<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: September 30, 1995 Commission File Number:
1-9605
- ------
Media Logic, Inc.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2772354
- -----------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
310 South Street; P.O. Box 2258; Plainville, MA 02762
- ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(508) 695-2006
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(Registrant's telephone number, including area code)
N/A
- -------------------------------------------------------------------
(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
-----
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 -- 6,130,309 shares as of November 8, 1995.
<PAGE> 2
INDEX
MEDIA LOGIC, INC.
PART I. FINANCIAL INFORMATION
- ------- ---------------------
Item 1. Consolidated financial statements (Unaudited)
Consolidated condensed balance sheets -- September 30,
1995 and March 31, 1995.
Consolidated condensed statements of operations --
three and six months ended September 30, 1995 and 1994.
Consolidated condensed statements of cash flows --
six months ended September 30, 1995 and 1994.
Notes to consolidated condensed financial statements --
September 30, 1995.
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
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<PAGE> 3
PART I. FINANCIAL INFORMATION
<TABLE>
MEDIA LOGIC, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
<CAPTION>
September 30, March 31,
1995 1995
----------------- ----------------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 5,611,861 $ 911,729
Marketable securities 1,003,623 2,031,289
Accounts receivable, net 624,193 1,248,055
Inventories (Note 2) 3,414,289 3,694,397
Refundable income taxes 197,455 1,729,630
Other current assets 91,161 194,472
----------------- ----------------
TOTAL CURRENT ASSETS 10,942,582 9,809,572
PROPERTY AND EQUIPMENT - NET 1,082,903 1,257,282
Other Assets 45,087 37,586
----------------- ----------------
$12,070,572 $11,104,440
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 461,693 $839,033
Accrued expenses 406,176 478,558
Customer deposits -- 19,709
----------------- ----------------
TOTAL LIABILITIES 867,869 1,337,300
STOCKHOLDERS' EQUITY:
Common stock par value $.01 per
share; authorized 20,000,000 shares,
6,120,109 and 4,979,000 outstanding
as of September 30, 1995 and
March 31, 1995, respectively 61,201 49,790
Additional paid-in capital 17,441,619 14,112,075
Retained deficit (6,300,117) (4,394,725)
------------------ ---------------
TOTAL STOCKHOLDERS' EQUITY 11,202,703 9,767,140
------------------ ---------------
$12,070,572 $11,104,440
================== ===============
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
<PAGE> 4
PART 1. FINANCIAL INFORMATION
<TABLE>
MEDIA LOGIC, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1995 1994 1995 1994
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
NET SALES $ 701,363 $ 973,979 $ 1,368,34 $ 1,505,709
COSTS AND EXPENSES:
Cost of products sold 543,411 803,671 1,110,542 2,083,199
Selling, general and
administrative expenses 1,087,517 1,420,038 2,209,526 2,749,962
Research and development
expenses 751,184 874,675 1,651,627 1,587,056
--------------- ---------------- --------------- --------------
LOSS FROM OPERATIONS (1,680,749) (2,124,405) (3,603,347) (4,914,508)
OTHER INCOME (EXPENSE):
Settlement costs -- (2,230,000) -- (2,230,000)
Interest income 10,110 105,467 31,049 187,706
Miscellaneous 5,975 937 9,165 695
LOSS BEFORE BENEFIT FOR INCOME (1,664,664) (4,248,001) (3,563,133) (6,956,107)
TAXES
BENEFIT FOR INCOME TAXES -- (300,000) -- (600,000)
--------------- --------------
NET LOSS $ (1,664,664) $ (3,948,001) $ (3,563,133) $(6,356,107)
=============== ================ ================ ==============
NET LOSS PER SHARE (NOTE 3) $ (.33) $ (.80) $ (.71) $ (1.28)
=============== ================ ================ ==============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 5,004,550 4,963,004 4,991,912 4,961,908
=============== ================ ================ ==============
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
<PAGE> 5
MEDIA LOGIC, INC.
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
1995 1994
-------------- --------------
<S> <C> <C>
CASH USED BY OPERATING
ACTIVITIES $ (1,338,011) $ (3,971,025)
INVESTING ACTIVITIES:
Sale of marketable securities 1,027,666 3,088,777
Sale (purchase) of property
and equipment 10,809 (149,915)
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Cash provided by
investing activities 1,038,475 2,938,862
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FINANCING ACTIVITIES:
Exercise of stock options and
disqualifying dispositions 16,500 14,675
Proceeds from private placement,
net 4,983,168 --
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Cash provided by financing
activities 4,999,668 14,675
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NET INCREASE (DECREASE) IN CASH 4,700,132 (1,017,488)
CASH BALANCE,
BEGINNING OF THE PERIOD 911,729 1,915,358
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CASH BALANCE, END OF THE PERIOD $ 5,611,861 $ 897,870
============== ==============
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
<PAGE> 6
MEDIA LOGIC, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1995
(1) Basis of Presentation
---------------------
As permitted by rules of the Securities and Exchange
Commission applicable to quarterly reports on Form 10-Q, these
notes are condensed and do not contain all disclosures required
by generally accepted accounting principles. Reference should be
made to the consolidated financial statements and related notes
included in the Company's Annual Report to shareholders on Form
10-K for the fiscal year ended March 31, 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 September
30, 1995, and the results of its operations and its cash flows
for the six months ended September 30, 1995 and September 30,
1994.
<TABLE>
(2) Inventories
-----------
<CAPTION>
September 30, 1995 March 31, 1995
--------------------- -------------------
<S> <C> <C>
Raw materials $ 1,697,842 $ 2,328,971
Work in process 1,635,166 695,971
Finished goods 81,281 669,455
--------------------- -------------------
$ 3,414,289 $ 3,694,397
===================== ===================
<FN>
(3) Loss per Share
--------------
</TABLE>
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.
<PAGE> 7
(4) Marketable Securities
---------------------
As of September 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.
(5) Private Placement
-----------------
On September 29, 1995, the Company sold 1,000,000 shares of
its Common Stock, $.01 par value per share to a private investor
at a price of $5.00 per share. In addition, the Company issued
an additional 130,909 shares to its financial advisory firm in
connection with this private placement. The Company's net
proceeds from this transaction was $4,983,168 and will be
restricted to utilization in connection with the Company's
automated data library (ADL) business, which it conducts through
its subsidiary, Media Logic ADL, Inc.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three and Six Months Ended September 30, 1995 Compared to Three
and Six Months Ended September 30, 1994
RESULTS OF OPERATIONS
- --------------------
SALES:
- -----
Sales for the three and six month period ended September 30, 1995
were $701,363 and $1,368,348 as compared with $973,979 and
$1,505,709 for the three and six months ended September 30, 1994.
Sales for the three and six month period ended September 30, 1995
were down 39.0% and 10.0% as compared with the three and six
month period ended September 30, 1994. Demand for certifiers,
test equipment and duplication equipment remained low during the
quarter. The Company experienced a higher level of interest from
potential customers during the second quarter but this has not
yet translated into substantially increased sales.
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 expansion of the Company's sales presence throughout
the world has led to better identification of potential sales
opportunities and is expected to generate increased sales
throughout all product lines.
GROSS PROFIT:
- ------------
Gross profit for the three and six months ended September 30,
1995 was $157,952 and $257,806 as compared with $170,308 and
$(577,490) for the three and six months ended September 30, 1994.
Higher gross margins are reflective of the stringent controls
which have been instituted and the significantly reduced costs
which have resulted.
EXPENSES:
- --------
Selling, General and Administrative (SG&A) expenses for the three
and six months ended September 30, 1995 was $1,087,517(155.1% of
sales) and $2,209,526 (161.5% of sales) as compared with
$1,420,038 (145.8% of sales)and $2,749,962 (182.6% of sales) for
the three ended September 30, 1994. SG&A expense related to the
Company's current product lines was $723,925 for the three months
<PAGE> 9
ended September 30, 1995 as compared with $1,108,879 for the
three months ended September 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
$363,592 in the three month period ended September 30, 1995 as
compared with 311,159 in the three month period ended September
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 and six month
period ended September 30, 1995 were $751,184 (107.1% of sales)
and 1,651,627 (120.7% of sales) as compared to $874,675 (89.8% of
sales) and 1,587,056 (105.4% of sales) for the three and six
month period ended September 30, 1994. Of the overall Company
research and development expenditure, $560,775 or 74.7% for the
period ended 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 September 30, 1995, the Company had working capital of $10.1
million compared to $8.5 million at March 31, 1995. The current
ratio was 12.8 to 1 as of September 30, 1995 and 7.3 to 1 at
March 31, 1995. The increase in working capital is due to the
investment of $5 million through a private placement of the
Company's common stock. Funding of the development of the ADL
family of products and continuing operating losses have
negatively impacted working capital.
The Company has no debt nor does it have a line of credit or
other committed source of additional financing.
The Company continually monitors the changing business conditions
and takes whatever actions it deems necessary to protect and
promote the Company's interests.
<PAGE> 10
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.
3.3 Stock Purchase Agreement dated as of
September 25, 1995.
<PAGE> 11
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: November 9, 1995 \S\ Paul M. O'Brien
--------------------- --------------------------------
Paul M. O'Brien,
Vice-President and
Chief Financial Officer
<PAGE> 1
MEDIA LOGIC, INC
________________________________________
1,000,000 shares of
Common Stock
_________________________________________
STOCK PURCHASE AGREEMENT
Dated as of September 25, 1995
__________________________________________
<PAGE> 2
STOCK PURCHASE AGREEMENT
This Agreement is by and between Media Logic, Inc., a
Massachusetts corporation (the "Company"), with principal
offices at 310 South Street, Plainville, Massachusetts
02762, and Raymond Leclerc (the "Purchaser"), an individual
residing at 4501 Pond Apple Drive, Naples, Florida 33999.
In consideration of the mutual covenants contained in
this Agreement, the parties agree as follows:
SECTION 1. AGREEMENT TO SELL AND PURCHASE THE SHARES.
At the Closing (as hereinafter defined), the Company shall
sell to the Purchaser, and the Purchaser shall buy from the
Company, upon the terms and conditions hereinafter set
forth, 1,000,000 shares (the "Shares") of Common Stock, $.01
par value per share ("Common Stock:), of the Company at a
purchase price of $5.00, being not less than the average of
the closing prices for the Common Stock on the American
Stock Exchange for the ten trading days immediately
preceding the Closing.
SECTION 2. ACKNOWLEDGMENTS AND AGREEMENTS OF THE
PURCHASER. The Purchaser acknowledges and agrees that:
(a) he will not resell any of the Shares for a year
after the Closing and, after that but prior to the third
anniversary of the Closing, he will not sell shares
representing 5% or more of the Common Stock outstanding to
any party without the Company's consent, which will not be
unreasonably withheld;
(b) prior to the third anniversary of the Closing, he
will not acquire shares of Common Stock which would result
in his owning more than 25% of the Common Stock then
outstanding; and
(c) he acknowledges the Shares are not registered
under federal securities laws and he will comply with all
applicable securities laws in connection with any future
resale of Shares, including but not limited to the SEC's
Rule 144, with which he has familiarized himself.
SECTION 3. AGREEMENTS AND UNDERTAKINGS OF THE COMPANY.
In connection with the sale and purchase of the Shares
hereunder, the Company convenants and agrees with the
Purchaser as follows:
(a) the Purchaser will be appointed as a director of
the Company as promptly after the Closing as practicable and
will be nominated and endorsed by the Board as a director at
each annual stockholders' meeting so long as he beneficially
owns 10% or more of the Common Stock outstanding;
<PAGE> 3
(b) as a director, the Purchaser will be appointed to
the Compensation Committee of the Board;
(c) the Company will afford the Purchaser the
opportunity to have shares included in registered public
offerings that it does, if the Purchaser so requests,
subject to usual and customary provisions and, unless and
until Rule 144 permits him to resell Shares after one year,
he will also have the right to demand one registration of
the public resale of Shares; and
(d) the net proceeds of the sale of the Shares to the
Purchaser will be used solely for the Company's automated
data library (ADL) business.
SECTION 4. CHANGES; COUNTERPARTS. Any term of this
Agreement may be amended or compliance therewith waived with
the written consent of both parties hereto. This Agreement
may be executed in counterparts, each of which shall
constitute an original, but all of which, when taken
together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been
signed by each party hereto and delivered to the other
parities.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the 25th day of September,
1995.
THE COMPANY: MEDIA LOGIC, INC.
By: /s/ William E. Davis, Jr.
--------------------------
Title: Chief Executive Officer
THE PURCHASER: /s/ Raymond Leclerc
-----------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1995.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 5,611,861
<SECURITIES> 1,003,623
<RECEIVABLES> 1,231,815
<ALLOWANCES> (607,022)
<INVENTORY> 3,414,289
<CURRENT-ASSETS> 10,942,582
<PP&E> 2,182,463
<DEPRECIATION> (1,099,560)
<TOTAL-ASSETS> 12,870,572
<CURRENT-LIABILITIES> 867,869
<BONDS> 0
<COMMON> 61,261
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,070,572
<SALES> 701,363
<TOTAL-REVENUES> 701,363
<CGS> 543,411
<TOTAL-COSTS> 2,382,112
<OTHER-EXPENSES> (16,085)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,664,664)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,664,664)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,664,664)
<EPS-PRIMARY> (.33)
<EPS-DILUTED> (.33)
</TABLE>
