0000802851-95-000009.txt : 19950811 0000802851-95-000009.hdr.sgml : 19950811 ACCESSION NUMBER: 0000802851-95-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950810 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOGIC DEVICES INC CENTRAL INDEX KEY: 0000802851 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 942893789 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17187 FILM NUMBER: 95560781 BUSINESS ADDRESS: STREET 1: 628 E EVELYN AVE CITY: SUNNYVALE STATE: CA ZIP: 94086 BUSINESS PHONE: 4087373300 MAIL ADDRESS: STREET 1: 628 EAST EVELYN AVE CITY: SUNNYVALE STATE: CA ZIP: 94086 10-Q 1 *---------------------------------------------------------------* UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended JUNE 30, 1995 Commission File Number 0-17187 *---------------------------------------------------------------* LOGIC DEVICES INCORPORATED (Exact name of registrant as specified in its charter) *---------------------------------------------------------------* CALIFORNIA 94-2893789 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 628 EAST EVELYN AVENUE, SUNNYVALE, CALIFORNIA 94086 (Address of principal executive offices) (Zip Code) (408) 737-3300 (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. Yes X No Indicate the number of shares outstanding of the issuer's classes of common stock, as of the latest practicable date. On August 2, 1995, 5,004,205 shares of Common Stock, without par value, were outstanding. *---------------------------------------------------------------* LOGIC DEVICES INCORPORATED INDEX PAGE NUMBER Part I. Financial Information ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of June 30, 1995 3 and December 31, 1994 Consolidated Statements of Income for the three 4 months ended June 30, 1995 and 1994 Consolidated Statements of Income for the six 5 months ended June 30, 1995 and 1994 Consolidated Statements of Cash Flows for the 6 six months ended June 30, 1995 and 1994 Notes to Consolidated Financial Statements 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 9 FINANCIAL CONDITION AND RESULTS OF OPERATIONS Part II. Other Information ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12 ITEM 5. OTHER INFORMATION 12 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13 Signatures 14 Exhibit 11 15 Exhibit 27 17 Part I - FINANCIAL INFORMATION Item 1. Financial Statements. LOGIC DEVICES INCORPORATED CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1995 1994 ASSETS (unaudited) Current assets: Cash and cash equivalents $ 284,500 $ 222,300 Accounts receivable, net of allowance 4,476,200 4,057,600 Inventories 7,137,500 7,081,600 Prepaid expenses 336,100 336,100 Deferred income taxes 433,000 405,800 Total current assets 12,667,300 12,103,400 Equipment and leasehold improvements, net 2,121,700 2,162,700 Other assets 868,400 658,500 $15,657,400 $14,924,600 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank borrowing $ 2,891,400 $ 2,846,400 Current portion of long-term obligations 366,900 325,400 Accounts payable 824,300 1,270,300 Accrued expenses 211,800 292,500 Income taxes payable 172,800 151,400 Total current liabilities 4,467,200 4,886,000 Obligations to shareholders - 663,900 Long-term obligations 645,600 155,100 Deferred income taxes 409,500 409,400 Total liabilities 5,522,300 6,114,400 Shareholders' equity: Preferred stock 77,000 154,000 Common stock 6,794,300 6,071,200 Retained earnings 3,263,800 2,585,000 Total shareholders' equity 10,135,100 8,810,200 $15,657,400 $14,924,600
LOGIC DEVICES INCORPORATED CONSOLIDATED STATEMENTS OF INCOME Three months ended June 30, 1995 and 1994 (unaudited)
1995 1994 Net revenues $ 4,408,300 $ 3,156,400 Cost of sales 2,581,200 1,710,800 Gross margin 1,827,100 1,445,600 Operating expenses: Research and development 365,400 339,400 Selling, general and administrative 765,300 898,000 Operating expenses 1,130,700 1,237,400 Income from operations 696,400 208,200 Other expenses, net 94,600 72,600 Income before taxes 601,800 135,600 Income taxes 195,200 40,000 Net income $ 406,600 $ 95,600 Net income per common share $ 0.08 $ 0.02 Weighted average common share equivalents 5,293,788 4,788,250 outstanding
LOGIC DEVICES INCORPORATED CONSOLIDATED STATEMENTS OF INCOME Six Months ended June 30, 1995 and 1994 (unaudited)
1995 1994 Net revenues $ 7,958,000 $ 6,453,400 Cost of sales 4,464,700 3,531,900 Gross margin 3,493,300 2,921,500 Operating expenses: Research and development 715,500 682,400 Selling, general and administrative 1,582,800 1,677,900 Operating expenses 2,298,300 2,360,300 Income from operations 1,195,000 561,200 Other expenses, net 193,500 140,400 Income before taxes 1,001,500 420,800 Income taxes 322,700 137,000 Net income $ 678,800 $ 283,800 Net income per common share $ 0.13 $ 0.06 Weighted average common share equivalents 5,149,780 4,779,300 outstanding
LOGIC DEVICES INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended June 30, 1995 and 1994 (unaudited)
1995 1994 Cash flows from operating activities: Net income $ 678,800 $ 283,800 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 612,700 618,300 ESOP compensation expense - 83,800 Change in operating assets and liabilities: Accounts receivable, net (418,600) (99,700) Inventories (55,900) (317,400) Prepaid expenses (27,200) (86,200) Accounts payable (446,000) 46,900 Accrued expenses (80,600) 36,200 Income taxes payable 21,400 96,600 Net cash provided by operating 284,600 662,300 activities Cash flows from investing activities: Capital expenditures (419,300) (327,500) Net increase in other assets (136,700) (100,300) Net cash (used in) investing activities (556,000) (427,800) Cash flows from financing activities: Bank borrowing, net 45,000 (43,100) Proceeds from long-term debt 800,000 - Repayment of notes payable and long-term debt (68,000) (262,800) Repayment of obligations to shareholders (863,900) (100,000) Proceeds from exercise of warrants 258,600 Proceeds from exercise of employee stock options 161,900 48,800 Net cash provided by (used in) 333,600 (357,100) financing activities Net increase (decrease) in cash and cash equivalents 62,200 (122,600) Cash and cash equivalents at beginning of period $ 222,300 $ 194,300 Cash and cash equivalents at end of period $ 284,500 $ 71,700
LOGIC DEVICES INCORPORATED Notes to Consolidated Financial Statements June 30, 1995 and December 31, 1994 (unaudited) (A) BASIS OF PRESENTATION The accompanying unaudited interim financial statements reflect all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. The accompanying unaudited interim financial statements have been prepared in accordance with the instructions for Form 10-Q and therefore do not include all information and footnotes necessary for a complete presentation of the financial position, results of operations, and cash flows, in conformity with generally accepted accounting principles. The Company filed audited financial statements which include all information and footnotes necessary for such a presentation of the financial position, results of operations, and cash flows for the years ended December 31, 1994 and 1993, with the Securities and Exchange Commission. It is suggested that the accompanying unaudited interim financial statements be read in conjunction with the aforementioned audited financial statements. The unaudited interim financial statements contain all normal and recurring entries. The results of operations for the interim period ended June 30, 1995 are not necessarily indicative of the results to be expected for the full year. (B) INVENTORIES A summary of inventories follows: June 30, December 31, 1995 1994 Raw materials $ 855,800 $ 835,500 Work-in-process 5,955,300 4,418,300 Finished goods 326,400 1,827,800 $ 7,137,500 $ 7,081,600 Based on forecasted 1995 sales levels, the Company has on hand inventories aggregating approximately ten months of sales. LOGIC DEVICES INCORPORATED Notes to Consolidated Financial Statements June 30, 1995 and December 31, 1994 (unaudited) (C) DEBT FINANCING On June 1, 1995, the Company renewed its $3,000,000 revolving line of credit with Sanwa Bank extending the maturity to May 31, 1996. The line of credit bears interest at the bank's prime rate plus 1.500% (10.500% at June 30, 1995). The Company also entered into an $800,000 Term Loan with Sanwa Bank to refinance the Company's existing obligation to shareholders. The Term Loan matures May 1, 1998, has monthly principal amortization, and bears interest at the bank's prime rate plus 1.75% (10.75% at June 30, 1995). The line of credit and Term Loan are secured by the assets of the Company. The line of credit and Term Loan require the Company to maintain a minimum tangible net worth, a maximum ratio of debt to tangible net worth, a minimum current ratio, a minimum quick ratio, and profitability over a specified interval of time. As of June 30, 1995, the Company had $153,600 available under the revolving line of credit. The outstanding balance under the Term Loan was $777,800 on June 30, 1995. (D) OBLIGATION TO SHAREHOLDERS The obligation due to shareholders was scheduled to mature on March 31, 1995. On February 15, 1995, the shareholder lenders agreed to extend the maturity date to March 31, 1996. On June 1, 1995 the Company obtained financing from Sanwa Bank for repayment of the outstanding shareholder obligation (see "Debt Financing"). Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. LOGIC DEVICES INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS REVENUES Net revenues increased by 40%, from $3,156,400 for the three months ended June 30, 1994 to $4,408,300 for the three months ended June 30, 1995. The increase was due to a substantial growth in revenues derived from the Company's SRAM ("Static Random Access Memory") products which accounted for 14% of revenues for the June 30, 1994 period, increasing to 52% of revenues for the June 30, 1995 period. Net revenues from DSP ("Digital Signal Processing") products accounted for 70% of revenues in 1994, whereas DSP products comprised 45% in 1995. Net revenues from the Company's SCSI ("Small Computer System Interface") products remained essentially the same while custom product revenues were substantially lower, decreasing from 15% of revenues in 1994 to 1% in 1995. Net revenues increased by 23%, from $6,453,400 for the six month period ended June 30, 1994 to $7,958,000 for the six months ended June 30, 1995. This increase was due to increased net revenues derived from the Company's SRAM products which accounted for 14% of revenues for the 1994 period, increasing to 44% of revenues for the 1995 period. Net revenues from DSP products accounted for 70% of revenues in 1994, whereas such net revenues comprised 50% in 1995. Net revenues from the Company's SCSI product remained essentially the same while custom product revenues were substantially lower, decreasing from 14% of revenues in 1994 to 2% in 1995. EXPENSES Cost of sales increased 51% from $1,710,800 or 54% of net revenues for the three months ended June 30, 1994 to $2,581,200 or 59% of net revenues for the same period in 1995. Gross profit increased 26%, from $1,445,600 in the former period to $1,827,100 in the latter period. The increase in gross profit is the result of higher revenues for the period. As a percentage of net revenues, gross profit decreased from 46% for the three months ended June 30, 1994 to 41% for the three months ended June 30, 1995. The decrease in gross profit margin is the result of the higher revenue mix from SRAM products which generally average a lower gross margin than the Company's DSP, custom, and SCSI products. Cost of sales increased 26% from $3,531,900 or 55% of net revenues for the six months ended June 30, 1994 to $4,464,700 or 56% of net revenues for the same period in 1995. Gross profit increased 20% from $2,921,500 in the former period to $3,493,300 in the latter period. The increase in gross profit is the result of higher revenues for the period. As a percentage of net revenues, gross profit decreased from 45% in the six months ended June 30, 1994 to 44% in the six months ended June 30, 1995. The decrease in gross profit margin is the result of a higher revenue mix from SRAM products which usually average a lower gross margin than the Company's DSP, custom, and SCSI products. Research and development ("R & D") expenses for the three months ended June 30, 1994, were $339,400 increasing to $365,400 for the same period in 1995. For the six month period, research and development expenses were $682,400 for 1994 increasing to $715,500 for 1995. As a percentage of net revenues, R & D expenses were 11% for the three months ended June 30, 1994, compared to 8% for 1995. For the six months ended June 30, 1994, R & D expenses as a percentage of net sales were 11% compared to 9% for 1995. The Company intends to continue to make substantial investments in its product R & D. Selling, general and administrative ("S,G & A") expenses were $898,000 for the three months ended June 30, 1994 decreasing to $765,300 for the same period in 1995. For the six months ended June 30, 1994, S, G & A expenses were $1,677,900 decreasing to $1,582,800 for the same period in 1995. In 1994, S,G & A expenses included non- recurring legal and accounting costs associated with a proposed secondary equity financing and legal costs associated with the defense of a long standing wrongful termination suit. As a percentage of net sales, selling, general and administrative expenses were 28% for the three months ended June 30, 1994 compared to 17% in 1995. As a percentage of net sales, selling, general and administrative expenses were 26% for the six months 1994 compared to 20% in 1995. Net operating income increased 235% to $696,400 for the three months ended June 30, 1995 versus $208,200 for the same period in 1994. For the six month period ended June 30, 1995 net operating income increased 113% to $1,195,000 from $561,200 for the same period in 1994. Net interest expense reflects interest expense incurred by the Company with respect to loans from shareholders and bank debt, offset by interest income earned. Net income increased 325% for the three months ended June 30, 1995 to $406,600 compared to $95,600 for the same period in 1994. For the six months ended June 30, 1995, net income increased 139% to $678,800 compared to $283,800 for the same period in 1994. LIQUIDITY AND CAPITAL RESOURCES WORKING CAPITAL For the six months ended June 30, 1995 the Company's after-tax cash earnings (net income plus non-cash charges) significantly exceeded its net income, due to large accruals for depreciation and amortization. Such after-tax cash earnings ($1,291,500 in six months ended June 30, 1995 and $985,900 in six months ended June 30, 1994) have served as the Company's primary source of financing for working capital needs, capital expenditures and the retirement of long term debt. In the first six months of 1995, the Company generated $284,600 in cash flow from operating activities (after-tax cash earnings less net increases and decreases in current assets and liabilities). Capital equipment expenditures and increases to other assets used $556,000 net in cash, and the repayment of bank notes and debt to shareholders used $86,900 net in cash. Due to an increase in the price of the Company's common stock throughout the first six months of 1995, the Company was provided with cash flow from the exercise of certain warrants and employee stock options which provided $420,500 in cash flow for the period. On June 1, 1995, the Company renewed its $3,000,000 revolving line of credit with Sanwa Bank extending the maturity to May 31, 1996. The line of credit bears interest at the bank's prime rate plus 1.500% (10.500% at June 30, 1995). The Company also entered into an $800,000 Term Loan with Sanwa Bank to refinance the Company's existing obligation to shareholders. The Term Loan matures May 1, 1998, has monthly principal amortization and bears interest at the bank's prime rate plus 1.75% (10.75% at June 30, 1995). The line of credit and Term Loan are secured by the assets of the Company. The line of credit and Term Loan require the Company to maintain a minimum tangible net worth, a maximum ratio of debt to tangible net worth, a minimum current ratio, a minimum quick ratio, and profitability over a specified interval of time. As of June 30, 1995, the Company had $153,600 available under the revolving line of credit. The outstanding balance under the Term Loan was $777,800 on June 30, 1995. The obligation due to shareholders was scheduled to mature on March 31, 1995. On February 15, 1995, the shareholder lenders agreed to extend the maturity date to March 31, 1996. On June 1, 1995 the Company obtained financing from Sanwa Bank for repayment of the outstanding shareholder obligation. The Company believes that its after-tax earnings and the financing available under its bank relationship will be sufficient to support its working capital and capital expenditure requirements. PART II - OTHER INFORMATION LOGIC DEVICES INCORPORATED Item 4. Submission of Matters to a Vote of Security Holders. The Annual Shareholders' meeting was held on June 13, 1995. There were two matters to be voted on at the meeting, the election of the Board of Directors and ratification of the issuance of warrants to the non- employee members of the Board of Directors. There were 4,855,417 shares present or represented by proxy at the meeting. Shareholders are permitted to vote cumulatively in the election of directors which allows each shareholder to cast a number of votes equal to the number of directors to be elected by the number of shares owned and to distribute such votes among the candidates in such proportion as such shareholder may determine. The votes for each nominee are as set forth in the following table: NOMINEE VOTES IN FAVOR Howard L. Farkas 7,763,500 Burton W. Kanter 2,639,652 Albert Morrison, Jr. 2,637,582 William J. Volz 3,815,810 The shareholders ratified the issuance of warrants to the non-employee members of the Board of Directors by a vote of 3,684,842 for ratification to 509,925 against ratification. Item 5. Other Information. (1) On April 14, 1995 the Company purchased all the remaining assets of Star Semiconductor Corporation. Star was the developer of the proprietary stream processor (SPROC), a programmable digital signal processing (DSP) architecture which offers significant performance advantages in data flow signal processing applications. The Company acquired Star's assets for 75,000 shares of the Company's common stock. The Company realized $271,900 in goodwill from the transaction which was recorded as other assets for the quarter ended June 30, 1995. (2) In the first half of 1995, the holders of the Company's then outstanding preferred stock exercised their option to convert the outstanding preferred shares to common shares. On March 23, 1995, half of the preferred shares were converted to common shares and on July 6, 1995 the remaining half of the outstanding preferred shares were converted to common shares. There are no remaining outstanding shares of preferred stock after July 6, 1995. (3) In 1994 the Company's Board of Directors had approved the termination of the Company Employee Stock Ownership Plan ("ESOP"). The plan held a total of 226,770 shares of common stock of the Company. As part of terminating the ESOP, participants are eligible for distribution of shares held under the plan. The Company, in July 1995, has started the distribution of such shares that had been allocated to eligible participants' accounts. Item 6. Exhibits and Reports on Form 8-K. (a) (1) Exhibit 11 - Computation of Earnings Per Common Share. (2) Exhibit 27 - Financial Data Schedule (b) No reports on Form 8-K have been filed during the quarter for which this report is filed. 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. Logic Devices Incorporated (Registrant) Date: AUGUST 10, 1995 By /S/ WILLIAM J. VOLZ William J. Volz President and Principal Executive Officer Date: AUGUST 10, 1995 By /S/ TODD J. ASHFORD Todd J. Ashford Chief Financial Officer and Principal Financial and Accounting Officer EXHIBIT 11 LOGIC DEVICES INCORPORATED Computation of Earnings per Common Share (unaudited) Three months ended June 30, 1995 and 1994 1995 1994 Weighted average shares of common stock 4,857,559 4,762,584 outstanding Common stock equivalent convertible 12,833 25,666 preferred stock Dilutive effect of common stock options and stock warrants 423,396 - Weighted average common and 5,293,788 4,788,250 common share equivalents Net income $ 406,600 $ 95,600 Net income per common $ .08 $ .02 share equivalent EXHIBIT 11 LOGIC DEVICES INCORPORATED Computation of Earnings per Common Share (unaudited) Six months ended June 30, 1995 and 1994 1995 1994 Weighted average shares of common stock 4,817,240 4,753,634 outstanding Common stock equivalent convertible 12,833 25,666 preferred stock Dilutive effect of common stock options and stock warrants 319,707 - Weighted average common and 5,149,780 4,779,300 common share equivalents Net income $ 678,800 $ 283,800 Net income per common $ .13 $ .06 share equivalent EX-27 2 ART. 5 FDS FOR 2ND QUARTER 10-Q
5 1 6-MOS DEC-31-1994 JUN-30-1995 284,500 0 4,476,200 0 7,137,500 12,667,300 9,368,700 7,247,000 15,657,400 4,467,200 0 6,794,300 0 77,000 0 15,657,400 7,958,000 7,958,000 4,464,700 6,763,000 193,500 0 193,500 1,001,500 322,700 678,800 0 0 0 678,800 .13 .13