-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TGtaCgYO4dkaUBBDEEWjr4DV5Ik2WA69Zl7u9MehadhPKHw82c9hHnA2gf6WEG96 h6h/7JNmI1QGYmOMwLprgQ== 0001093114-00-000024.txt : 20000503 0001093114-00-000024.hdr.sgml : 20000503 ACCESSION NUMBER: 0001093114-00-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000402 FILED AS OF DATE: 20000502 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: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-17187 FILM NUMBER: 616725 BUSINESS ADDRESS: STREET 1: 1320 ORLEANS DR CITY: SUNNYVALE STATE: CA ZIP: 94086 BUSINESS PHONE: 4085425400 MAIL ADDRESS: STREET 1: 1320 ORLEANS DRIVE CITY: SUNNYVALE STATE: CA ZIP: 94089 10-Q 1 FORM 10-Q FOR QUARTERLY PERIOD ENDED 04/02/2000 ================================================================================ 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 APRIL 2, 2000 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 Number) 1320 ORLEANS DRIVE, SUNNYVALE, CALIFORNIA 94089 (Address of principal executive offices) (Zip Code) (408) 542-5400 (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 classed of common stock, as of the latest practicable date. On May 1, 2000, 6,841,888 shares of common stock, without par value, were outstanding. ================================================================================ 1 of 17 pages
LOGIC DEVICES INCORPORATED INDEX Page Number ------ Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets as of April 2, 2000 and October 3, 1999 3 Consolidated Statements of Income for the three months ended April 2, 2000 and March 31, 1999 4 Consolidated Statements of Income for the six months ended April 2, 2000 and March 31, 1999 5 Consolidated Statements of Cash Flows for the six months ended April 2, 2000 and March 31, 1999 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II. Other Information Item 2. Changes in Securities and Use of Proceeds 13 Item 4. Submission of Matter to a Vote of Security Holders 13 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15 Exhibit 27 17
2 of 17 pages PART I - FINANCIAL INFORMATION Item 1. Financial Statements
LOGIC DEVICES INCORPORATED CONSOLIDATED BALANCE SHEETS April 2, October 3, 2000 1999 ----------------- ------------------ (unaudited) ASSETS Current assets: Cash and cash equivalents $ 1,130,800 $ 237,700 Accounts receivable, net of allowance 3,142,500 4,813,400 Inventories 11,712,400 11,838,300 Prepaid expenses and other assets 225,500 178,900 Income taxes receivable - 68,000 ----------------- ------------------ Total current assets 16,211,200 17,136,300 Property and equipment, net 3,243,100 3,702,000 Other assets 379,500 502,400 ----------------- ------------------ $ 19,833,800 $ 21,340,700 ================= ================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank borrowings $ 1,958,600 $ 3,490,000 Accounts payable 636,700 718,200 Accrued expenses 289,400 388,700 Notes payable, related party - 250,000 Current portion, capital lease obligations 184,100 218,300 Income taxes payable 21,800 - ----------------- ------------------ Total current liabilities 3,090,600 5,065,200 Capital lease obligations, net of current portion 103,500 182,600 ----------------- ------------------ Total liabilities 3,194,100 5,247,800 ----------------- ------------------ Shareholders' equity: Common stock 18,498,800 18,133,400 Accumulated deficit (1,859,100) (2,040,500) ----------------- ------------------ Total shareholders' equity 16,639,700 16,092,900 ----------------- ------------------ $ 19,833,800 $ 21,340,700 ================= ==================
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LOGIC DEVICES INCORPORATED CONSOLIDATED STATEMENTS OF INCOME Three months ended April 2, 2000 and March 31, 1999 (unaudited) 2000 1999 ----------------- ------------------ Net revenues $ 2,768,800 $ 3,256,100 Cost of revenues 1,333,800 1,812,500 ----------------- ------------------ Gross margin 1,435,000 1,443,600 ----------------- ------------------ Operating expenses: Research and development 453,700 359,900 Selling, general and administrative 822,300 910,900 ----------------- ------------------ Total operating expenses 1,276,000 1,270,800 ----------------- ------------------ Income from operations 159,000 172,800 Other expense, net 65,600 132,600 ----------------- ------------------ Income before income taxes 93,400 40,200 Income tax provision - - ----------------- ------------------ Net income $ 93,400 $ 40,200 ================= ================== Basic income per common share $ 0.01 $ 0.01 ================= ================== Weighted average common shares outstanding 6,753,037 6,632,388 ================= ================== Diluted income per common share $ 0.01 $ 0.01 ================= ================== Weighted average common shares outstanding 6,858,623 6,632,388 ================= ==================
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LOGIC DEVICES INCORPORATED CONSOLIDATED STATEMENTS OF INCOME Six months ended April 2, 2000 and March 31, 1999 (unaudited) 2000 1999 ----------------- ------------------ Net revenues $ 5,778,600 $ 6,327,000 Cost of revenues 2,786,800 3,492,800 ----------------- ------------------ Gross margin 2,991,800 2,834,200 ----------------- ------------------ Operating expenses: Research and development 882,600 729,000 Selling, general and administrative 1,784,500 1,794,900 ----------------- ------------------ Total operating expenses 2,667,100 2,523,900 ----------------- ------------------ Income from operations 324,700 310,300 Other expense, net 142,500 262,600 ----------------- ------------------ Income before income taxes 182,200 47,700 Income tax provision 800 800 ----------------- ------------------ Net income $ 181,400 $ 46,900 ================= ================== Basic income per common share $ 0.03 $ 0.01 ================= ================== Weighted average common shares outstanding 6,701,764 6,632,388 ================= ================== Diluted income per common share $ 0.03 $ 0.01 ================= ================== Weighted average common shares outstanding 6,923,193 6,632,388 ================= ==================
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LOGIC DEVICES INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended April 2, 2000 and March 31, 1999 (unaudited) 2000 1999 ----------------- ------------------ Cash flows from operating activities: Net income $ 181,400 $ 46,900 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 738,800 900,200 Changes in operating assets and liabilities: Accounts receivable 1,670,900 335,900 Inventories 125,900 347,100 Prepaid expenses and other assets (46,600) (116,000) Income taxes receivable 68,000 - Accounts payable (81,500) (235,200) Accrued expenses (99,300) (162,400) Income taxes payable 21,800 - ----------------- ----------------- Net cash provided by operating activities 2,579,400 1,116,500 ----------------- ----------------- Cash flows from investing activities: Capital expenditures (190,800) (202,500) Decrease in other assets 33,800 273,700 ----------------- ----------------- Net cash (used in) provided by investing activities (157,000) 71,200 ----------------- ----------------- Cash flows from financing activities: Bank borrowing, net (1,531,400) (1,100,000) Repayment of capital lease obligations (113,300) (312,300) Proceeds from notes payable, related party - 252,000 Repayment of notes payable, related party (250,000) - Proceeds from exercise of warrants 146,900 - Proceeds from exercise of stock options 218,500 - ----------------- ----------------- Net cash used in financing activities (1,529,300) (1,160,300) ----------------- ----------------- Net increase in cash and cash equivalents 893,100 27,400 Cash and cash equivalents, beginning of period 237,700 142,900 ----------------- ----------------- Cash and cash equivalents, end of period $ 1,130,800 $ 170,300 ================= =================
6 of 17 pages LOGIC DEVICES INCORPORATED Notes to Consolidated Financial Statements April 2, 2000 and October 3, 1999 (unaudited) A. BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to present fairly the financial position, results of operations, and cash flows of the Company for the periods indicated. The accompanying unaudited interim consolidated 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 for the Company, in conformity with generally accepted accounting principles. The Company has filed audited financial statements that include all information and footnotes necessary for such a presentation of the financial position, results of operations and cash flows for the fiscal year ended October 3, 1999 and the nine months ended September 30, 1998, with the Securities and Exchange Commission. It is suggested that the accompanying unaudited interim consolidated financial statements be read in conjunction with the aforementioned audited consolidated financial statements. The unaudited interim consolidated financial statements contain all normal and recurring entries. The results of operations for the interim period ended April 2, 2000 are not necessarily indicative of the results to be expected for the full year. B. INVENTORY A summary of inventories follows: April 2, October 3, 2000 1999 ----------------- ------------------ Raw materials $ 3,825,800 $ 3,618,800 Work-in-process 5,500,900 4,908,800 Finished goods 2,385,700 3,310,700 ----------------- ------------------ $ 11,712,400 $ 11,838,300 ================= ================== Based on forecasted sales levels for fiscal year 2000, the Company has on-hand inventory aggregating approximately 12 months of sales. 7 of 17 pages LOGIC DEVICES INCORPORATED Notes to Consolidated Financial Statements April 2, 2000 and October 3, 1999 (unaudited) C. FINANCING Since July 27, 1999, the Company has had two lines of credit with Silicon Valley Bank, with an aggregate availability of up to $4,000,000. A domestic line of credit bears interest at the bank's prime rate (9.00% at April 2, 2000) plus 0.50%. This line of credit requires the Company to maintain a minimum quick ratio of not less than 1.00 to 1.00 and profitability, on a quarterly basis. Borrowings under the domestic line are subject to the limits of eligible domestic accounts receivable and are secured by all the assets of the Company. The second line of credit bears interest at the bank's prime rate plus 0.25%, is secured by certain of the Company's inventory, accounts receivable, and related proceeds, and is guaranteed, in part, by a federal agency. This facility has other terms similar to the first line of credit facility. Both credit facilities mature July 26, 2000. On April 2, 2000, the Company had an aggregate outstanding balance of $1,958,600 under these facilities. Under the terms of its line of credit facilities, the Company is precluded from paying any dividends without the consent of the parties to such agreements, even if the Company is in compliance with all of the financial covenants. Regardless of any such restrictions in its line of credit facilities, the Company does not intend to pay cash dividends in the near future and anticipates reinvesting its cash flow in operations. 8 of 17 pages Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Reported financial results may not be indicative of the financial results of future periods. All non-historical information contained in the following discussion constitutes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Some forward-looking statements are identified by the words "believe," "expect," "anticipate," "project," and similar expressions. These statements are not guarantees of future performance and involve a number of risks and uncertainties, including but not limited to operating results, new product introductions and sales, competitive conditions, customer demand, capital expenditures and resources, manufacturing capacity utilization, and intellectual property claims and defense. Factors that could cause actual results to differ materially are included in, but not limited to, those identified in "Factors Affecting Future Results" in the Annual Report on Form 10-K for the Company's fiscal year ended October 3, 1999 and elsewhere in Management's Discussion and Analysis of Financial Conditions and Results of Operations in such Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may reflect events or circumstances after the date of this report. Results of Operations Revenues Net revenues of $2,768,800 for the three months ended April 2, 2000 decreased 15% from $3,256,100 for the three months ended March 31, 1999. This decrease in revenues for the three-month period resulted from the discontinuation of product lines in fiscal 1998 that still contributed revenues in the 1999 period. The Company is continuing its shift in product offerings to higher margin proprietary products and reducing the total number of products that it offers. Expenses Cost of revenues decreased 26% from $1,812,500 for the three months ended March 31, 1999, to $1,333,800 for the three months ended April 2, 2000. The gross profit decreased by 0.6%, from $1,443,600 in 1999 to $1,435,000 in 2000. As a percentage of revenues, gross profit increased from 45% for the three month ended March 31, 1999, to 52% for the three months ended April 2, 2000, due to the continued shift towards higher margin proprietary products. Research and development expense increased from $359,900 (11% of net revenues) in the 1999 period to $453,700 (16% of net revenues) in the 2000 period. The Company plans to continue its substantial investments in new product research and development. Selling, general and administrative expense decreased from $910,900 in the 1999 period to $822,300 in the 2000 period, due to increased efforts to control costs. 9 of 17 pages Due to the aforementioned factors, the Company's income from operations decreased from $172,800 for the 1999 period to $159,000 for the 2000 period. During the 2000 period, the Company incurred $65,600 of other expense, principally consisting of interest expense, compared to $132,600 of other expense for the 1999 period, due to the reduction in bank borrowings. As a result of the foregoing, the Company earned net income of $93,400 for the three months ended April 2, 2000, versus net income of $40,200 for the 1999 period. Liquidity and Capital Resources Cash Flows For the six months ended April 2, 2000, the Company had after-tax cash earnings (defined as net income plus non-cash depreciation charges) of $920,200, compared to $947,100 for the six months ended March 31, 1999. During the 2000 period, after-tax cash earnings of $920,200, plus decreases in accounts receivable of $1,670,900 and inventories of $125,900, funded decreases in accounts payable of $81,500 and accrued expenses of $99,300. This resulted in total net cash provided by operations of $2,579,400. During the 2000 period, the Company invested $190,800 in capital expenditures, reduced bank borrowings by $1,531,400, repaid related party notes payable of $250,000, and reduced capital lease obligations by $113,300. The Company also received $146,900 and $218,500 from the exercise of warrants and stock options, respectively. During the 1999 period, after-tax cash earnings of $947,100, plus an increase in related party notes payable of $252,000 and decreases in accounts receivable of $335,900 and inventories of $347,100, funded decreases in accounts payable of $235,200 and accrued expenses of $162,400. This resulted in total net cash provided by operations of $1,116,500. The Company invested $202,500 in capital expenditures, reduced bank borrowings by $1,100,000, and reduced capital lease obligations by $312,300 during the period. Working Capital Over prior periods, the Company, as a nature of its business, has maintained high levels of inventory and accounts receivable. The Company's investment in inventory and accounts receivable has been significant, and will continue to be significant in the future. Although current levels of inventory and accounts receivable impact the Company's liquidity, the Company believes that it is a cost of doing business given the Company's fabless operation. The Company relies on third party suppliers for raw materials and as a result maintains substantial inventory levels to protect against disruption in supplies. The Company has historically maintained inventory turnover of approximately 225 days to 365 days, since 1990. The low point in inventory levels came in 1992 and 1993, when the Company had supply disruptions from one of its major suppliers. 10 of 17 pages The Company provides reserves for product material that is over one year old, with no backlog or sales activity, and reserves for future obsolescence. The Company also takes physical inventory write-downs for obsolescence. The Company has been actively attempting to reduce inventory levels over the past several quarters. The Company is continuing its shift in product offerings to higher margin proprietary products and reducing the total number of products that it offers. As this transition continues, the Company expects to improve its sales to inventory ratio. The Company's accounts receivable level is correlated to the Company's previous quarter revenue level. Generally, the Company's customer scheduled backlog results in up to 80% of the quarterly revenues shipping in the last month of the quarter. This has the effect of placing a large portion of the quarterly shipments reflected in accounts receivable not yet due per the Company's net 30 day terms. This, combined with the fact that the Company's distributor customers pay 90 days and beyond, results in the accounts receivable balance at the end of the quarterly period being at its highest point for the period. By reducing its number of distributors and increasing its collection efforts, the Company has made significant progress in reducing its accounts receivable levels, and expects to continue this reduction in the future. However, the Company continues to experience stocking and collection issues with its largest distributor. Financing Since July 27, 1999, the Company has had two lines of credit with Silicon Valley Bank, with an aggregate availability of up to $4,000,000. A domestic line of credit bears interest at the bank's prime rate (9.00% at April 2, 2000) plus 0.50%. This line of credit requires the Company to maintain a minimum quick ratio of not less than 1.00 to 1.00 and profitability, on a quarterly basis. Borrowings under the domestic line are subject to the limits of eligible domestic accounts receivable and are secured by all the assets of the Company. The second line of credit bears interest at the bank's prime rate plus 0.25%, is secured by certain of the Company's inventory, accounts receivable, and related proceeds, and is guaranteed, in part, by a federal agency. This facility has other terms similar to the first line of credit facility. Both credit facilities mature July 26, 2000. On April 2, 2000, the Company had an aggregate outstanding balance of $1,958,600 under these facilities, and was in compliance with its covenants. The Company will continue to evaluate debt and equity financing opportunities. It believes its current financing arrangements and cash flow from operations provide a sufficient base of liquidity to support the Company's operations. Year 2000 Compliance The Company completed its internal assessment and remediation of its Year 2000 issues at an aggregate cost of approximately $50,000 prior to October 4, 1999, the beginning of the Company's fiscal year 2000. The Company has not expended any additional amounts on Year 2000 compliance from October 4, 1999 through May 8, 2000, consistent with the Company's projections. To date, there has been no incidence of Year 2000 errors or shutdowns in the Company's internal systems. In 11 of 17 pages addition, the Company is not aware of any adverse impact of the Year 2000 on any of its customers or suppliers. Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company conducts all of its transactions, including those with foreign suppliers and customers, in U.S. dollars. It is therefore not directly subject to the risks of foreign currency fluctuations and does not hedge or otherwise deal in currency instruments in an attempt to minimize such risks. Of course, demand from foreign customers and the ability or willingness of foreign suppliers to perform their obligations to the Company may be affected by the relative change in value of such customer or supplier's domestic currency to the value of the U.S. dollar. Furthermore, changes in the relative value of the U.S. dollar may change the price of the Company's prices relative to the prices of its foreign competitors. The Company also does not hold any market risk sensitive instruments that are not considered cash under generally accepted accounting principles. The Company's credit facilities bear interest at rates determined from the prime rate of the Company's lender; therefore, changes in interest rates affect the amount of interest that the Company is required to pay thereunder. 12 of 17 pages PART II - OTHER INFORMATION Item 1. Legal Proceedings Not applicable. Item 2. Changes in Securities and Use of Proceeds On February 7, 2000, the Company issued 100,000 shares of its common stock, no par value, upon the exercise in full of an outstanding warrant for such shares with a term expiring February 15, 2000. The holder of the warrant paid the aggregate exercise price of $146,900 to the Company in cash. This issuance of shares was not registered under the Securities Act of 1933 in reliance on an exemption from registration under Section 4(2) of such Act and rules promulgated thereunder. No underwriters participated in the transaction. The shares of common stock of the Company received upon exercise of the warrant were subsequently resold in the open market pursuant to an effective registration statement under the Securities Act of 1933. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders At 8:00 a.m. on April 4, 2000, the Company held its Annual Shareholders Meeting at the Company's headquarters located at 1320 Orleans Drive, Sunnyvale, California. The only item to be voted upon at the meeting was the election of the Board of Directors. There were 5,573,020 shares present or represented by proxy at the meeting, representing a quorum. 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 multiplied by the number of shares owned, and to distribute such votes among the candidates in such proportion as such shareholder may determine. In order to vote cumulatively, a shareholder must give notice of this intention by proxy or at the meeting. No shareholders elected to cumulate votes. The votes for each nominee are as set forth in the following table: Nominee Votes in Favor Votes Against Abstention - ------------------- -------------- ------------- ---------- Howard L. Farkas 5,568,155 - 4,865 Burton W. Kanter 5,568,155 - 4,865 Albert Morrison Jr. 5,568,155 - 4,865 William J. Volz 5,568,155 - 4,865 Fredric J. Harris 5,568,155 - 4,865 Item 5. Other Information Not applicable. 13 of 17 pages Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 27 - Financial Data Schedule, which can be found on page 17 of this report. (b) No reports on Form 8-K have been filed during the quarter for which this report is filed. 14 of 17 pages 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: May 2, 2000 By /s/ William J. Volz --------------------- -------------------------- William J. Volz President and Principal Executive Officer Date: May 2, 2000 By /s/ Kimiko Lauris --------------------- -------------------------- Kimiko Lauris Chief Financial Officer and Principal Financial and Accounting Officer 15 of 17 pages INDEX TO EXHIBITS Exhibit Number Description - -------------- ----------- 27 Financial Data Schedule. 16 of 17 pages EX-27 2 FDS FOR 2ND QUARTER 10-Q
5 1 6-MOS OCT-1-2000 APR-2-2000 1,130,800 0 3,396,000 253,500 11,712,400 16,211,200 11,322,100 8,079,000 19,833,800 3,090,600 0 18,498,800 0 0 (1,859,100) 19,833,800 5,778,600 5,778,600 2,786,800 0 2,667,100 0 142,500 182,200 800 181,400 0 0 0 181,400 0.03 0.03
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