-----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, QDCxzFiUTOzNnPYc/3Owhu9+LOPnpYKIR4yYYG/0eglpSy2Rwgz+OkPJmMZ6mzWC FUegMrLlcAueUuMBrNYJXg== /in/edgar/work/20000814/0001093114-00-000035/0001093114-00-000035.txt : 20000921 0001093114-00-000035.hdr.sgml : 20000921 ACCESSION NUMBER: 0001093114-00-000035 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000702 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOGIC DEVICES INC CENTRAL INDEX KEY: 0000802851 STANDARD INDUSTRIAL CLASSIFICATION: [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: 699362 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 0001.txt FORM 10-Q FOR QUARTERLY PERIOD ENDED 07/02/2000 ================================================================================ 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 JULY 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 August 14, 2000, 6,841,888 shares of common stock, without par value, were outstanding. ================================================================================ 1 of 16 pages
LOGIC DEVICES INCORPORATED INDEX Page Number ------ Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets as of July 2, 2000 and October 3, 1999 3 Consolidated Statements of Income for the three months ended July 2, 2000 and June 30, 1999 4 Consolidated Statements of Income for the nine months ended July 2, 2000 and June 30, 1999 5 Consolidated Statements of Cash Flows for the nine months ended July 2, 2000 and June 30, 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 1. Legal Proceedings 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 Exhibit 27 16
2 of 16 pages PART I - FINANCIAL INFORMATION Item 1. Financial Statements
LOGIC DEVICES INCORPORATED CONSOLIDATED BALANCE SHEETS July 2, October 3, 2000 1999 ----------------- ----------------- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 796,000 $ 237,700 Accounts receivable, net of allowance 2,859,900 4,813,400 Inventories 12,204,100 11,838,300 Prepaid expenses and other assets 162,300 178,900 Income taxes receivable - 68,000 ----------------- ----------------- Total current assets 16,022,300 17,136,300 Property and equipment, net 2,917,800 3,702,000 Other assets 333,000 502,400 ----------------- ----------------- $ 19,273,100 $ 21,340,700 ================= ================= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank borrowings $ 1,745,000 $ 3,490,000 Accounts payable 293,400 718,200 Accrued expenses 223,100 388,700 Notes payable, related party - 250,000 Current portion, capital lease obligations 143,700 218,300 Income taxes payable 16,200 - ----------------- ------------------ Total current liabilities 2,421,400 5,065,200 Capital lease obligations, net of current portion 41,200 182,600 ----------------- ------------------ Total liabilities 2,462,600 5,247,800 ----------------- ------------------ Shareholders' equity: Common stock 18,522,700 18,133,400 Accumulated deficit (1,712,200) (2,040,500) ----------------- ------------------ Total shareholders' equity 16,810,500 16,092,900 ----------------- ------------------ $ 19,273,100 $ 21,340,700 ================= ==================
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LOGIC DEVICES INCORPORATED CONSOLIDATED STATEMENTS OF INCOME Three months ended July 2, 2000 and June 30, 1999 (unaudited) 2000 1999 ----------------- ------------------ Net revenues $ 2,990,000 $ 3,532,100 Cost of revenues 1,538,700 1,797,000 ----------------- ------------------ Gross margin 1,451,300 1,735,100 ----------------- ------------------ Operating expenses: Research and development 425,500 372,000 Selling, general and administrative 830,900 1,037,200 ----------------- ------------------ Total operating expenses 1,256,400 1,409,200 ----------------- ------------------ Income from operations 194,900 325,900 Other expense, net 48,000 126,500 ----------------- ------------------ Income before income taxes 146,900 199,400 Income tax provision - - ----------------- ------------------ Net income $ 146,900 $ 199,400 ================= ================== Basic income per common share $ 0.02 $ 0.03 ================= ================== Weighted average common shares outstanding 6,841,888 6,632,388 ================= ================== Diluted income per common share $ 0.02 $ 0.03 ================= ================== Weighted average common shares outstanding 6,844,884 6,632,388 ================= ==================
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LOGIC DEVICES INCORPORATED CONSOLIDATED STATEMENTS OF INCOME Nine months ended July 2, 2000 and June 30, 1999 (unaudited) 2000 1999 ----------------- ------------------ Net revenues $ 8,768,600 $ 9,859,100 Cost of revenues 4,325,500 5,289,800 ----------------- ------------------ Gross margin 4,443,100 4,569,300 ----------------- ------------------ Operating expenses: Research and development 1,308,100 1,101,000 Selling, general and administrative 2,615,400 2,832,100 ----------------- ------------------ Total operating expenses 3,923,500 3,933,100 ----------------- ------------------ Income from operations 519,600 636,200 Other expense, net 190,500 389,100 ----------------- ------------------ Income before income taxes 329,100 247,100 Income tax provision 800 800 ----------------- ------------------ Net income $ 328,300 $ 246,300 ================= ================== Basic income per common share $ 0.05 $ 0.04 ================= ================== Weighted average common shares outstanding 6,748,471 6,632,388 ================= ================== Diluted income per common share $ 0.04 $ 0.04 ================= ================== Weighted average common shares outstanding 6,761,805 6,632,388 ================= ==================
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LOGIC DEVICES INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine months ended July 2, 2000 and June 30, 1999 (unaudited) 2000 1999 ----------------- ----------------- Cash flows from operating activities: Net income $ 328,300 $ 246,300 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,100,700 1,306,300 Gain on disposal of equipment (12,200) - Allowance for doubtful accounts (150,000) - Changes in operating assets and liabilities: Accounts receivable 2,103,500 252,100 Inventories (365,800) 816,000 Prepaid expenses and other assets 16,600 77,500 Income taxes receivable 68,000 - Accounts payable (424,800) (854,300) Accrued expenses (165,600) (234,700) Income taxes payable 16,200 - ----------------- ----------------- Net cash provided by operating activities 2,514,900 1,609,200 ----------------- ----------------- Cash flows from investing activities: Capital expenditures (193,500) (153,200) Proceeds from disposal of equipment 600 - Other assets 10,400 310,700 ----------------- ----------------- Net cash (used in) provided by investing activities (182,500) 157,500 ----------------- ----------------- Cash flows from financing activities: Bank borrowing, net (1,745,000) (1,850,000) Repayment of capital lease obligations (168,400) (459,700) Proceeds from notes payable, related party - 257,600 Repayment of notes payable, related party (250,000) - Proceeds from common stock subscribed - 307,500 Proceeds from exercise of warrants 146,900 - Proceeds from exercise of stock options 242,400 - ----------------- ----------------- Net cash used in financing activities (1,774,100) (1,744,600) ----------------- ----------------- Net increase in cash and cash equivalents 558,300 22,100 Cash and cash equivalents, beginning of period 237,700 142,900 ----------------- ----------------- Cash and cash equivalents, end of period $ 796,000 $ 165,000 ================= =================
6 of 16 pages LOGIC DEVICES INCORPORATED Notes to Consolidated Financial Statements July 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 July 2, 2000 are not necessarily indicative of the results to be expected for the full year. B. INVENTORY A summary of inventories follows: July 2, October 3 2000 1999 ---------------- -------------- Raw materials $ 3,837,600 $ 3,618,800 Work-in-process 5,342,600 4,908,800 Finished goods 3,023,900 3,310,700 ---------------- -------------- $ 12,204,100 $ 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 16 pages 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 (9.50% at July 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 matured July 26, 2000 and were replaced as of such date. See Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources-Financing." On July 2, 2000, the Company had an aggregate outstanding balance of $1,745,000 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 16 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 $2,990,000 for the three months ended July 2, 2000 decreased 15% from $3,532,100 for the three months ended June 30, 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 14% from $1,797,000 for the three months ended June 30, 1999, to $1,538,700 for the three months ended July 2, 2000. The gross profit decreased by 16%, from $1,735,100 in 1999 to $1,451,300 in 2000. As a percentage of revenues, gross profit remained consistent between periods. Research and development expense increased from $372,000 (10% of net revenues) in the 1999 period to $425,500 (14% 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 $1,037,200 in the 1999 period to $830,900 in the 2000 period, due to increased efforts to control costs. Due to the aforementioned factors, the Company's income from operations decreased from $325,900 for the 1999 period to $194,900 for the 2000 period. 9 of 16 pages During the 2000 period, the Company incurred $48,000 of other expense, principally consisting of interest expense, compared to $126,500 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 $146,900 for the three months ended July 2, 2000, versus net income of $199,400 for the 1999 period. Liquidity and Capital Resources Cash Flows For the nine months ended July 2, 2000, the Company had after-tax cash earnings (defined as net income plus non-cash depreciation charges) of $1,429,000, compared to $1,552,600 for the nine months ended June 30, 1999. During the 2000 period, after-tax cash earnings of $1,429,000, plus decreases in accounts receivable of $2,103,500, funded decreases in accounts payable of $424,800 and accrued expenses of $165,600. This resulted in total net cash provided by operations of $2,514,900. During the 2000 period, the Company invested $193,500 in capital expenditures, reduced bank borrowings by $1,745,000, repaid related party notes payable of $250,000, and reduced capital lease obligations by $168,400. The Company also received $146,900 and $242,400 from the exercise of warrants and stock options, respectively. During the 1999 period, after-tax cash earnings of $1,552,600, plus an increase in related party notes payable of $252,000 and decreases in accounts receivable of $252,100 and inventories of $816,000, funded decreases in accounts payable of $854,300 and accrued expenses of $234,700. This resulted in total net cash provided by operations of $1,609,200. The Company invested $153,200 in capital expenditures, reduced bank borrowings by $1,850,000, and reduced capital lease obligations by $459,700 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 16 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 certain 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 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 a large distributor. See Part II - Item 1, "Legal Proceedings." 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 (9.50% at July 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. On July 2, 2000, the Company had an aggregate outstanding balance of $1,745,000 under these facilities, and was in compliance with its covenants. Both of the above credit facilities expired July 26, 2000 and have been replaced by a $2,000,000 revolving line of credit with Comerica Bank-California. The line of credit bears interest at the bank's prime rate plus 0.25%, is secured by all of the Company's assets, and is guaranteed, in part, by a federal agency. The borrowings under the line of credit are to finance the cost of manufacturing, producing, purchasing, or selling the Company's finished goods and services, which are intended for export. The Company is required to maintain a quarterly minimum quick ratio of 1.1 to 1.0, maintain a quarterly debt-to-effective tangible net worth rate of not more than 0.60 to 1.0, and have a positive net income as of the end of each fiscal year. Borrowings supported by export-related inventory are required to not exceed 70% of the total outstanding borrowings. As with the previous credit facilities, no dividends can be paid without the consent of the parties to the loan agreements. The line of credit matures July 31, 2001. 11 of 16 pages 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. The Company is generating cash in excess of its current expenditures and anticipates having no outstanding bank debt within the next year. 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 August 2, 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 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 16 pages PART II - OTHER INFORMATION Item 1. Legal Proceedings On July 28, 2000, the Company filed a Statement of Claim with the American Arbitration Association in San Francisco, California, against All American Semiconductor, Inc. (the "Distributor") seeking a declaratory judgment that the Distributor has breached the inventory stocking requirements and payment terms of the Exclusive Distributor Agreement between them (the "Agreement"). The Company also seeks to recover any money damages it suffered as a result of such breaches. The Agreement appointed the Distributor as the Company's exclusive domestic distributor and requires the Distributor to, among other things, maintain certain levels of inventory. The Distributor has not yet filed a response to the Statement of Claim. Should the arbitration panel find that the Distributor has breached the Agreement, the Company will terminate the Agreement. By its terms, the Agreement is also terminable on December 31, 2000 and, regardless of the outcome of the arbitration, the Company currently intends to give such notice of termination. Item 2. Changes in Securities and Use of Proceeds Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Item 5. Other Information Not applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 27 - Financial Data Schedule, which can be found on page 16 of this report. (b) No reports on Form 8-K have been filed during the quarter for which this report is filed. 13 of 16 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: August 14, 2000 By /s/ William J. Volz ---------------------- ---------------------- William J. Volz President and Principal Executive Officer Date: August 14, 2000 By /s/ Kimiko Lauris ---------------------- ---------------------- Kimiko Lauris Chief Financial Officer and Principal Financial and Accounting Officer 14 of 16 pages INDEX TO EXHIBITS Exhibit Number Description - -------------- ----------- 27 Financial Data Schedule. 15 of 16 pages EX-27 2 0002.txt FDS FOR 3ND QUARTER 10-Q
5 1 9-MOS OCT-1-2000 JUL-2-2000 796,000 0 2,963,400 103,500 12,204,100 16,022,300 11,269,800 8,352,000 19,273,100 2,421,400 0 18,522,700 0 0 (1,712,200) 19,273,100 8,768,600 8,768,600 4,325,500 0 3,923,500 0 190,500 329,100 800 328,300 0 0 0 328,300 0.05 0.04
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