<PAGE> 1
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended: June 30, 1995 Commission File Number: 1-9605
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Media Logic, Inc.
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(Exact name of registrant as specified in its charter)
Massachusetts 04-2772354
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
310 South Street; P.O. Box 2258; Plainville, MA 02762
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(Address of principal executive offices) (Zip Code)
(508) 695-2006
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year, if changed since last
report.)
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
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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 -- 4,979,200 shares as of
August 10, 1995.
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INDEX
MEDIA LOGIC, INC.
PART I. FINANCIAL INFORMATION
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Item 1. Consolidated financial statements (Unaudited)
Consolidated condensed balance sheets -- June 30, 1995
and March 31, 1995.
Consolidated condensed statements of operations --
three months ended June 30, 1995 and 1994.
Consolidated condensed statements of cash flows --
three months ended June 30, 1995 and 1994.
Notes to consolidated condensed financial statements --
June 30, 1995.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. OTHER INFORMATION
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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
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PART I. FINANCIAL INFORMATION
<TABLE>
MEDIA LOGIC, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
<CAPTION>
June 30, March 31,
1995 1995
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<S> <C> <C>
ASSETS
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CURRENT ASSETS:
Cash and cash equivalents $ 451,383 $ 911,729
Marketable securities 1,003,623 2,031,289
Accounts receivable, net 578,386 1,248,055
Inventories (Note 2) 3,698,325 3,694,397
Refundable income taxes 1,729,578 1,729,630
Other current assets 133,972 194,472
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TOTAL CURRENT ASSETS 7,595,267 9,809,572
PROPERTY AND EQUIPMENT - NET 1,179,309 1,257,282
Other Assets 33,500 37,586
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$ 8,808,076 $11,104,440
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 504,931 $ 839,033
Accrued expenses 434,399 478,558
Customer deposits -- 19,709
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TOTAL LIABILITIES 939,330 1,337,300
STOCKHOLDERS' EQUITY:
Common stock par value $.01 per share; authorized
20,000,000 shares, 4,979,200 and 4,979,000 outstanding
as of June 30, 1995 and March 31, 1995, respectively 49,792 49,790
Additional paid-in capital 14,112,148 14,112,075
Retained deficit (6,293,194) (4,394,725)
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TOTAL STOCKHOLDERS' EQUITY 7,868,746 9,767,140
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$ 8,808,076 11,104,440
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</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
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PART 1. FINANCIAL INFORMATION
<TABLE>
MEDIA LOGIC, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<CAPTION>
Three Months Ended
June 30,
1995 1994
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<S> <C> <C>
NET SALES $ 666,984 $ 531,730
COSTS AND EXPENSES:
Cost of products sold 567,131 1,279,528
Selling, general and administrative expenses 1,122,009 1,329,924
Research and development expenses 900,443 712,382
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LOSS FROM OPERATIONS (1,922,599) (2,790,104)
OTHER INCOME (EXPENSE):
Interest income 20,939 82,239
Miscellaneous 3,191 (242)
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LOSS BEFORE BENEFIT FOR INCOME TAXES (1,898,469) (2,708,107)
BENEFIT FOR INCOME TAXES -- (300,000)
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NET LOSS $(1,898,469) $(2,408,107)
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NET LOSS PER SHARE (NOTE 3) $ (.38) $ (.49)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 4,979,066 4,960,800
=========== ===========
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
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<TABLE>
MEDIA LOGIC, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1995 1994
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<S> <C> <C>
CASH USED BY OPERATING
ACTIVITIES $ (1,510,515) $ (2,314,949)
INVESTING ACTIVITIES:
Sale of marketable securities 1,027,666 3,601,205
Sale (purchase) of property and equipment 18,417 (25,115)
Other assets 4,086 --
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Cash provided by investing activities 1,050,169 3,576,090
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NET INCREASE (DECREASE) IN CASH (460,346) 1,261,141
CASH BALANCE,
BEGINNING OF THE PERIOD 911,729 1,915,358
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CASH BALANCE, END OF THE PERIOD $ 451,383 $ 3,176,499
============ =============
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
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MEDIA LOGIC, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 1995
(1) Basis of Presentation
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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, 1995.
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, 1995, and the results of its
operations and its cash flows for the three months ended June 30, 1995 and
June 30, 1994.
(2) Inventories
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<TABLE>
<CAPTION>
June 30, 1995 March 31, 1995
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<S> <C> <C>
Raw materials $ 2,232,998 $ 2,328,971
Work in process 506,495 695,971
Finished goods 958,832 669,455
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$ 3,698,325 $ 3,694,397
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</TABLE>
(3) Loss per Share
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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.
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(4) Marketable Securities
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As of June 30, 1995, 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.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Three Months Ended June 30, 1995 Compared to Three Months Ended June 30, 1994
RESULTS OF OPERATIONS
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SALES:
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Sales for the three month period ended June 30, 1995 were $666,984 as compared
with $531,730 for the three months ended June 30, 1994. Sales for the three
month period ended June 30, 1995 were up 25.4% as compared with the three month
period ended June 30, 1994. Demand for certifiers, test equipment and
duplication equipment remained low during the quarter. While diskette prices
have experienced a modest increase, margins remain low for disk manufacturers
and the Company has not yet seen firm indications of any intention to invest in
additional capital equipment. However industry reports show that demand for
disks remains high and is growing.
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 and
expects to see the results of these efforts in the coming months.
GROSS PROFIT:
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Gross profit for the three months ended June 30, 1995 was $99,853 as compared
with a loss of $747,798 for the three months ended June 30, 1994. The
generation of a gross profit on low sales volume is reflective of the cost
reduction measures which have been instituted.
EXPENSES:
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Selling, General and Administrative (SG&A) expenses for the three months ended
June 30, 1995 was $1,122,009 (168.2% of sales) as compared with $1,329,924
(250.1% of sales) for the three months ended June 30, 1994. SG&A expense
related to the Company's current product lines was $782,628 for the three
months ended June 30, 1995 as compared with $1,329,924 for the three months
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ended June 30, 1994. SG&A expenses related directly to a product line of
automated data libraries being developed by the Company's MediaLogic ADL
subsidiary were $339,381 in the three month period ended June 30, 1995 as
compared with no such expenses in the three month period ended June 30, 1994.
The Company expects that SG&A expenses related to ADL will 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,
1995 were $900,443 (135.0% of sales) as compared to $712,382 (134.0% of sales)
for the three month period ended June 30, 1994. Of the overall Company
research and development expenditure, $658,532 or 73.1% for the period ended
June 30, 1995 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, 1995, the Company had working capital of $6.7 million compared to
$8.5 million at March 31, 1995. The current ratio was 8.1 to 1 as of June 30,
1995 and 7.3 to 1 at March 31, 1995. 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
<PAGE> 10
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.
The Company continually monitors the changing business conditions and takes
whatever actions it deems necessary to protect and promote the Company's
interests.
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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
(a) Exhibits
3.1 Restated Articles of Organization.
Incorporated by reference to the
Company's Annual Report on Form 10-K
for its fiscal year ended March 31, 1993.
3.2 Bylaws. Incorporated by reference to
the Company's Registration Statement
on Form S-18 (No. 33-14722) effective
July 23, 1987.
<PAGE> 12
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: 8/10/95 /S/ Paul M. O'Brien
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Paul M. O'Brien,
Vice-President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1995.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 451,383
<SECURITIES> 1,003,623
<RECEIVABLES> 1,165,458
<ALLOWANCES> (587,072)
<INVENTORY> 3,698,325
<CURRENT-ASSETS> 7,595,267
<PP&E> 2,211,690
<DEPRECIATION> (1,032,381)
<TOTAL-ASSETS> 8,808,076
<CURRENT-LIABILITIES> 939,330
<BONDS> 0
<COMMON> 49,792
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,808,076
<SALES> 666,984
<TOTAL-REVENUES> 666,984
<CGS> 567,131
<TOTAL-COSTS> 2,589,583
<OTHER-EXPENSES> (24,130)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,898,469)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,898,469)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,898,469)
<EPS-PRIMARY> (.38)
<EPS-DILUTED> (.38)
</TABLE>
