MDI raises $2m in cash

Saturday, July 1, 2006

SAN ANTONIO--In late May, MDI, a manufacturer of access control software and surveillance hardware, entered into identical securities purchase agreements, registration rights agreements and common stock purchase warrants with five investors: Crestview Capital Master, Iroquois Master Fund, Rockmore Investment Master Fund, Cranshire Capital and Bristol Investment Fund. MDI sold them 2,875,000 shares of common stock at $.80 per share to raise $2.3 million. MDI also issued warrants totaling 1,150,000 shares to the five investors, exercisable at $1.02 a share, with a five-year term from the date of issuance.
"We've got a lot of initiatives going right now," said MDI vice president of marketing Mike Garcia. "We decided as a company those initiatives needed some funding."
In the company's March 31, 2006, quarterly filing with the SEC, MDI showed a net loss of $1.4 million over the past three months, despite a 38 percent increase in sales to $2.7 million, $300,000 of which came from newly acquired Advanced Security Link (see the February issue of Security Systems News). At the time of the filing, cash reserves had fallen to $500,000, and MDI reported, "Our current business plan anticipates that we will raise additional capital by mid-year 2006 to finance our operations," so the financing is no surprise.
For observers of the company looking for good news, Garcia points to success in the company's previously reported plans to diversify its sales portfolio. He said where once MDI's sales were roughly 90 percent government-related, that number is now more like 50 percent, thanks to partnerships with independent integrators like Palmer Electric and Jenkins Security (see related story, page 17).
For example, said Garcia, "As a convergence integrator, they were able to do things with the system that we hadn't experienced before and it really allowed us to get into new verticals."