but the Company expects that SG&A expenses related to its ADL line will increase as product development is completed and the Company continues the market introduction of its ADL products. Research and development expenses for the three month period ended June 30, 1997 were $429,682 (129.2% of sales) as compared to $520,503 (61.3% of sales) for the three month period ended June 30, 1996. All of the Company's research and development expenses for the three month period ended June 30, 1997 were related to the development of the ADL product line of automated data libraries, compared to $433,603, or 83.3% of total research and development expenses, for the three month period ended June 30, 1996. Liquidity and Capital Resources: At June 30, 1997, the Company had working capital of $4.3 million compared to $5.4 million at March 31, 1997. The current ratio was 6.6 to 1 as of June 30, 1997 and 4.8 to 1 as of March 31, 1997. The decrease in working capital is principally due to significant operating losses and funding of the development and introduction to the marketplace of the ADL family of products. On March 24, 1997, the Company issued 7% Convertible Subordinated Debentures (the "Debentures") aggregating $3,530,000 in a private placement. The Debentures mature on March 24, 2000 and are convertible into the Company's common stock prior to that date at the option of the holder. The Debentures, together with accrued interest thereon, are convertible into shares of common stock at the lower of (i) $2.805 and (ii) 80% of the average closing bid price of the common stock over the five trading days immediately preceding the conversion date. In connection with the issuance of the Debentures, the Company issued warrants to purchase 1,550,870 shares of common stock at $3.00 per share and warrants to purchase 151,016 shares of common stock at $3.51 per share. Subsequent to June 30, 1997, Debentures aggregating $440,000, plus accrued interest, were converted to 291,520 shares of the Company's common stock. The Company, because of its continuing losses from operations, anticipates that, unless revenues increase significantly, it will require additional capital in order to continue its operations. The Company has no assurance that it will be able to raise such additional capital, if needed, in a timely manner or on favorable terms, if at all. If the Company is unable to increase revenues significantly and/or secure additional financing, the Company could be forced to curtail or discontinue its operations. 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 which express "belief", "anticipation", "plans", "expectation", "future" or "intention" as well as other statements which are not historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and involve a number of risks and uncertainties. The Company's actual results could differ significantly from the results discussed in these forward-looking statements. 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; the Company's limited experience in manufacturing, marketing and selling 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 competitors, many of whom 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 continued operations 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 operations involve a high degree of risk. PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS None Item 2. CHANGES IN SECURITIES Subsequent to June 30, 1997, 291,520 shares of the Company's common stock were issued upon the conversion of 7% Convertible Subordinated Debentures aggregating $440,000, plus interest. 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 (a) Exhibits 27 Financial data schedule (b) 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: August 14, 1997 \S\ Paul M. O'Brien --------------- ----------------------------- Paul M. O'Brien Vice President and Chief Financial Officer EX-27 2 ARTICLE 5 FDS FOR 1ST QUARTER 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED BALANCE SHEETS AND STATEMENTS OF OPERATIONS FOUND IN THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS MAR-31-1998 JUN-30-1997 1,177,479 0 535,319 61,925 3,422,570 5,074,443 1,723,622 1,326,096 7,059,786 766,657 3,288,608 0 0 63,215 20,579,138 7,059,786 332,569 332,569 245,441 1,422,050 0 0 226,372 (1,302,000) 0 (1,302,000) 0 0 0 (1,302,000) (.21) (.21)
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