-----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, M4kObQqDh2Mi0GSiE8HCscGQGPEFQIeMK47rUadLJyyeuJkk9o2l3OVUnA6fgXCh cJC6B1GCAt86lFJIL0kAkg== 0001047469-98-025540.txt : 19980629 0001047469-98-025540.hdr.sgml : 19980629 ACCESSION NUMBER: 0001047469-98-025540 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980626 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/A SEC ACT: SEC FILE NUMBER: 001-09605 FILM NUMBER: 98655192 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/A 1 FORM 10-Q/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended: December 31, 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 incorporation or organization) Identification No.)
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 per share - 11,081,076 shares issued and outstanding as of February 9, 1998. INDEX MEDIA LOGIC, INC. PART I. FINANCIAL INFORMATION - ------------------------------ Item 1. Consolidated condensed financial statements (Unaudited) Consolidated condensed balance sheets - December 31, 1997 (As Restated) and March 31, 1997 Consolidated condensed statements of operations - three and nine months ended December 31, 1997 (As Restated) and 1996 Consolidated condensed statements of cash flows - nine months ended December 31, 1997 and 1996 Notes to consolidated condensed financial statements - December 31, 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) December 31, March 31, 1997 1997 --------------------------- ------------------------- ASSETS As Restated CURRENT ASSETS: Cash and cash equivalents $ 1,357,739 $2,382,875 Accounts receivable, net 132,259 813,993 Inventories 3,897,088 3,563,482 Prepaid expenses and other current assets 4,230 1,000 --------------------------- ------------------------- Total current assets 5,393,316 6,761,350 PROPERTY AND EQUIPMENT, net 318,170 469,080 DEFERRED FINANCING COSTS 1,451,659 1,711,829 OTHER ASSETS 31,364 30,696 --------------------------- ------------------------- $7,192,509 $8,972,955 --------------------------- ------------------------- --------------------------- ------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 482,423 $1,107,732 Accrued expenses 166,728 293,238 --------------------------- ------------------------- Total current liabilities 649,151 1,400,970 CONVERTIBLE SUBORDINATED DEBENTURES 1,009,232 3,266,663 STOCKHOLDERS' EQUITY: Common stock, par value $.01 per share; 20,000,000 shares authorized; 10,253,660 and 6,320,909 shares issued and outstanding as of December 31, 1997 and March 31, 1997, respectively 102,537 63,209 Additional paid-in capital 24,941,168 20,577,945 Accumulated deficit (19,509,579) (16,335,832) --------------------------- ------------------------- Total stockholders' equity 5,534,126 4,305,322 --------------------------- ------------------------- $7,192,509 $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 Nine Months Ended December 31, December 31, 1997 1996 1997 1996 ------------------- ------------------- ----------------- ------------------- As Restated As Restated NET SALES $ 200,749 $ 897,376 $ 968,375 $2,972,809 COSTS AND EXPENSES: Cost of products sold 136,818 739,535 628,110 2,017,060 Selling, general and administrative expenses 644,210 883,465 1,926,134 2,820,786 Research and development expenses 279,824 463,436 959,076 1,316,292 ------------------- ------------------- ----------------- ------------------- LOSS FROM OPERATIONS $(860,103) $(1,189,060) $(2,544,945) $(3,181,329) OTHER INCOME (EXPENSE): Interest income - - 18,897 73,035 Interest expense-convertible debentures (215,993) - (653,278) - Other 979 1,273 5,579 (4,808) ------------------- ------------------- ----------------- ------------------- LOSS BEFORE INCOME TAXES $(1,075,117) $(1,187,787) $(3,173,747) $(3,113,102) PROVISION FOR INCOME TAXES - - - 46,122 ------------------- ------------------- ----------------- ------------------- NET LOSS $(1,075,117) $(1,187,787) $(3,173,747) $(3,159,224) ------------------- ------------------- ----------------- ------------------- ------------------- ------------------- ----------------- ------------------- BASIC AND DILUTED LOSS PER SHARE $(.13) $(.19) $(.44) $(.50) (NOTE 4) ------------------- ------------------- ----------------- ------------------- ------------------- ------------------- ----------------- ------------------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 8,330,927 6,315,439 7,236,279 6,255,950 ------------------- ------------------- ----------------- ------------------- ------------------- ------------------- ----------------- -------------------
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS PART I. FINANCIAL INFORMATION MEDIA LOGIC, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED DECEMBER 31, 1997 1996 ------------------ ----------------- CASH (USED) BY OPERATING ACTIVITIES $(2,812,318) $(3,239,991) ------------------ ----------------- CASH PROVIDED (USED) BY INVESTING ACTIVITIES: Sale (purchase) of property and equipment, net (9,663) (115,100) (Increase) in other assets (668) - ------------------ ----------------- (10,331) (115,100) ------------------ ----------------- CASH PROVIDED BY FINANCING ACTIVITIES: Exercise of stock options 1,200 117,277 Net proceeds from issuance of convertible debentures 607,342 - Net proceeds from issuance of common stock 1,188,971 - Issuance of common stock upon conversion of debentures 2,919,806 - Decrease in debentures upon conversion (2,919,806) - ------------------ ----------------- 1,797,513 117,277 ------------------ ----------------- NET INCREASE (DECREASE) IN CASH (1,025,136) (3,237,814) CASH BALANCE, BEGINNING OF PERIOD 2,382,875 3,545,477 ------------------ ----------------- ------------------ ----------------- CASH BALANCE, END OF PERIOD $1,357,739 $ 307,663 ------------------ ----------------- ------------------ -----------------
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS PART I. FINANCIAL INFORMATION MEDIA LOGIC, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) December 31, 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 the 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 on Form 10-K for the fiscal year ended March 31, 1997 and the Company's Quarterly Reports on Form 10-Q for the quarterly periods ended June 30, 1997 and September 30, 1997. In the opinion of the Company's management, 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 December 31, 1997, and the results of its operations and its cash flows for the nine months ended December 31, 1997 and December 31, 1996. (2) Restatement of Financial Information ------------------------------------ The Company has restated its consolidated condensed financial statements for the unaudited quarter ended December 31, 1997, because subsequent to the issuance of the Company's financial statements for the quarter ended December 31, 1997 certain products sold by the Company were returned. The restatement reflects the reversal of certain product sales recorded in the third quarter, consisting primarily of initial production tape library units which, despite efforts by the Company to remedy customers' concerns regarding problems with the units, payment was not received and the product was subsequently returned. In the opinion of management, all material adjustments necessary to correct the financial statements have been recorded. A summary of the impact of such restatement on the financial statements for the unaudited three and nine month periods ended December 31, 1997 is as follows:
Three Months Ended Nine Months Ended December 31, 1997 December 31, 1997 Previously As Restated Previously As Restated Reported Reported ------------------- ------------------- ------------------ ----------------- Net Sales $ 450,749 $ 200,749 $ 1,218,375 $ 968,375 Cost of products sold 261,818 136,818 753,110 628,110 Loss from operations (735,103) (860,103) (2,419,945) (2,544,945) Net Loss (950,117) (1,075,117) (3,048,747) (3,173,747) Basic and diluted loss per share $(0.11) $(0.13) $(0.42) $(0.44) Accounts receivable 382,259 132,259 Inventory 3,772,088 3,897,088 Total assets $ 7,317,509 $ 7,192,509
(3) Inventories
December 31, 1997 March 31, 1997 Previously As Restated Reported Raw materials $ 1,873,399 $ 1,873,399 $ 1,808,917 Work in process 160,082 160,082 168,762 Finished goods 1,738,607 1,863,607 1,585,803 ------------- --------- --------- $ 3,772,088 $ 3,897,088 $ 3,563,482 ------------- ------------- ------------
(4) 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. (5) Convertible 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. In connection with the Company's private placement of common stock in December 1997, on December 29, 1997, all of the remaining holders of the Debentures and the Company agreed to set a fixed conversion price for the Debentures of $.90 per share of common stock until January 28, 1998 and thereafter of the lower of (i) $2.805, which amount is 120% of the average closing bid price of the common stock as calculated over the five trading-day period ending on March 21, 1997 and (ii) 80% of the average closing bid price of the common stock as calculated over the five trading-day period immediately preceding the date of conversion, subject to a $.90 per share minimum conversion price. 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 200,000 shares of common stock at $2.00 per share. 650,870 of the warrants to purchase shares of common stock at an exercise price of $3.00 per share are exercisable at any time prior to September 22, 2001 and 900,000 of such warrants are exercisable at any time on or prior to March 24, 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", which is a non-cash expense, 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. On October 29, 1997, the Company issued 7% convertible debentures ("the October Debentures") with gross proceeds of $750,000. The October Debentures mature on October 29, 2000 and are convertible into the Company's common stock prior to that date at the option of the holder at a conversion price equal to $.90 per share until January 28, 1998 and thereafter equal to the lower of (i) 80% of the average closing bid price for the common stock for the five days prior to the conversion date and (ii) $1.95 per share, subject to a $.90 per share minimum conversion price. In connection with the issuance of the October Debentures, the Company issued warrants to purchase 500,000 shares of common stock at $2.00 per share, with an expiration date of January 25, 2003. The Company recognized the estimated fair value of the warrants based on the Black-Scholes valuation model and the guaranteed return conversion feature as deferred financing costs with an increase to additional paid-in capital. These amounted to approximately $342,000, with actual cash financing costs of approximately $142,000, and are being amortized over three years, the stated term of the October Debentures, and are included in "Interest expense-convertible debentures", which are a non-cash expense, in the accompanying Consolidated Condensed Statements of Operations. Unamortized deferred financing costs will be charged against additional paid-in capital to the extent that the October Debentures are converted. (6) Common Stock ------------ On December 29, 1997, the Company sold 1,700,000 shares of common stock (the "December Private Placement") with gross proceeds of $1,530,000. Costs associated with this financing of approximately $340,000 were charged to additional paid-in capital. In connection with the December Private Placement, the Company issued warrants to purchase 1,000,000 shares of common stock at an exercise price of $3.00 per share and warrants to purchase 1,000,000 shares of common stock at an exercise price of $1.50 per share. The Company is also obligated to issue warrants to purchase an aggregate of 500,000 shares of common stock at an exercise price of $2.00 per share to the placement agents for the December Private Placement. Management's Discussion and Analysis of Financial Condition and Results of Operations Three and Nine Months Ended December 31, 1997 Compared to Three and Nine Months Ended December 31, 1996 The Company has restated its consolidated condensed financial statements for the unaudited quarter ended December 31, 1997, because subsequent to the issuance of the Company's financial statements for the quarter ended December 31, 1997 certain products sold by the Company were returned. The restatement reflects the reversal of certain product sales recorded in the third quarter, consisting primarily of initial production tape library units which, despite efforts by the Company to remedy customers' concerns regarding problems with the units, payment was not received and the product was subsequently returned. In the opinion of management, all material adjustments necessary to correct the financial statements have been recorded. The discussion below reflects such changes. Results of operations - --------------------- Sales: - ------ Sales for the three and nine month periods ended December 31, 1997 were $200,749 and $968,375 as compared with $897,376 and $2,972,809 for the three and nine month periods ended December 31, 1996, representing sales decreases from the three and nine month periods ended December 31, 1996 of 77.6% and 67.4%, respectively. Demand for the Company's traditional products continues to decline, while sales of the Company's Automated Data Library ("ADL") line have not been sufficient to offset this decline. The Company is primarily focused on the sale of its ADL products. The Company is also continuing to pursue its traditional product lines, which includes not only the sale of new certification, test and duplication equipment but also upgrades, spare parts and maintenance for previously sold units. Gross Profit: - ------------- Gross profit for the three and nine months ended December 31, 1997 was $63,931 (31.8%) and $340,265 (35.1%) as compared with $157,841 (17.6%) and $955,749 (32.1%) for the three and nine months ended December 31, 1996. Expenses: - --------- Selling, general and administrative ("SG&A") expenses for the three and nine months ended December 31, 1997 were $644,210 (320.9% of sales) and $1,926,134 (198.9% of sales) as compared with $883,465 (98.4% of sales) and $2,820,786 (94.9% of sales) for the three and nine months ended December 31, 1996. The Company's total SG&A expenses have been significantly reduced by the Company's consolidation of all ADL operations in Plainville, MA. Research and development ("R&D") expenses for the three and nine month periods ended December 31, 1997 were $279,824 (139.4% of sales) and $959,076 (99.0% of sales) as compared to $463,436 (51.6% of sales) and $1,316,292 (44.3% of sales) for the three and nine month periods ended December 31, 1996. All of the Company's R&D expenses for the three and nine months ended December 31, 1997 were related to the development of the ADL product line. During the quarter ended September 30, 1997, all R&D operations were consolidated in Plainville, resulting in a decline in R&D expenses. Interest expense-convertible debentures, a non-cash item, represents the amortization of assigned deferred costs in accordance with generally accepted accounting principles in conjunction with the issuance of the Company's 7% Convertible Subordinated Debentures and 7% Convertible Debentures. See Note 5 of Notes to Consolidated Condensed Financial Statements. Liquidity and Capital Resources: - -------------------------------- At December 31, 1997, the Company had working capital of $4.7 million compared to $5.4 million at March 31, 1997. The current ratio was 8.3 to 1 as of December 31, 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 $3,530,000 aggregate principal amount of 7% Convertible Subordinated Debentures (the "Debentures") in a private placement exempt from registration under Regulation D under the Securities Act of 1933, as amended, (the "Securities Act"). 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. In connection with the Company's private placement of common stock in December 1997, all of the remaining holders of the Debentures and the Company agreed to set a fixed conversion price for the Debentures of $.90 per share of common stock until January 28, 1998 and thereafter at the lower of (i) $2.805, which amount is 120% of the average closing bid price of the common stock as calculated over the five trading-day period ending on March 21, 1997 and (ii) 80% of the average closing bid price of the common stock as calculated over the five trading-day period immediately preceding the date of conversion, subject to a $.90 per share minimum conversion price. In connection with the issuance of the Debentures, the Company issued warrants to purchase 1,550,870 shares of common stock at an exercise price of $3.00 per share and warrants to purchase 200,000 shares of common stock at $2.00 per share. During the quarter ended September 30, 1997, Debentures aggregating $1,770,000, plus accrued interest, were converted into 1,341,788 shares of the Company's common stock. During the quarter ended December 31, 1997, Debentures aggregating $1,060,000, plus accrued interest, were converted into 890,363 shares of the Company's common stock. Subsequent to December 31, 1997, Debentures aggregating $700,000, plus accrued interest, were converted into 807,416 shares of the Company's common stock. All of these Debentures have now been converted. On October 29, 1997, the Company issued $750,000 aggregate principal amount of 7% Convertible Debentures (the "October Debentures") in a private placement exempt from registration under Regulation D under the Securities Act, with gross proceeds of $750,000. The October Debentures mature on October 29, 2000 and are convertible into the Company's common stock prior to that date at the option of the holder at a conversion price equal to $.90 per share until January 28, 1998 and thereafter equal to the lower of (i) 80% of the average closing bid price for the common stock for the five days prior to the conversion date, and (ii) $1.95 per share, subject to a $.90 minimum conversion price. In connection with the issuance of the October Debentures, the Company issued warrants to purchase 500,000 shares of common stock at an exercise price of $2.00 per share. On December 29, 1997, the Company sold 1,700,000 shares of common stock in a private placement (the "December Private Placement") exempt from registration under Regulation D under the Securities Act, with gross proceeds of $1,530,000. Costs associated with this financing of approximately $340,000 were charged to additional paid-in capital. In connection with the December Private Placement, the Company issued warrants to purchase 1,000,000 shares of common stock at an exercise price of $3.00 per share and warrants to purchase 1,000,000 shares of common stock at an exercise price of $1.50 per share. The Company is also obligated to issue warrants to purchase an aggregate of 500,000 shares of common stock at an exercise price of $2.00 per share to the placement agents for the December Private Placement. The Company, because of its continuing losses from operations, anticipates that, unless revenues increase significantly, it will not have sufficient cash resources for the next twelve months and 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 does not fully satisfy all of the American Stock Exchange guidelines for continued listing and there is no assurance listing will be continued. 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 During the quarter ended December 31, 1997, 890,363 shares of the Company's common stock were issued upon the conversion of an aggregate of $1,060,000 principal amount of 7% Convertible Subordinated Debentures, plus interest. Subsequent to December 31, 1997, 807,416 shares of the Company's common stock were issued upon the conversion of an aggregate of $700,000 principal amount of 7% Convertible Subordinated Debentures, plus interest. On October 29, 1997, the Company sold $750,000 aggregate principal amount of 7% Convertible Debentures (the "October Debentures") to an accredited investor, F.T.S. Worldwide Corporation ("FTS"), in a private placement (the "October Financing") exempt from registration pursuant to Rule 506 of Regulation D under the Securities Act of 1993, as amended (the "Securities Act") for gross proceeds of $750,000. The principal amount of the October Debentures is convertible into shares of the Company's common stock based on a predetermined formula. The price at which the October Debentures will convert will be $.90 per share until January 28, 1998 and thereafter will be the lower of (i) $1.95, and (ii) 80% of the average closing bid price of the common stock as calculated over the five trading- day period immediately preceding the date of conversion, subject to a $.90 per share minimum conversion price. The October Debentures bear interest at a rate of 7% per year. Interest is payable only upon conversion of the October Debentures and, at the Company's option, is payable either in cash or in shares of the Company's common stock based on the average closing sale price of the common stock as calculated over the five trading-day period ending on the trading day immediately preceding the date of conversion. In connection with the October Financing, the Company issued warrants to purchase 500,000 shares of common stock which are exercisable at any time during the period commencing January 26, 1998 and ending January 25, 2003 at an exercise price of $2.00 per share. On December 29, 1997, the Company sold an aggregate of 1,700,000 shares of common stock to two accredited investors, Imprimis SB L.P. and Wexford Spectrum Investors LLC (together,"Wexford"), for gross proceeds of $1,530,000 in a private placement (the "December Financing") exempt from registration pursuant to Rule 506 of Regulation D under the Securities Act. For so long as Wexford and its affiliates own at least 5% of the issued and outstanding common stock of the Company on a fully diluted basis, the Company may not make any distributions or pay any dividends to its stockholders without the prior written consent of Wexford. In connection with the December Private Placement, the Company issued warrants (the "Wexford Warrants") to purchase an aggregate of 2,000,000 shares of common stock. 1,000,000 of such warrants are exercisable at an exercise price of $3.00 per share and 1,000,000 of such warrants are exercisable at an exercise price of $1.50 per share. The Wexford Warrants may be exercised at any time prior to December 29, 2002. The Company is also obligated to issue warrants (the "December Warrants") to purchase an aggregate of 500,000 shares of common stock at an exercise price of $2.00 per share to the placement agents for the December Private Placement. The December Warrants will be exercisable at any time during the period commencing March 29, 1998 and ending March 29, 2003. 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 The Company filed a report on Form 8-K dated December 31, 1997 announcing that (i) on October 29, 1997 the Company had completed the October Financing in which it raised gross proceeds of $750,000, (ii) on December 29, 1997, the Company had completed the December Financing in which it raised gross proceeds of $1,530,000 and (iii) on December 29, 1997, FTS and the Company signed Amendment No. 1 to Convertible Debentures Due October 29, 2000 in which FTS and the Company agreed to set a fixed conversion price for the October Debentures of $0.90 per share of common stock until 30 days after the closing of the December Financing and thereafter to set a minimum conversion price of $0.90 per share of common stock. 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: June 26, 1998 /s/ John T. Loughran ------------- ------------------------- John T. Loughran Principal Accounting Officer EX-27 2 EXHIBIT 27 FINANCIAL DATA SCHEDULE
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. 9-MOS MAR-31-1998 DEC-31-1997 1,357,739 0 160,113 27,854 3,897,088 5,393,316 1,733,210 1,415,040 7,192,509 649,151 1,009,232 0 0 102,537 24,941,168 7,192,509 968,375 968,375 628,110 3,513,320 0 0 653,278 (3,173,747) 0 (3,173,747) 0 0 0 (3,173,747) (.44) (.44)
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