<PAGE>
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.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Massachusetts 04-2772354
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
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)
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.
<PAGE>
INDEX
MEDIA LOGIC, INC.
PART I. FINANCIAL INFORMATION
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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
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<PAGE>
PART I. FINANCIAL INFORMATION
MEDIA LOGIC, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
December 31, March 31,
1997 1997
--------------------------- -------------------------
ASSETS As Restated
<S> <C> <C>
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
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$7,192,509 $8,972,955
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--------------------------- -------------------------
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
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$7,192,509 $8,972,955
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</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
<PAGE>
PART I. FINANCIAL INFORMATION
- ------------------------------
MEDIA LOGIC, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1997 1996 1997 1996
------------------- ------------------- ----------------- -------------------
As Restated As Restated
<S> <C> <C> <C> <C>
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
------------------- ------------------- ----------------- -------------------
------------------- ------------------- ----------------- -------------------
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
<PAGE>
PART I. FINANCIAL INFORMATION
MEDIA LOGIC, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
1997 1996
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<S> <C> <C>
CASH (USED) BY OPERATING ACTIVITIES $(2,812,318) $(3,239,991)
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CASH PROVIDED (USED) BY INVESTING ACTIVITIES:
Sale (purchase) of property and equipment, net (9,663) (115,100)
(Increase) in other assets (668) -
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(10,331) (115,100)
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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
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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
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</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
<PAGE>
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:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, 1997 December 31, 1997
Previously As Restated Previously As Restated
Reported Reported
------------------- ------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
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
</TABLE>
<PAGE>
(3) Inventories
<TABLE>
<CAPTION>
December 31, 1997 March 31, 1997
Previously As Restated
Reported
<S> <C> <C> <C>
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
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$ 3,772,088 $ 3,897,088 $ 3,563,482
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</TABLE>
(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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 1,357,739
<SECURITIES> 0
<RECEIVABLES> 160,113
<ALLOWANCES> 27,854
<INVENTORY> 3,897,088
<CURRENT-ASSETS> 5,393,316
<PP&E> 1,733,210
<DEPRECIATION> 1,415,040
<TOTAL-ASSETS> 7,192,509
<CURRENT-LIABILITIES> 649,151
<BONDS> 1,009,232
0
0
<COMMON> 102,537
<OTHER-SE> 24,941,168
<TOTAL-LIABILITY-AND-EQUITY> 7,192,509
<SALES> 968,375
<TOTAL-REVENUES> 968,375
<CGS> 628,110
<TOTAL-COSTS> 3,513,320
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 653,278
<INCOME-PRETAX> (3,173,747)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,173,747)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,173,747)
<EPS-PRIMARY> (.44)
<EPS-DILUTED> (.44)
</TABLE>
