<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended: February 28, 1997
-----------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From ____ To ____
Commission File Number: 0-14779
MEDIA 100 INC.
-------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 04-2532613
---------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer
organization or incorporation) Identification Number)
100 LOCKE DRIVE
MARLBOROUGH, MASSACHUSETTS
-------------------------------------------------------------
(Address of principal executive offices)
01752-1192
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(Zip code)
(508) 460-1600
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(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.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, par value $.01 per share 8,119,002 shares
-------------------------------------- ---------------------------------
Class Outstanding at March 31, 1997
<PAGE> 2
MEDIA 100 INC. AND SUBSIDIARIES
<TABLE>
INDEX
-----
<S> <C>
PAGE
PART I - FINANCIAL INFORMATION NUMBER
ITEM 1 Consolidated Financial Statements: ------
Consolidated Balance Sheets as of
February 28, 1997 and November 30, 1996 3
Consolidated Statements of Operations for the three
months ended February 28, 1997 and February 29, 1996 4
Consolidated Statements of Cash Flows for the three
months ended February 28, 1997 and February 29, 1996 5
Notes to Consolidated Financial Statements 6 - 9
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 12
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings 12
ITEM 6 Exhibits and Reports on Form 8-K 12
SIGNATURES 13
EXHIBIT INDEX 14
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
<TABLE>
MEDIA 100 INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(unaudited)
February 28, November 30,
(in thousands except share amounts) 1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,117 $ 2,733
Marketable securities 28,991 27,983
Accounts receivable, net of reserves of
$372 in 1997 and $328 in 1996 9,894 11,665
Inventories 1,281 1,473
Prepaid expenses 740 567
------- -------
Total current assets 43,023 44,421
Property and equipment, net 3,231 2,467
Other assets, net 88 112
Assets of discontinued operations, net 0 12,990
------- -------
Total assets $46,342 $59,990
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,421 $ 1,981
Accrued expenses 5,273 5,791
Deferred revenue 2,597 2,153
------- -------
Total current liabilities 9,291 9,925
Commitments and contingencies - -
Stockholders' equity:
Preferred stock - -
Common stock 81 81
Capital in excess of par value 40,222 40,035
Retained (deficit) earnings (3,000) 9,826
Cumulative translation adjustment (69) 123
Unrealized holding loss on
available for sale securities, net (183) -
------- -------
Total stockholders' equity 37,051 50,065
------- -------
Total liabilities and stockholders' equity $46,342 $59,990
======= =======
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
3
<PAGE> 4
<TABLE>
MEDIA 100 INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<CAPTION>
Three Months Ended
February 28, February 29,
(in thousands, except per share data) 1997 1996
------------ ------------
<S> <C> <C>
Net sales $11,524 $10,690
Cost of sales 4,361 4,313
------- -------
Gross profit 7,163 6,377
Operating expenses:
Research and development 1,995 1,312
Selling and marketing 4,229 3,055
General and administrative 933 1,147
------- -------
Total operating expenses 7,157 5,514
------- -------
Income from operations 6 863
Interest income 462 387
Other income (expense), net (248) 1
------- -------
Income from continuing operations
before tax provision 220 1,251
Tax provision 55 250
------- -------
Income from continuing operations 165 1,001
Discontinued operations:
Income from discontinued operations
of Data Translation, Inc. 0 149
------- -------
Net income $ 165 $ 1,150
======= =======
Income per common and common equivalent
share from continuing operations $ 0.02 $ 0.12
Income per common and common equivalent
share from discontinued operations $ 0.00 $ 0.02
------- -------
Net income per common and common
equivalent share $ 0.02 $ 0.14
======= =======
Weighted average number of common
and common equivalent shares outstanding 8,284 8,406
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
4
<PAGE> 5
<TABLE>
MEDIA 100 INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Three Months Ended
February 28, February 29,
(in thousands) 1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 165 $ 1,150
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Depreciation and amortization 278 509
(Gain) loss on sale of marketable securities (22) 1
Changes in assets and liabilities
Accounts receivable 1,771 (817)
Inventories 192 169
Prepaid expenses (173) (147)
Accounts payable (560) 443
Accrued expenses (518) 752
Deferred revenue 444 (166)
-------- ---------
Net cash provided by continuing operating activities 1,577 1,894
Net cash used in discontinued operating activities - (11,752)
-------- ---------
Net cash provided by (used in) operating activities $ 1,577 $ (9,858)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of equipment (1,043) (1,193)
Increase (decrease) in other assets 24 (27)
Purchases of marketable securities (12,621) (24,720)
Proceeds from sales of marketable securities 11,452 4,990
-------- ---------
Net cash used in investing activities $ (2,188) $ (20,950)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock plans 187 170
Net proceeds from public sale of common stock - 3,473
-------- ---------
Net cash provided by financing activities $ 187 $ 3,643
-------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (192) 218
-------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS $ (616) $ (26,947)
CASH AND CASH EQUIVALENTS, beginning of period 2,733 28,602
-------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 2,117 $ 1,655
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 56 $ -
======== =========
OTHER TRANSACTIONS NOT PROVIDING (USING) CASH:
Decrease in value of marketable securities $ (183) $ (110)
======== =========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
5
<PAGE> 6
MEDIA 100 INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, EXCEPT FOR NOVEMBER 30, 1996 AMOUNTS)
1. Basis of Presentation
The accompanying consolidated financial statements include the accounts of Media
100 Inc. ("the Company") and its wholly-owned subsidiaries. The interim
financial statements are unaudited. However, in the opinion of management, the
consolidated financial statements and disclosures reflect all adjustments
necessary for fair presentation. Interim results are not necessarily indicative
of results expected for a full year. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
These consolidated condensed financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto included in the
Company's latest audited financial statements, which are incorporated by
reference in the Company's Annual Report on Form 10-K for the fiscal year ended
November 30, 1996, filed with the Securities and Exchange Commission on February
28, 1997.
The Company's preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
On July 30, 1996, the Company announced its intention to separate its Media
100(R) digital video business from its data acquisition and imaging, commercial
products and U.K.-based networking distribution businesses. The Company
announced that it would contribute its data acquisition and imaging and
commercial products businesses to a newly-formed subsidiary, Data Translation
II, Inc. ("DTI"), the stock of which would then be distributed as a dividend to
the Company's stockholders. The Company further announced that it planned to
dispose of its networking distribution business within twelve months. On
November 11, 1996, the Company sold substantially all of the assets associated
with its networking distribution business in connection with the winding up of
that business. On December 2, 1996, the Company distributed all of the shares of
DTI, to which it had contributed its data acquisition and imaging and commercial
products businesses and the remaining assets and liabilities of the networking
distribution business, as a dividend to the Company's stockholders (the
"Spin-Off"), in the ratio of one share of DTI common stock for every four shares
of Company common stock. In connection with the Spin-Off, the Company retained
only its Media 100 related business and changed its name to Media 100 Inc.
2. Cash Equivalents and Marketable Securities
Cash equivalents are carried at cost, which approximates market value, and have
original maturities of less than three months. Cash equivalents include money
market accounts and repurchase agreements with overnight maturities.
The Company accounts for marketable securities in accordance with Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Under this standard, the Company is
required to classify all investments in debt and equity securities into one or
more of the following three categories: held-to-maturity, available-for-sale or
trading. Available-for-sale securities are recorded at fair market value with
unrealized gains and losses excluded from earnings and reported to stockholders'
equity. All of the Company's marketable securities are classified as
available-for-sale.
<TABLE>
Marketable securities held as of February 28, 1997, consist of the following (in
thousands):
<CAPTION>
Investments available for sale: Maturity Market Value
-------- ------------
<S> <C> <C>
U.S. Treasury Notes less than 1 year $4,034
U.S. Treasury Notes 1 - 4 years 3,964
------
Total U.S. Treasury Notes 7,998
Municipal Bonds less than 1 year 4,029
Municipal Bonds 1 - 2 years 2,009
------
Total Municipal Bonds 6,038
U.S. Agency Bonds less than 1 year 1,370
U.S. Agency Bonds 1 - 3 years 462
------
Total U.S. Agency Bonds 1,832
U.S. Treasury Bills less than 1 year 964
</TABLE>
6
<PAGE> 7
<TABLE>
2. Cash Equivalents and Marketable Securities (continued)
<CAPTION>
Investments available for sale: Maturity Market Value
-------- ------------
<S> <C> <C>
Money Market Instruments 1,272
Corporate Obligations less than 1 year 5,422
Corporate Obligations 1 - 3 years 5,465
---------
Total Corporate Obligations 10,887
---------
Total investments available for sale $ 28,991
=========
</TABLE>
Marketable securities had a cost of $29,174 and $27,983 at February 28, 1997 and
November 30, 1996, respectively, and a market value of $28,991 and $27,983,
respectively. To decrease the carrying amount of the February 1997 marketable
securities portfolio to market value, a valuation allowance has been reflected
as a separate component of stockholders' equity on February 28, 1997 pursuant to
the provisions of SFAS No. 115.
3. Inventories
<TABLE>
Inventories are stated at the lower of first-in, first-out (FIFO) cost or market
and consist of the following (in thousands):
<CAPTION>
February 28, November 30,
1997 1996
------------ -----------
<S> <C> <C>
Raw materials $ 659 $ 780
Work-in-process 49 302
Finished goods 573 391
------ ------
$1,281 $1,473
====== ======
</TABLE>
Work-in-process and finished goods inventories include material, labor and
manufacturing overhead. Management performs periodic reviews of inventory and
disposes of items not required by their manufacturing plan.
4. Property and equipment, net
<TABLE>
Equipment, net is stated at cost, less accumulated depreciation and
amortization, and consists of the following (in thousands):
<CAPTION>
February 28, November 30,
1997 1996
------------ ------------
<S> <C> <C>
Machinery and equipment $4,995 $4,251
Furniture and fixtures 478 480
Vehicles 13 14
------ ------
$5,486 $4,745
Less accumulated depreciation and amortization 2,255 2,278
------ ------
$3,231 $2,467
====== ======
</TABLE>
5. Net Income Per Common Share
Net income per common share is determined by dividing net income by the weighted
average number of common and common equivalent shares outstanding during each
period. Common equivalent shares have been calculated in accordance with the
treasury stock method and are included for all periods where their effect is
dilutive. Fully diluted net income per common and common equivalent share has
not been separately presented, as the amounts would not be materially different
from net income per common and common equivalent share for all periods
presented.
7
<PAGE> 8
6. Contingencies
(i) On June 7, 1995, a lawsuit was filed against the Company by Avid Technology,
Inc. ("Avid"), in the United States District Court for the District of
Massachusetts. The complaint generally alleges patent infringement by the
Company arising from the manufacture, sale, and use of the Company's Media 100
product. The complaint includes requests for injunctive relief, treble damages,
interest, costs and fees. In July, 1995 the Company filed an Answer and
Counterclaim denying any infringement and asserting that the Avid patent in
question is invalid. The Company intends to vigorously defend the lawsuit. In
addition, Avid is seeking reissue of the patent, including claims that it
asserts are broader than in the existing patent, and these reissue proceedings
remain pending before the U.S. Patent and Trademark Office. On July 31, 1996,
the court ordered a stay of all proceedings in the lawsuit pending conclusion of
the reissue proceedings referred to above. There can be no assurance that the
Company will prevail in the lawsuit asserted by Avid or that the expense or
other effects of the lawsuit, whether or not the Company prevails, will not have
a material adverse effect on the Company's business, operating results and
financial condition.
(ii) On February 12, 1997, a lawsuit was filed in Germany against the Company's
former German subsidiary, Data Translation GmbH ("DT GmbH"), and its managing
director, by Lex Computer and Management Corporation ("Lex"). The complaint
generally alleges patent infringement by DT GmbH arising from the manufacture,
sale and use of the Company's Media 100 products in Germany. The complaint
includes requests for injunctive relief, damages, costs and fees. DT GmbH is
currently a subsidiary of DTI. Under the terms of the Spin-Off the Company has
agreed to indemnify DTI and its affiliates (including DT GmbH) against
liabilities arising out of the Company's Media 100 business. The Company
currently intends to vigorously defend the lawsuit. There can be no assurances
that the Company will prevail in the lawsuit asserted by Lex or that the expense
or other effects of the lawsuit, whether or not the Company prevails, will not
have a material adverse effect on the Company's international operations and,
consequently, on the Company's business and operating results.
(iii) From time to time the Company is involved in other disputes and/or
litigation encountered in its normal course of business. The Company does not
believe that the ultimate impact of the resolution of such other outstanding
matters will have a material effect on the Company's business, operating results
or financial condition.
7. Capitalized Software Development Costs
The Company capitalizes certain computer software development costs.
Capitalization of costs commences upon establishing technological feasibility.
Capitalized costs, net of accumulated amortization, were approximately $88,000
and $104,000 as of February 28, 1997 and November 30, 1996, respectively and are
included in other assets. These costs are amortized on a straight-line basis
over two years, which approximates the economic life of the product.
Amortization expense, included in cost of sales in the accompanying consolidated
statements of operations, was approximately $25,000 and $40,000 for the three
months ended February 28, 1997 and twelve months ended November 30, 1996,
respectively.
8. Income Taxes
The Company has provided for income taxes, based on the projected taxable income
from operations for fiscal 1997, using an effective tax rate of approximately
25% taking into consideration research and development tax credit carryforwards
and other general business tax credits.
9. Discontinued Operations
<TABLE>
The components of net assets of discontinued operations included in the
accompanying consolidated balance sheets at February 28, 1997 and November 30,
1996 follow (in thousands):
<CAPTION>
February 28, November 30,
1997 1996
------------ ------------
<S> <C> <C>
Current assets $ - $ 14,090
Equipment, net - 2,351
Other assets, net - 260
Current liabilities - (2,317)
Net liabilities of networking distribution business - (1,424)
Cumulative translation adjustment - 30
-------- --------
$ - $ 12,990
======== ========
</TABLE>
8
<PAGE> 9
9. Discontinued Operations (continued)
<TABLE>
The components of discontinued operations included in the accompanying
consolidated statements of operations for the three months ended February 28,
1997 and February 29, 1996, respectively, follow (in thousands):
<CAPTION>
Three Months Ended
February 28, February 29,
1997 1996
------------ ------------
<S> <C> <C>
Income from operations of discontinued businesses - 111
Gain on disposal of networking distribution business - 38
-------- ----
Income from discontinued operations $ - $149
======== ====
</TABLE>
Income for the three months ended February 29, 1996 also reflects an allocation
of $139 of interest income relating to the $10,000 of cash contributed to DTI by
the Company.
10. New Accounting Standard
In March 1997, the Financial Accounting Standards Board issued 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 November
30, 1998. The Company believes that the adoption of SFAS No. 128 will not have
a material effect on its financial statements.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
Media 100 Inc. is a technology and market leader in the market for personal
computer-based digital video systems. The Media 100 family of products are
analog and digital conversion systems that enable users to capture video and
audio into a personal computer, perform random-access ("nonlinear") video
editing and audio mixing, and directly produce a finished program with
broadcast-quality picture and compact disc-quality sound, all without the use of
traditional video tape equipment.
On July 30, 1996, the Company announced its intention to separate its Media 100
digital video business from its data acquisition and imaging, commercial
products and U.K.-based networking distribution businesses. The Company
announced that it would contribute its data acquisition and imaging and
commercial products businesses to a newly-formed subsidiary, Data Translation
II, Inc. ("DTI"), the stock of which would then be distributed as a dividend to
the Company's stockholders. The Company further announced that it planned to
dispose of its networking distribution business within twelve months. On
November 11, 1996, the Company sold substantially all of the assets associated
with its networking distribution business in connection with the winding up of
that business. On December 2, 1996, the Company distributed all of the shares of
DTI, to which it had contributed its data acquisition and imaging and commercial
products businesses and the remaining assets and liabilities of the networking
distribution business, as a dividend to the Company's stockholders (the
"Spin-Off"), in the ratio of one share of DTI common stock for every four shares
of Company common stock. In connection with the Spin-Off, the Company retained
only its Media 100 related business and changed its name to Media 100 Inc.
Results of Operations
<TABLE>
The following table shows certain consolidated statements of operations data as
a percentage of net sales.
<CAPTION>
February 28, February 29,
Continuing operations 1997 1996
------------ ------------
<S> <C> <C>
Net sales 100.0% 100.0%
Gross margin 62.2 59.7
Research and development expenses 17.3 12.3
Selling and marketing expenses 36.7 28.6
General and administrative expenses 8.1 10.7
----- ------
Operating income 0.1 8.1
Interest income and other, net 1.8 3.6
Provision for income taxes 0.5 2.3
----- ------
Income from continuing operations 1.4% 9.4%
===== ======
</TABLE>
Comparison of First Fiscal Quarter of 1997 to First Fiscal Quarter of 1996
Net sales from continuing operations for the fiscal quarter ended February 28,
1997 were $11,524,000, an increase of $834,000, or 7.8%, over the same period a
year ago. The increase in sales was due to higher unit sales of Media 100 and
the first full quarter of sales of Gaudi(TM), the Company's advanced digital
video effects product. Shipments of Gaudi began in November 1996.
Gross margin for the fiscal quarter ended February 28, 1997 was 62.2%, compared
to 59.7% in the comparable quarter a year ago. This increase in gross margin was
primarily a result of reductions in the cost of key component parts used in the
manufacture of the Media 100 hardware and, to a lessor extent, favorable product
mix with respect to the Company's new products which began shipping in the first
fiscal quarter of 1997.
Operating income for the first fiscal quarter of 1997 was $6,000, a decrease of
$857,000, over the same period a year ago. The increase in net sales and gross
margin were more than offset by higher operating expenses resulting in lower
operating income in the first fiscal quarter of 1997. Operating expenses for the
first fiscal quarter of 1997 were $7,157,000, an increase of $1,643,000, or
29.8%, over the same period a year ago. The increase in operating expenses
reflects the Company's continued investment in research and development for new
and existing products and expansion of the Company's support for the sales
channel. In
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Comparison of First Fiscal Quarter of 1997 to First Fiscal Quarter of 1996
(continued)
addition, the first fiscal quarter of 1997 included the first full quarter of
expenses for the Company's European headquarters located in Paris, France. The
increase in operating expenses for research and development, sales and marketing
were partially offset by lower general and administrative expenses. The decrease
in general and administrative expenses reflects lower legal expenses for the
defense of patent infringement litigation, as discussed in Note 6 to the
Consolidated Financial Statements.
Interest income for the fiscal quarter ended February 28, 1997 was $462,000, or
4.0% of net sales, compared to $387,000, or 3.6% of net sales, in the comparable
quarter a year ago, reflecting an increase in cash balances including cash
equivalents and marketable securities. Other expense for the first fiscal
quarter of 1997 was $248,000, an increase of $249,000 over the same period a
year ago, reflecting one-time expenses related to the incorporation of Media 100
GmbH and losses on foreign currency transactions arising out of the Company's
subsidiaries.
The tax provision of $55,000 for the fiscal quarter ended February 28, 1997
compares to a $250,000 tax provision for the same period a year ago. The Company
estimates its effective tax rate for fiscal 1997 will be approximately 25% for
its domestic operations taking into consideration research and development tax
credit carryforwards and other business tax credits available for use against
taxable income.
Income from continuing operations for the fiscal quarter ended February 28, 1997
was $165,000 or $0.02 per share, compared to $1,001,000, or $0.12 per share, for
the same period a year ago. Income from discontinued operations for the first
fiscal quarter of 1997 was $0 compared to $149,000, or $.02 per share, for the
same period a year ago. As discussed in the Overview, on December 2, 1996, the
Company effected the Spin-Off.
Liquidity and Capital Resources
The Company has funded its operations to date primarily from public offerings of
equity securities and cash flows from operations. As of February 28, 1997 the
Company's principal sources of liquidity included cash and cash equivalents and
marketable securities totaling approximately $31,108,000.
In the fiscal quarter ended February 28, 1997, cash provided by continuing
operating activities was approximately $1,577,000 compared to cash provided by
continuing operating activities of approximately $1,894,000 for the same period
a year ago. Cash was generated during the first quarter of fiscal 1997 primarily
from reductions in accounts receivable and inventory, partially offset by
reductions in accounts payable and accrued expenses. Net cash used in investing
activities was approximately $2,188,000 during the fiscal quarter ended February
28, 1997 compared to approximately $20,950,000 (primarily for purchases of
marketable securities) for the same period a year ago. Cash used in investing
activities during the first fiscal quarter of 1997 was primarily for purchases
of capital equipment of approximately $1,043,000 and net purchases of marketable
securities of approximately $1,169,000. Cash provided by financing activities
during the fiscal quarter ended February 28, 1997 was approximately $187,000
compared to $3,643,000 for the same period a year ago. All of the cash provided
by financing activities in the first fiscal quarter of 1997 came from proceeds
from the Company's stock plans.
The Company believes it existing cash balance, including cash equivalents and
marketable securities, and cash generated from future operations will be
sufficient to meet the Company's cash requirements for the foreseeable future.
Certain Factors That May Affect Future Performance
Except for the historical information contained herein, the matters discussed in
this Quarterly Report on Form 10-Q are forward-looking statements based on
current expectations, and involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from those
expressed in such forward-looking statements. The risks and uncertainties
associated with such statements have been described under the heading "Certain
Factors That May Affect Future Results" in the Company's Annual Report on Form
10-K for the fiscal year ended November 30, 1996, and also include the
following:
The Company's current efforts to develop a product operating on Microsoft
Corporation's Windows NT operating system and utilizing the Company's
Vincent(TM) digital video engine involve a collaborative effort with Macromedia,
Inc., whose new Final Cut digital video application software would be bundled
with the new product. The Company currently anticipates that Macromedia will not
make Final Cut commercially available until after the end of the Company's
current fiscal year. Any delay
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Certain Factors That May Affect Future Performance (continued)
or failure of Macromedia in releasing Final Cut would adversely affect the
Company's current Windows NT product development, which in turn could have a
material adverse effect on the Company's business and operating results.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
(i) On June 7, 1995, a lawsuit was filed against the Company by Avid Technology,
Inc. ("Avid"), in the United States District Court for the District of
Massachusetts. The complaint generally alleges patent infringement by the
Company arising from the manufacture, sale, and use of the Company's Media 100AE
product. The complaint includes requests for injunctive relief, treble damages,
interest, costs and fees. In July, 1995 the Company filed an Answer and
Counterclaim denying any infringement and asserting that the Avid patent in
question is invalid. The Company intends to vigorously defend the lawsuit. In
addition, Avid is seeking reissue of the patent, including claims that it
asserts are broader than in the existing patent, and these reissue proceedings
remain pending before the U.S. Patent and Trademark Office. On July 31, 1996,
the court ordered a stay of all proceedings in the lawsuit pending conclusion of
the reissue proceedings referred to above. There can be no assurance that the
Company will prevail in the lawsuit asserted by Avid or that the expense or
other effects of the lawsuit, whether or not the Company prevails, will not have
a material adverse effect on the Company's business, operating results and
financial condition.
(ii) On February 12, 1997, a lawsuit was filed in Germany against the Company's
former German subsidiary, Data Translation GmbH ("DT GmbH") and its managing
director, by Lex Computer and Management Corporation ("Lex"). The complaint
generally alleges patent infringement by DT GmbH arising from the manufacture,
sale and use of the Company's Media 100 products in Germany. The complaint
includes requests for injunctive relief, damages, costs and fees. DT GmbH is
currently a subsidiary of DTI. Under the terms of the Spin-Off the Company has
agreed to indemnify DTI and its affiliates (including DT GmbH) against
liabilities arising out of the Company's Media 100 business. The Company
currently intends to vigorously defend the lawsuit. There can be no assurances
that the Company will prevail in the lawsuit asserted by Lex or that the
expense or other effects of the lawsuit, whether or not the Company prevails,
will not have a material adverse effect on the Company's international
operations and, consequently, on the Company's business and operating results.
(iii) From time to time the Company is involved in other disputes and/or
litigation encountered in its normal course of business. The Company does not
believe that the ultimate impact of the resolution of such other outstanding
matters will have a material effect on the Company's business, operating results
or financial condition.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibits required as part of this Quarterly Report on Form 10-Q are listed in
the exhibit index on page 14.
b) Reports on Form 8-K
The following report on Form 8-K was filed during the first quarter of fiscal
year 1997:
Form 8-K dated December 2, 1996 and filed on December 6, 1996 consisting of the
following: Item 5. Other Events (Press Release) and Item 7. Exhibits (Exhibit
99 - Press Release).
12
<PAGE> 13
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 100 Inc.
Date: April 14, 1997 By: PETER J. RICE
---------------------
Peter J. Rice
Vice President & Chief Financial Officer,
Treasurer
Date: April 14, 1997 By: STEVEN D. SHEA
---------------------
Steven D. Shea
Corporate Controller and
Chief Accounting Officer
13
<PAGE> 14
EXHIBIT INDEX
Number Description
------ -----------
27 Financial Data Schedule
14
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000713138
<NAME> MEDIA 100, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> FEB-28-1997
<EXCHANGE-RATE> 1
<CASH> 2,117
<SECURITIES> 28,991
<RECEIVABLES> 10,266
<ALLOWANCES> 372
<INVENTORY> 1,281
<CURRENT-ASSETS> 43,023
<PP&E> 5,486
<DEPRECIATION> 2,255
<TOTAL-ASSETS> 46,342
<CURRENT-LIABILITIES> 9,291
<BONDS> 0
0
0
<COMMON> 81
<OTHER-SE> 36,970
<TOTAL-LIABILITY-AND-EQUITY> 46,342
<SALES> 11,524
<TOTAL-REVENUES> 11,524
<CGS> 4,361
<TOTAL-COSTS> 4,361
<OTHER-EXPENSES> 7,157
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 220
<INCOME-TAX> 55
<INCOME-CONTINUING> 165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 165
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
