<PAGE>
UNITED STATES
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 September 30, 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 0-21200
MERIDIAN DATA, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0188708
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5615 Scotts Valley Drive, California 95066
------------------------------------ -----
(Address of principal executive office) (Zip Code)
(408) 438-3100
(Registrant's telephone number, including area code)
(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 in 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 .
The number of shares of Common Stock, no par value, outstanding on
October 28, 1997, was 8,720,907.
Exhibit index on page 21. Page 1 of 25
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
MERIDIAN DATA, INC.
BALANCE SHEETS
September 30, December 31,
(In thousands) 1997 1996
- --------------------------------------------------------------------------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $13,315 $24,809
Marketable securities 20,129 14,340
Accounts receivable (net of allowance
for returns and doubtful accounts of $512
and $512, respectively) 3,347 2,991
Inventories 1,762 1,311
Other assets 204 324
------- -------
Total current assets 38,757 43,775
Property and equipment,
less accumulated depreciation 595 653
Other assets 17 817
------- -------
$39,369 $45,245
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,530 $ 1,632
Accrued payroll and related expenses 1,660 686
Accrued advertising and promotion 1,066 506
Other accrued liabilities 1,519 1,191
------- -------
Total current liabilities 6,775 4,015
------- -------
Stockholders' equity:
Common stock 66,020 69,578
Unrealized gains on marketable securities 2 5
Accumulated deficit (33,428) (28,353)
------- -------
Total stockholders' equity 32,594 41,230
------- -------
$39,369 $45,245
======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE>
MERIDIAN DATA, INC.
STATEMENTS OF OPERATIONS
Three months ended Nine months ended
(In thousands, except per share September 30,
data, unaudited) 1997 1996 1997 1996
- -------------------------------------------------------------------------------
Revenues:
Product sales $ 6,151 $6,652 $14,707 $20,116
Costs and expenses:
Cost of product sales 2,815 2,431 6,945 7,929
Research and development 1,620 821 4,333 2,342
Sales and marketing 2,951 1,801 7,847 5,400
General and administrative 624 534 2,185 1,581
------- ------ ------- -------
Total costs and expenses 8,010 5,587 21,310 17,252
------- ------ ------- -------
Income (loss) from operations (1,859) 1,065 (6,603) 2,864
Interest income 455 520 1,528 1,091
------- ------ ------- -------
Pretax income (loss) (1,404) 1,585 (5,075) 3,955
Provision for income taxes -- (82) -- (197)
------- ------ ------- -------
Net income (loss) $(1,404) $1,503 $(5,075) $ 3,758
======= ====== ======= =======
Net income (loss) per share $ (0.16) $ 0.15 $ (0.55) $ 0.39
======= ====== ======= =======
Weighted average common shares and
common stock equivalents 8,716 10,041 9,162 9,549
======= ====== ======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE>
MERIDIAN DATA, INC.
STATEMENTS OF CASH FLOWS
Nine months ended September 30,
(In thousands, unaudited) 1997 1996
- -------------------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) $ (5,075) $ 3,758
Adjustments to reconcile net income to net
cash (used in) provided by operating
activities:
Depreciation and amortization 369 317
Amortization of advance for research and
development arrangements 800 --
Changes in assets and liabilities:
Accounts receivable (356) (736)
Inventories (451) (236)
Other current assets 120 (243)
Accounts payable 898 (680)
Accrued payroll and related expenses 974 (401)
Other accrued liabilities 888 (257)
-------- --------
Net cash (used in) provided by
operating activities (1,833) 1,522
-------- --------
Cash flows from investing activities:
Purchase of property and equipment (306) (429)
Redemption of marketable securities 36,546 2,841
Additions to marketable securities (42,338) (3,624)
-------- --------
Net cash provided by (used in)
investing activities (6,098) (1,212)
-------- --------
Cash flows from financing activities:
Issuance of common stock, net -- 36,971
Repurchase of common stock (3,966) (17,271)
Issuance of common stock related to stock plans 403 796
-------- --------
Net cash (used in) provided by
financing activities (3,563) 20,496
-------- --------
Net (decrease) increase in cash and
cash equivalents (11,494) 20,806
Cash and cash equivalents at:
beginning of period 24,809 11,752
-------- --------
end of period $ 13,315 $ 32,558
======== ========
Statement of cash flows supplemental disclosure:
Total cash paid for interest during the period $ 9 $ 14
Total cash paid for taxes during the period 32 94
The accompanying notes are an integral part of these financial statements.
<PAGE>
MERIDIAN DATA, INC.
NOTES TO FINANCIAL STATEMENTS
For The Three and Nine Months Ended September 30, 1997, and September 30, 1996
NOTE 1. GENERAL
The accompanying financial information is unaudited, but, in the opinion of
management, reflects all adjustments (which include only normally recurring
adjustments) necessary to present fairly the Company's financial position as of
the dates indicated and the results of operations for the periods then ended.
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. While the Company believes that the
disclosures are adequate to make the information presented not misleading, the
financial information should be read in conjunction with the audited financial
statements, and notes thereto for the year ended December 31, 1996 included in
the Company's Annual Report on Form 10-K. Results for the interim period are not
necessarily indicative of the results for the entire year.
NOTE 2. INCOME TAXES
The Company made no provision for income taxes in the third quarter and first
nine months of 1997 due to a net operating loss. The Company's effective tax
rate for the third quarter and first nine months of 1996 was approximately 5%.
This rate was lower than the expected statutory rate due to the utilization of
net operating loss carryforwards. The Company's tax liability in 1996 resulted
from federal and state alternative minimum taxes.
NOTE 3. INVENTORIES CONSIST OF THE FOLLOWING (IN THOUSANDS):
September 30, 1997 December 31, 1996
------------------- -----------------
(unaudited)
Raw materials $1,147 $ 885
Work-in-progress 615 426
------ ------
$1,762 $1,311
====== ======
NOTE 4. RESEARCH AND DEVELOPMENT ARRANGEMENTS:
In November 1996, the Company entered into an agreement with a
development stage company ("DSC") to partially fund the development of a media
independent software search technology. As envisioned, the product would allow
searches of textual, audio, and video data stored on corporate intranets, the
Internet, or such possible future media such as digital video disc's ("DVD's").
As part of this agreement, Meridian loaned $1 million (the "Loan") to DSC at an
annual rate of 5.96%, due in August of 1997, which was recorded in other assets.
In the fourth quarter of 1996, the Company reduced the carrying value of this
Loan by $0.2 million, which represented Meridian's estimate of the realizability
of the Loan at December 31, 1996. At March 31, 1997, the carrying value of the
Loan was reduced by an additional $0.8 million due to uncertainty regarding the
realizability of the Loan. These charges were recorded as research and
development expense. The Loan was repaid in full with interest by DSC in June of
1997. This was recorded as a credit against research and development expense.
In May 1997 the Company purchased a software technology license for $1
million. The cost of the acquired technology was charged against research and
development expense during the second quarter of 1997.
NOTE 5. PRO FORMA EARNINGS PER SHARE:
In February 1997, the Financial Accounting Standards Boards issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (the "Statement").
This statement is effective for the Company's fiscal year ending December 31,
1997. The Statement redefines earnings per share under generally accepted
accounting principles. Under the new standard, primary earnings per share and
fully diluted earnings per share are replaced by basic earnings per share and
diluted earnings per share, respectively. There is no material difference
between reported earnings (loss) per share in the statement of operations and
what would have been reported had the Company adopted the Statement for the
three and nine month ended September 30, 1997 and 1996.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD-LOOKING STATEMENTS IN THIS REPORT ARE MADE PURSUANT TO THE SAFE
HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
INVESTORS ARE CAUTIONED THAT SUCH FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, RISKS DISCLOSED UNDER THE CAPTION
"RISK FACTORS" BEGINNING ON PAGE 12 OF THIS REPORT; AND OTHER RISKS DETAILED
FROM TIME TO TIME IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS.
GENERAL
Meridian provides CD-ROM networking software and systems that enable
multiple users on a network to simultaneously access CD-ROM titles from their
desktops. The Company's software supports a broad array of personal computer and
network operating systems and provides access to networked CD-ROMs in
heterogeneous environments. In addition, to meet customer demands for integrated
solutions, Meridian provides systems containing the Company's networking
software and CD-ROM servers configured by Meridian from third party components.
Because the Company generally ships its software and systems within a
short period after receipt of an order, the Company typically does not have a
material backlog of unfilled orders, and total revenues in any quarter are
substantially dependent on orders booked in that quarter. The Company's
quarterly operating results may also vary significantly depending on other
factors, such as: price and other forms of competition; seasonality; the
introduction of new products by the Company's competitors; market acceptance of
new products; mix of software and systems sales; the long and complex sales
cycle for site licenses; the timing of site license revenue; adoption of new
technologies and standards; the cost, quality and availability of third party
components used in the Company's systems; changes in the Company's distribution
arrangements; and the inability of the Company to accurately monitor end-user
demand for its products due to the sale of products through distributors and
value-added resellers ("VARs"). In 1996, identifiable sales to federal
governmental agencies accounted for approximately 11% of the Company's product
sales, and the Company anticipates that such sales will continue to account for
a significant percentage of the Company's revenues for the foreseeable future.
In the event that there is any reduction or deferral in spending by such
governmental agencies, the Company's quarterly results may be adversely
affected. Moreover, the Company's business has experienced and is expected to
continue to experience seasonality in the form of higher sales for its products
during the quarters ending in September and December and weaker sales during the
quarters ending in March and June. The Company's operating results will also be
affected by the economic condition of the personal computer industry, which has
from time to time experienced cyclical, depressed business conditions, often in
connection with or in anticipation of a decline in general economic conditions.
RESULTS OF OPERATIONS
REVENUES
PRODUCT SALES
Product sales in the third quarter and first nine months of 1997
decreased by $0.5 million and $5.4 million, respectively, over the corresponding
periods of 1996. This decrease was the result of lower product pricing
instituted in January of 1997 and lower unit shipments. Meridian's product sales
increased 11% between the second and third quarters of 1997 due to increased
sales of its higher priced systems, increased promotional activities and new
products introduced in the second and third quarters of 1997, partially offset
by lower unit shipments versus the second quarter of 1997. The increased sales
of higher priced systems was due to large government orders, which is typical of
the Company's third quarter. The markets for the Company's products are
extremely competitive, and Meridian expects that the Company's revenue could be
adversely impacted as competition continues to consolidate, change and expand
product offerings, and react to the Company's pricing and promotional
activities. The Company generally ships its software and systems within a short
period after receipt of an order, and the Company typically does not have a
material backlog of unfilled orders, thus total revenues in any quarter are
substantially dependent on orders booked in that quarter. There can be no
assurance that the Company's bookings or shipments will increase from one
quarter to the next.
For a discussion of certain other risks that may affect the Company's
future product sales, see "Risk Factors-Operating losses; Fluctuations in
Quarterly Operating Results," "-Rapid Technological Change;-Potential for
Product Defects" and "-Emerging Markets; Product Concentration."
COST AND EXPENSES
COST OF SALES
The Company's gross margin decreased from 63% and 61% in the third
quarter and first nine months of 1996, to 54% and 53% for the comparable periods
of 1997. This decrease was due primarily to lower prices on Meridian's CD-ROM
networking systems. As a result of January's price decrease, the Company's gross
margins in 1997 will fall below the gross margins reported for the comparable
periods of 1996.
For a discussion of certain other risks that may affect the Company's
future cost of product sales, see "Risk Factors-Dependence on Third party
Suppliers" and "-Expansion of International Operations; Foreign Currency
Fluctuations."
RESEARCH AND DEVELOPMENT
Total research and development expense increased to $1.6 and $4.3
million in the third quarter and first nine months of 1997, respectively, from
$0.8 million and $2.3 million for the comparable periods of 1996. These
increases were primarily due to expenses related to the development of the
Company's new, non-CD-ROM product. Included in the Company's research and
development expense for the first nine months of 1997 was a $1.0 million charge
for the acquisition of technology to be used in new products (see Note 4 of
Notes to Financial Statements).
This charge was offset by the receipt of the proceeds from the Loan (see below).
In November 1996, the Company entered into an agreement with a
development stage company ("DSC") to partially fund the development of a media
independent software search technology. The product allows searches of textual,
audio, and video data stored on corporate intranets, the Internet, or such
possible future media such as digital video disc's ("DVD's"). As part of this
agreement, Meridian loaned $1 million (the "Loan") to DSC at and annual rate of
5.96%, due in August of 1997, which was recorded in other assets. In the fourth
quarter of 1996, the Company reduced the carrying value of this Loan by $0.2
million, which represented Meridian's estimate of the realizability of the Loan
at December 31, 1996. At March 31, 1997, the carrying value of the Loan was
reduced by an additional $0.8 million. These charges were recorded as research
and development expense. The Loan was repaid in full with interest by DSC in
June 1997. This was recorded as a credit against research and development
expense.
Over the last nine months, Meridian has introduced five new products to
help solidify the Company's position as a one stop shop for CD-ROM networking
solutions. CD Net Remote is a network appliance that automatically recognizes,
configures and provides network access to CD-ROM drives located on a Novell
network. CD Net Universal is a fully loaded, CD-ROM server that addresses one of
the fastest growing segments of the CD-ROM networking market, protocol
independent, entry level, plug-and-play network servers. CD Net Ultimate servers
provide access to CD ROM data at speeds comparable to hard disks. This product
is targeted at the high-end users who require extremely rapid access speeds, and
are ideal for running multimedia applications in a networking environment. Most
recently, the Company introduced a multi-functional, high-speed data access
storage server designed for the Microsoft Windows NT server platform and a line
of CD Net 24X systems.
The Company believes that due to CD-ROM server hardware increasingly
becoming a commodity item, it is difficult to create a significant competitive
advantage solely through hardware development. As such, the Company devotes
substantially all of its engineering resources towards software and new product
development. The Company's inability to anticipate and respond to technological
and market changes or the Company's failure to incorporate new technologies in a
timely manner could have a material adverse effect on the Company's business. In
the second quarter of 1997, Meridian embarked on the development of its first
non-CD ROM networking system. The Company anticipates that it will incur
significant amounts of non-recurring engineering expenses in relations to the
new product. As such, Meridian anticipates that R&D expense will continue to
increase substantially through at least the third quarter of 1998. In addition,
there can be no assurance that Meridian's research and development efforts will
result in the introduction of new products or that any of such products, if
developed, will be commercially successful. For a discussion of certain other
risks that may relate to the Company's research and development, see "Risk
Factors-Rapid Technological Change; Potential for Product Defects."
SALES AND MARKETING
Sales and marketing expense increased from $1.8 million and $5.4
million for the third quarter and first nine months of 1996, to $3.0 million and
$7.8 million for the comparable periods of 1997. This increase was due primarily
to increased promotional activity, higher payroll and related expenses
(including commissions). Meridian anticipates that sales and marketing expenses
will continue to increase in the future both in absolute dollars and as a
percent of sales. Sales and marketing expense consists primarily of payroll and
related expenses (including commissions), and promotional expenses.
Meridian is currently developing its first non-CD-ROM product for
release in the first half of 1998. Due to the potential size and growth of this
new market, the Company anticipates that likelihood of other competitors
entering this market is very high. As such, Meridian is planning an aggressive
launch campaign in the hopes of achieving a competitive advantage in this new
market. The Company anticipates that it will incur significantly higher
promotional costs related to the introduction of this new product than it has
for other products in the past. Accordingly, sales and marketing expense will
increase significantly beginning in the fourth quarter of 1997 and continue
throughout 1998. In addition, there can be no assurance that Meridian's sales
and marketing efforts will result in the successful introduction of new products
or that any of such products, if developed, will be commercially successful. For
a discussion of certain other risks that may relate to the Company's sales and
marketing, see "Risk Factors-Dependence on Third Party Distributors" and
"-Emerging Markets; Product Concentrations."
GENERAL AND ADMINISTRATIVE
General and administrative expense increased from $0.5 million and $1.6
million for the third quarter and first nine months of 1996, respectively, to
$0.6 million and $2.2 million for the corresponding periods of 1997. This
increase was primarily due to higher payroll related expenses, legal expenses
incurred in connection with the Company's reincorporation in Delaware, and other
corporate expenses. General and administrative expenses consist primarily of
payroll, payroll related expenses, and occupancy expenses.
INTEREST INCOME
Interest income decreased from $520,000 in the third quarter of 1996 to
$455,000 in the third quarter of 1997 primarily due to lower invested cash
balances resulting from the Company's stock repurchase program and operating
losses. Interest income increased from $1.1 million for the first nine months of
1996 to $1.5 million for the corresponding periods of 1997 primarily due to
higher invested balances resulting from a public offering of stock in the second
quarter of 1996. This was partially offset by a stock repurchase program and
expenses incurred in the development of its new products. Future interest income
will vary depending on the average invested balance and interest rates.
INCOME TAXES
The Company made no provision for income taxes in the first nine months
of 1997 due to a net operating loss. The Company's effective tax rate for the
first nine months of 1996 was approximately 5%. This rate was lower than the
expected statutory rate due to the utilization of net operating loss carry
forwards. The Company's tax liability in the first nine months of 1996 resulted
from federal and state alternative minimum taxes.
CAPITAL RESOURCES AND LIQUIDITY
Meridian's cash flow from operations for the first nine months of 1997
was adversely impacted by the net loss of $5.1 million, and increases in
accounts receivable and inventory. Accounts receivable increased due to timing
of shipments at the end of September. The increase in inventory was due to a
purchase of components which have been difficult to obtain in the past. These
were partially offset by an increase in accrued liabilities and expenses, and
noncash depreciation and amortization charges. In addition the Company
repurchased $4.0 million of its Common Stock during the first nine months of
1997. At September 30, 1997, the Company's principal source of liquidity
consisted of cash and marketable securities totaling $33.4 million. Meridian
believes that its current cash and marketable securities will satisfy its
working capital and capital expenditures at least through the first nine months
of 1998.
Meridian believes that success in its industry requires substantial
capital in order to maintain the flexibility to take advantage of opportunities
as they may arise. The Company may, from time to time, as market and business
conditions warrant, invest in or acquire complementary businesses, products or
technologies. The costs of such investments could be charged to expense. Such
investment or acquisitions may be funded by internally generated cash,
marketable securities, or additional equity. The sale of additional equity would
result in dilution in the equity ownership of the Company's stockholders
<PAGE>
RISK FACTORS
THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN ADDITION
TO THE OTHER INFORMATION PRESENTED IN THIS REPORT. THIS REPORT CONTAINS FORWARD
LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL
RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD
LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH DIFFERENCES INCLUDE, BUT ARE
NOT LIMITED TO, THE FOLLOWING RISK FACTORS.
OPERATING LOSSES; FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. The Company
fundamentally changed its business in December 1994 with the purchase of
Meridian Data, Inc. During 1994, the Company exited its prior business and
product line, which had generated substantial losses. In the first half of 1995,
the Company incurred an operating loss, excluding certain non-recurring revenue.
From that point the Company operated profitably until the first quarter of 1997,
when it again began incurring net losses. There can be no assurance that
profitable operations will return. In late 1996 and early 1997, the Company made
several decisions to address the disappointing systems revenue growth
experienced in the last three quarters of 1996. Late in the fourth quarter of
1996, Meridian increased its sales and promotional expenditures and, at the end
of January 1997, significantly reduced system prices in response to competitive
pressures. Even if unit shipments were to increase in the future, there can be
no assurance that prices for the Company's products will not decrease further
due to competitive pricing pressures. Accordingly, the Company may not meet its
total revenue goals and the Company's results of operations and liquidity would
be materially adversely affected.
The Company generally ships its software and systems within a short
period after receipt of an order, therefore the Company typically does not have
a material backlog of unfilled orders. Accordingly, total revenues in any
quarter are substantially dependent on orders booked in that quarter. This may
result in quarterly fluctuations in revenue, and the inability to adjust
expenses to match such quarterly fluctuations, may lead to substantial
fluctuations in net operating results. The Company's quarterly operating results
may also vary significantly depending on other factors, including the
introduction of new products by the Company's competitors; market acceptance of
the Company's new products; mix of software and systems sales; the long and
complex sales cycle for site licenses; the timing of site license revenue;
adoption of new technologies and standards; price and other forms of
competition; the cost, quality and availability of third party components used
in the Company's systems; changes in the Company's distribution arrangements;
and the inability of the Company to accurately monitor end user demand for its
products due to the sale of products through distributors and value-added
resellers. In 1996, identifiable sales to federal governmental agencies
accounted for approximately 11% of the Company's product sales, and the Company
anticipates that such sales will continue to account for a significant
percentage of the Company's revenues for the foreseeable future. In the event
that there is any reduction or deferral in spending by such governmental
agencies, the Company's quarterly and annual results would be adversely
affected. Similarly, if such government agencies reduced their purchases of
Meridian products in favor of those of its competitors, the Company's quarterly
results would be adversely affected. Moreover, the Company's business has
experienced and is expected to continue to experience seasonality in the form of
higher sales for its products during the quarters ending in September and
December and weaker sales during the quarters ending in March and June. The
Company's operating results will also be affected by the economic condition of
the personal computer industry, which has from time to time experienced
cyclical, depressed business conditions, often in connection with or in
anticipation of a decline in general economic conditions. Due to all of the
foregoing factors, the Company's total revenues or operating results may in one
or more future quarters be below the expectations of stock market analysts and
investors. In such event, the price of the Company's Common Stock would likely
decline, perhaps substantially. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
NEW PRODUCT DEVELOPMENT. The Company is actively developing products for entry
into non-CD-ROM networking markets. Such entry entails substantially higher
risks to the Company in the form of new and well established competition, and
competitive dynamics different than those experienced in the CD ROM networking
market. In attempting to successfully enter these new markets, the Company will
have to commit to significant levels of engineering, sales and marketing
expenditures. There can be no assurance that the Company will be successful in
developing and marketing new products, that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of these new products, or that its new products will
adequately meet the requirements of the marketplace and achieve market
acceptance. If the Company is unable, for technological or other reasons, to
develop and introduce new products in a timely manner in response to changing
market conditions or customer requirements, the Company's business, operating
results and financial condition will all be materially adversely affected. Due
to the complexity of the Company's contemplated new products and the difficulty
in gauging the engineering effort required to produce these potential new
products, such potential new products are subject to significant technical
risks. There can be no assurance that such potential new products will be
introduced on a timely basis or at all. If potential new products are delayed or
do not achieve market acceptance, the Company's business, operating results and
financial condition will be materially adversely affected. As a result of the
preceding, the Company anticipates that it will operate at a net loss through at
least the first half of 1998.
DEPENDENCE ON THIRD PARTY DISTRIBUTORS. The Company derives substantially all of
its product sales through distributors and VARs. Two distributors accounted for
25% and 18%, respectively, of the Company's 1996 product sales. The loss of
either of these distributors, or certain other distributors or VARs, would have
a material adverse effect on the Company's business and results of operations.
The Company's contractual relationships with its distributors and VARs can
generally be canceled upon notice to the Company. Certain of the Company's
distributors and VARs also act as distributors for competitors of the Company
and could devote greater effort and resources to marketing competitive products.
In addition, effective distributors and VARs must devote significant technical,
marketing and sales resources to an often lengthy sales cycle. There can be no
assurance that the Company's current distributors and VARs will continue to
market the Company's products effectively or that economic or industry
conditions will not adversely affect such distributors and VARs. Because the
Company sells a significant portion of its products through distributors and
VARs, it is difficult for the Company to monitor end user demand for its
products on a current basis. Initial stocking orders may not be indicative of
long-term end user demand. The Company's distributors typically are allowed by
contract to return products, subject to certain limitations, without charge or
penalty. While the Company provides for a reserve for future returns, there can
be no assurance that the reserve will adequately cover actual product returns.
Excessive or unanticipated returns could materially adversely affect the
Company's business, liquidity, or results of operations. The Company's results
of operations could also be materially adversely affected by changes in
distributors' inventory strategies, which could occur rapidly, and in many cases
may not be related to end user demand. New products may require different
marketing, sales and distribution strategies than those for the Company's
current products. There can be no assurance that the Company's distributors and
VARs will choose or be able to effectively market these new products or to
continue to market the Company's existing products. A failure of the Company's
distributors and VARs to successfully market the Company's products would have a
material adverse effect on the Company's business and results of operations.
DEPENDENCE ON THIRD PARTY SUPPLIERS. The Company is dependent on a small number
of suppliers for certain key components used in its products, including CD ROM
and DVD drives, microprocessors, integrated circuits and power modules. The
Company purchases these components pursuant to periodic purchase orders, does
not carry significant inventories of these components, and has no long-term
supply arrangements. In addition, certain subassemblies used in the Company's
products are manufactured by a single third party vendor. The loss of a key
supplier or a disruption to the business of a key supplier could have a material
adverse effect upon the Company's business, financial condition and results of
operations. Although the Company believes that alternative sources of components
or subassemblies could be arranged, the process of qualifying new suppliers
could be lengthy. There can be no assurance that any additional source would be
available to the Company on a timely basis or at a cost acceptable to the
Company. Any disruption or reduction in the future supply of any key components
currently obtained from limited sources could have a material adverse effect on
the Company's business, financial condition and results of operations. In the
past, there has been unexpected significant growth in the demand for CD ROM
drives, which has caused temporary supply disruptions. These components are only
available from a limited number of manufacturers, most of which are Japanese
manufacturers. The Company has experienced in the past, and may experience in
the future, an adverse impact on the cost in dollars of certain components
purchased from Japanese manufacturers due to fluctuations in the exchange rate
for the yen. Moreover, the Company has been required to make spot market
purchases for certain components at premium prices. In the third quarter of
1995, the Company experienced temporary delays in obtaining the drives required
for its products. If such delays reoccur or the Company is required to purchase
components at a higher cost due to fluctuating currency exchange rates, spot
market shortages or other factors, the Company may be unable to ship products on
the schedule anticipated or may sustain higher product costs with a resulting
adverse effect on the Company's business, financial condition and results of
operations.
RAPID TECHNOLOGICAL CHANGE; POTENTIAL FOR PRODUCT DEFECTS. The market for the
Company's products is characterized by rapid technological advances, evolving
industry standards in computer hardware and software technology, changes in
customer requirements and frequent new product introductions and enhancements.
The Company's future success will depend on its ability to continue to enhance
its current product line and to continue to develop and introduce new products
that keep pace with competitive product introductions and technological
developments, satisfy diverse and evolving customer requirements and otherwise
achieve market acceptance. There can be no assurance that the Company will be
successful in continuing to develop and market on a timely and cost-effective
basis new products or product enhancements that respond to technological
advances by others, or that these products will achieve market acceptance. In
addition, companies in the industry have in the past experienced delays in the
development, introduction and marketing of new and enhanced products, and there
can be no assurance that the Company will not experience delays in the future.
Any failure by the Company to anticipate or respond adequately to changes in
technology and customer preferences, or any significant delays in product
development or introduction, would have a material adverse effect on the
Company's business, financial condition and results of operations.
Due to their complexity and sophistication, the Company's products from
time to time may contain defects or "bugs" which can be difficult to correct.
Furthermore, as the Company continues to develop and enhance its products, there
can be no assurance that the Company will be able to identify and correct
defects in a manner that will permit the timely introduction of such products.
Moreover, despite extensive testing, the Company has from time to time
discovered defects only after its products have been commercially released.
There can be no assurance that software defects will not cause delays in product
introductions and shipments or loss of or delay in market acceptance, result in
increased costs, require design modifications, impair customer satisfaction, or
result in customer returns. Any such event could materially adversely affect the
Company's business, financial condition and results of operations.
Over the past two years, CD ROM drive technology has advanced
significantly. Additionally, the pace of new drive introductions has increased.
As a result, the Company may find itself holding an inventory of obsolete
drives. Further, the Company's contracts with its distributors allow for product
return, or price protection credits, based on current inventory levels of
current and obsolete products under certain limited circumstances. Meridian
estimates and accrues its required allowance for such occurrences, but there can
be no assurance that actual inventory writedowns, product returns, or price
protection credits will not exceed the Company's estimate. Such an event could
materially adversely affect the Company's business, financial condition and
results of operations.
COMPETITION. The markets for the Company's products are extremely competitive.
The Company expects that competition will increase as more companies enter the
market and as existing competitors continue to change and expand their product
offerings. Pricing is very aggressive in the Company's industry, and the Company
expects pricing pressures to continue to intensify. The Company's current
competitors in the CD ROM networking market include other suppliers of CD ROM
networking software and hardware such as Procom Technologies, Microtest, Inc.
and Microdesign International. The Company also competes indirectly with
suppliers of personal computers, such as Dell Computer, Compaq, and IBM, and
network operating systems such as Microsoft and Novell, to the extent such
companies include CD ROM networking utilities as part of their operating
systems. The Company's potential competitors in the hardware area include
companies in the personal computer market and certain CD ROM manufacturers.
These companies in particular, and the Company's competitors in general, include
large domestic and international companies, many of which have significantly
greater financial, technical, manufacturing, marketing, sales and distribution
resources than the Company. There can be no assurance that the Company's current
or potential competitors will not develop products comparable or superior to
those developed by the Company or adapt more quickly than the Company to new or
emerging technologies, evolving industry trends or changing customer
requirements. There can be no assurance that the Company will have the financial
resources, technical expertise, or marketing, sales, distribution and customer
service and technical support capabilities to compete successfully.
EXPANSION OF INTERNATIONAL OPERATIONS. An important element of the Company's
strategy is to expand its international operations. There can be no assurance
that the Company will be able to successfully localize, market, sell and deliver
its products internationally. The inability of the Company to successfully
expand its international operations in a timely and cost effective manner could
materially adversely affect the Company's business, financial condition and
results of operations. International product sales were approximately 14% of
total product sales in 1996. The Company's business and results of operations
could be materially adversely affected by risks inherent in conducting business
internationally, such as changes in currency exchange rates, longer payment
cycles, difficulties in staffing and managing international operations, problems
in collecting accounts receivable, slower acceptance of technology advances
compared with the United States, lack of published CD ROM content, seasonal
reductions in business activity during the summer months in Europe and certain
other parts of the world, and tariffs, duties and other trade barriers. For a
discussion of the effect of fluctuations in the exchange rate of the Japanese
yen on the cost of certain components used in the Company's products, see "Risk
Factors - Dependence on Third Party Suppliers."
EMERGING MARKETS; PRODUCT CONCENTRATION. The Company's future financial
performance will depend in large part on the growth in demand for CD ROM
networking products. While there is a substantial installed base of CD ROM
drives in the United States, the market for CD ROM networking applications is
relatively new and undeveloped. There can be no assurance that the Company's
products will be widely accepted in these emerging markets. If the demand for CD
ROM networking products fails to continue to develop, or develops more slowly
than the Company currently anticipates, the demand for the Company's products
and the Company's business, financial condition and results of operations would
be materially adversely affected. In addition, if CD ROM server products become
generally available, the Company anticipates that, as a percentage of product
sales, systems sales could decline and software sales may increase. In the event
that software sales do not increase in an amount sufficient to offset a decline
in systems sales, the Company's business, financial condition and results of
operations will be materially adversely affected.
DEPENDENCE ON KEY PERSONNEL; MANAGEMENT OF GROWTH. Due to the specialized nature
of the Company's business, the Company's future success is highly dependent upon
the continued services of its key engineering personnel and executive officers
and upon its ability to attract and retain qualified engineering, sales and
marketing, management and manufacturing personnel for its operations.
Competition for such personnel is intense. There can be no assurance that the
Company will be successful in attracting or retaining such personnel. The loss
of any key personnel or the Company's inability to attract and retain qualified
employees could have a material adverse effect on the Company's business,
financial condition and results of operations. None of the Company's key
employees has an employment agreement with the Company, and the Company does not
maintain key man insurance policies on the lives of its key employees. Although
the Company's senior executives have lengthy experience in the computer
industry, they have had only limited experience with the CD ROM networking
business that was acquired in December 1994. To manage its growth, the Company
must continue to implement and improve its operational, financial and management
information systems and expand, train and manage its workforce. Meridian
believes that success in its industry requires substantial capital in order to
maintain the flexibility to take advantage of opportunities as they may arise.
The Company may, from time to time, as market and business conditions warrant,
invest in or acquire complementary businesses, products or technologies. Such
investment or acquisitions may be funded by internally generated cash,
marketable securities, or additional equity. The sale of additional equity could
result in dilution in the equity ownership of Meridian's stockholders. The
Company's failure to manage growth effectively could have a material adverse
effect on the Company's business, financial condition and results of operations.
DEPENDENCE ON PROPRIETARY RIGHTS. The Company's success depends in part upon
protecting its proprietary technology. The Company relies on a combination of
intellectual property laws, nondisclosure agreements and other protective
measures to protect its proprietary information. There can be no assurance,
however, that the steps taken by the Company will be adequate to deter
misappropriation or independent third party development of its technology or
that its intellectual property rights can be successfully defended if
challenged. In addition, the laws of certain foreign countries do not protect
the Company's intellectual property rights to the same extent as the laws of the
United States. Given the rapid development of CD ROM technology, there can be no
assurance that certain aspects of the Company's products do not or will not
infringe upon the existing or future proprietary rights of others or that, if
licenses or rights are required to avoid infringement, such licenses or rights
could be obtained or obtained on terms that are acceptable to the Company. The
Company is not currently aware of any infringement of its proprietary rights,
nor is it aware of any claims that its products infringe the rights of others.
POSSIBLE VOLATILITY OF STOCK PRICE. The Company believes that factors such as
announcements of developments related to the Company's business, announcements
by competitors, quarterly fluctuations in the Company's financial results,
conditions in the CD ROM networking industry, changes in the general economy and
other factors could cause the price of the Company's Common Stock to fluctuate,
perhaps substantially. In addition, in recent years the stock market in general,
and the market for shares of small capitalization technology stocks in
particular, have experienced extreme price fluctuations, which have often been
unrelated to the operating performance of affected companies. Such fluctuations
could have a material adverse effect on the market price of the Company's Common
Stock.
ANTI-TAKEOVER EFFECT OF STOCKHOLDER RIGHTS PLAN AND CERTAIN CHARTER AND BYLAW
PROVISIONS. In February 1997, the Company's Board of Directors authorized the
Company's reincorporation in the State of Delaware (the "Reincorporation"). The
Company's Reincorporation was approved by its stockholders and effective in May
1997.
In July 1997, the Company's Board of Directors adopted a Preferred
Shares Rights Plan (the "Rights Plan"). The Rights Plan provides for a dividend
distribution of one Preferred Shares Purchase Right (a "Right") on each
outstanding share of the Company's Common Stock. The Rights will become
exercisable following the tenth day after a person or group announces
acquisition of 15% or more of the Company's Common Stock, or announces
commencement of a tender offer, the consummation of which would result in
ownership by the person or group of 15% or more of the Company's Common Stock.
The Company will be entitled to redeem the Rights at $0.01 per Right at any time
on or before the tenth day following acquisition by a person or group of 15% of
more of the Company's Common Stock.
The Rights Plan and certain provisions of the Company's Certificate of
Incorporation and Bylaws may have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from attempting to
acquire, control of the Company. The Company's Certificate of Incorporation
allows the Company to issue Preferred Stock without any vote or further action
by the stockholders, and certain provisions of the Company's Certificate of
Incorporation and Bylaws specify procedures for director nominations by
stockholders and submission of other proposals for consideration at stockholder
meetings, and eliminate cumulative voting in the election of directors. Certain
provisions of Delaware law could also delay or make more difficult a merger,
tender offer or proxy contest involving the Company, including Section 203,
which prohibits a Delaware corporation from engaging in any business combination
with any interested stockholder for a period of three years unless certain
conditions are met. The Rights Plan, the possible issuance of Preferred Stock,
the procedures required for director nominations and stockholder proposals and
Delaware law could have the effect of delaying, deferring or preventing a change
in control of the Company, including without limitation, discouraging a proxy
contest or making more difficult the acquisition of a substantial block of the
Company's Common Stock. These provisions could also limit the price that
investors might be willing to pay in the future for shares of the Company's
Common Stock.
PART II. - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
2.0 Agreement and Plan of Reorganization among Parallan Computer, Inc.,
PAC Acquisition Subsidiary, Inc. and Meridian Data, Inc. dated
December 1, 1994 previously filed as Exhibit 2 to the Current Report
on Form 8-K and incorporated herein by reference.
3.1 Restated Articles of Incorporation of Parallan Computer, Inc.
previously filed as Exhibit 3.1A to Registration Statement on Form
S-1 (Registration No. 33-57976) and incorporated herein by reference.
31.a Certificate of Amendment of the Articles of Incorporation of Parallan
Computer, Inc., previously filed as Exhibit 3.1a to the Quarterly
Report on Form 10-Q for the period ended March 31, 1995, and
incorporated by reference.
3.1b Restated Certificate of Incorporation of Meridian Data, Inc.
previously filed as Exhibit 3.1b to the Quarterly Report of Form 10-Q
for the period ended march 31, 1995, and incorporated herein by
reference.
3.2 Bylaws of Parallan Computer, Inc. previously filed as Exhibit 3.2 to
Registration Statement on Form S-1 (Registration No. 33-57976) and
incorporated herein by reference.
4.1 Specimen Common Stock certificate of Meridian Data, Inc., a Delaware
corporation
9.1 Shareholders Agreement, dated as of June 1, 1992, among IBM
Corporation, Parallan Computer, Inc. and certain shareholders of
Parallan Computer, Inc. previously filed as Exhibit 9.1 to
Registration Statement on Form S-1 (Registration No. 33-57976) and
incorporated herein by reference.
10.1 Form of Indemnification Agreement for directors and officers
previously filed as Exhibit 10.1 to Registration Statement on Form
S-1 (Registration No. 33-57976) and incorporated herein by reference.
10.2 Restated and Amended 1988 Incentive Stock Plan and forms of
agreements thereunder previously filed under Registration Statement
on Form S-8 (Registration No. 333-3934) and incorporated herein by
reference.
10.3 1992 Incentive Stock Plan and form of agreement thereunder previously
filed as Exhibit 10.3 to Registration Statement on Form S-1
(Registration No. 33-57976) and incorporated herein by reference.
10.4 1992 Key Employee Stock Plan and form of agreement thereunder
previously filed as Exhibit 10.4 to Registration Statement on Form
S-1 (Registration No. 33-57976) and incorporated herein by reference.
10.5 Amended and Restated 1992 Employee Stock Purchase Plan and form of
subscription agreement thereunder previously filed as Exhibit 10.5 to
the Quarterly Report on Form 10-Q for the period ended March 31,
1995, and incorporated herein by reference.
10.6 Registration Rights Agreement between the Registrant and certain of
the Registrant's shareholders previously filed as Exhibit 10.6 to
Registration Statement on Form S-1 (Registration No. 33-57976) and
incorporated herein by reference.
10.7 Custodial Agreement dated as of May 12, 1992 between Parallan
Computer, Inc., IBM Corporation and File-PROTEK, Inc. previously
filed as Exhibit 10.7 to Registration Statement on Form S-1
(Registration No. 33-57976) and incorporated herein by reference.
10.8 Share Purchase Agreement dated as of May 15, 1992 between Parallan
Computer, Inc., and IBM Corporation, as amended, previously filed as
Exhibit 10.8 to Registration Statement on Form S-1 (Registration No.
33-57976) and incorporated herein by reference.
10.9 Marketing Agreement dated as of June 1, 1992 between Parallan
Computer, Inc. and IBM Corporation previously filed as Exhibit 10.9
to Registration Statement on Form S-1 (Registration No. 33-57976) and
incorporated herein by reference.
10.10 Master Work Agreement dated as of June 1, 1992 between Parallan
Computer, Inc. and IBM Corporation previously filed as Exhibit 10.10
to Registration Statement on Form S-1 (Registration No. 33-57976) and
incorporated herein by reference.
10.11 Secured Loan Agreement dated as of June 1, 1992 between Parallan
Computer, Inc. and IBM Credit Corporation previously filed as Exhibit
10.11 to Registration Statement on Form S-1 (Registration No.
33-57976) and incorporated herein by reference.
10.12 Lease Agreement dated as of October 26, 1992 between Parallan
Computer, Inc. and South Bay/Copley Joint Venture previously filed as
Exhibit 10.12 to Registration Statement on Form S-1 (Registration No.
33-57976) and incorporated herein by reference.
10.13 Master Equipment Lease dated as of June 29, 1990 between Parallan
Computer, Inc. and Western Technology Investment previously filed as
Exhibit 10.13 to Registration Statement on Form S-1 (Registration No.
33-57976) and incorporated herein by reference.
10.14 Master Equipment Lease dated as of January 15, 1993 between Parallan
Computer, Inc. and Phoenix Leasing Incorporated previously filed as
Exhibit 10.14 to Registration Statement on Form S-1 (Registration No.
33-57976) and incorporated herein by reference.
10.15 Amendment to the Master Work Agreement and Marketing Agreement dated
as of March 31, 1994, between Parallan Computer, Inc. and IBM
Corporation.
10.16 Meridian Data, Inc. 1987 Incentive Stock Plan and form of
subscription agreement thereunder previously filed as Exhibit 4.3 to
Registration Statement on Form S-8 (Registration No. 33-89162) and
incorporated herein by reference.
10.17 Stock Option Assignment and Exercise Agreement between the
Registrant, International Business Machines Corporation and certain
shareholders of the Registrant dated March 6, 1996 previously filed
as Exhibit 10.17 to the Annual Report on Form 10-K for the year ended
December 31, 1995, and incorporated herein by reference.
10.18 Meridian Data, Inc. 1995 Director Stock Plan and form of subscription
agreement thereunder previously filed as Exhibit 4.3 to the
Registration Statement on Form S-8 (Registration No, 333-2622) and
incorporated herein by reference.
11 Computation of Net Income (loss) per share
16.1 Letter regarding change in accountants previously filed as Exhibit
16.1 to Registration Statement on Form S-1 (Registration No.
33-57976) and incorporated herein by reference.
27 Financial Data Schedule
(b) Reports on Form 8-K.
none
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
MERIDIAN DATA, INC.
Date: October 28, 1997 /S/ GIANLUCA U RATTAZZI
------------------ -----------------------
Gianluca U. Rattazzi, President and
Chief Executive Officer.
Date: October 28, 1997 /S/ ERIK E. MILLER
------------------ -----------------------
Erik E. Miller, Sr. Vice President,
Finance and Chief Financial Officer
(Principal Financial and Accounting
Officer)
<PAGE>
MERIDIAN DATA, INC.
INDEX TO EXHIBITS
Exhibit Item Page
- ------- ----------------------------------
4.1 Specimen Common Stock certificate of Meridian
Data, Inc., a Delaware corporation 22
11 Computation of net income (loss) per share 24
27 Financial Data Schedule 25
<PAGE>
Exhibit 4.1
-----------
MERIDIAN DATA, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE IN
BOSTON, MA OR NEW YORK, NY SEE REVERSE FOR RESTRICTED LEGENDS
CUSIP 589601 10 3
THIS CERTIFIES THAT_____________________________________________________________
________________________________________________________________________________
WATERMARK LOGO
IS THE RECORD HOLDER OF_________________________________ FULLY PAID AND
NONASSESSABLE SHARES OF THE COMMON STOCK, $0.001 PAR VALUE, OF
MERIDIAN DATA, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signature of its duly authorized officers.
Dated:______________
/s/ Mario M. Rosati Countersigned and Registered:
- ------------------- BANKBOSTON, N.A.
SECRETARY CORPORATE Transfer Agent and Registrar
SEAL
/s/ Gianluca U. Rattazzi By:__________________________
- ------------------------ Authorized Signature
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
<PAGE>
The Corporation is authorized to issue two classes of stock, Common Stock
and Preferred Stock. The Board of Directors of the Corporation has the authority
to fix the number of shares and the designation of any series of Preferred Stock
and to determine or alter the rights, preferences, privileges and restrictions
granted to or imposed upon any unissued series of Preferred Stock.
A statement of the rights, preferences, privileges and restrictions granted
to or imposed upon the respective classes and/or series of shares of stock of
the Corporation and upon the holders thereof as established, from time to time,
by the Articles of Incorporation of the Corporation and by any certificate of
determination, may be obtained by any stockholder upon request and without
charge from the Corporation at its offices in Scotts Valley, CA.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM -- as tenants in common UNIF GIFT MIN ACT --________ Custodian
TEN ENT -- as tenants by the (Cust)
entireties ________ (Minor)
JT TEN -- as joint tenants with right under Uniform Gifts
of survivorship and not as to Minors Act
tenants in common _______ (State)
UNIF TRF MIN ACT --_______ Custodian
(until age___)
_______ Minor
under Uniform
Transfers to Minors
Act_____ (State)
Additional abbreviations may also be used though not in the above list
FOR VALUE RECEIVED, ______ hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
(PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
Shares of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ______ Attorney to transfer the said stock
on the books of the within named Corporation with full power of substitution
in the premises.
Dated:________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature(s) Guaranteed:
By________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17AD-15.
This certificate also evidences and entitles the holder hereof to certain rights
as set forth in a Rights Agreement between Meridian Data, Inc. and BankBoston,
N.A. as the Rights Agent, dated as of August 11, 1997 (the "Rights Agreement"),
the terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of Meridian Data, Inc. Under
certain circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer by evidenced by this
certificate. Meridian Data, Inc. will mail to the holder of this certificate a
copy of the Rights Agreement without charge after receipt of a written request
therefor. Under certain circumstances set forth in the Rights Agreement, Rights
issued to, or held by, any Person who is, was or becomes an Acquiring Person or
an Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement), whether currently held by or on behalf of such Person or by any
subsequent holder, may become null and void.
<PAGE>
EXHIBIT 11
----------
MERIDIAN DATA, INC.
COMPUTATION OF NET INCOME (LOSS) PER SHARE
- -------------------------------------------------------------------------------
(In thousands, except Three months ended Sept 30,
per share data) 1997 1996
- -------------------------------------------------------------------------------
Net income .. ................... $(1,404) $1,503
======= ======
Weighted average shares outstanding :
Common stock..................... 8,716 9,566
Common stock issuable upon exercise of
options....................... -- 475
------- ------
Weighted average common shares
and equivalents............... 8,716 10,041
======= ======
Net Income (loss) per share...... $ (0.16) $ 0.15
======= ======
- -------------------------------------------------------------------------------
(In thousands, except Nine months ended Sept 30,
per share data) 1997 1996
- -------------------------------------------------------------------------------
Net income ...................... $(5,075) $3,758
======= ======
Weighted average shares outstanding :
Common stock..................... 9,162 8,895
Common stock issuable upon exercise of
options....................... -- 654
------- ------
Weighted average common shares
and equivalents............... 9,162 9,549
======= ======
Net Income (loss) per share...... $ (0.55) $ 0.39
======= ======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
MERIDIAN DATA, INC.
Financial Data Schedule
Article 5 of Regulation SX
This schedule contains summary financial information extracted from the
Quarterly Report on Form 10-Q for the period ended September 30, 1997 and is
qualified in its entirety by reference to such financial statements
CATEGORY RESPONSE
</LEGEND>
<CIK> 0000864568
<NAME> Meridian Data, Inc.
<MULTIPLIER> 1000
<CURRENCY> U.S. Dollars
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 13,315
<SECURITIES> 20,129
<RECEIVABLES> 3,347
<ALLOWANCES> 512
<INVENTORY> 1,762
<CURRENT-ASSETS> 204
<PP&E> 1,634
<DEPRECIATION> 1,039
<TOTAL-ASSETS> 39,369
<CURRENT-LIABILITIES> 6,775
<BONDS> 0
0
0
<COMMON> 66,020
<OTHER-SE> 2
<TOTAL-LIABILITY-AND-EQUITY> 39,369
<SALES> 14,707
<TOTAL-REVENUES> 14,707
<CGS> 6,945
<TOTAL-COSTS> 6,945
<OTHER-EXPENSES> 14,365
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,528)
<INCOME-PRETAX> (5,075)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,075)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,075)
<EPS-PRIMARY> (0.55)
<EPS-DILUTED> (0.55)
</TABLE>
