-----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, HhgukHGpO/0NenDd3KyexwjVPn/SnvhvajGp5R7doeUcVM/aP+md/ud9eHhSAM3r XCeRmGEowbu+E8UWgBtb7g== 0001093114-01-500016.txt : 20010727 0001093114-01-500016.hdr.sgml : 20010727 ACCESSION NUMBER: 0001093114-01-500016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010701 FILED AS OF DATE: 20010726 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: 1689260 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 q3_01.txt FORM 10-Q FOR QUARTERLY PERIOD ENDED JULY 1, 2001 ================================================================================ 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 1, 2001 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 July 26, 2001, 6,841,888 shares of common stock, without par value, were outstanding. ================================================================================ 1 of 14 pages
LOGIC DEVICES INCORPORATED INDEX Page Number ------ Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets as of July 1, 2001 and October 1, 2000 3 Consolidated Statements of Income for the three months ended July 1, 2001 and July 2, 2000 4 Consolidated Statements of Income for the nine months ended July 1, 2001 and July 2, 2000 5 Consolidated Statements of Cash Flows for the nine months ended July 1, 2001 and July 2, 2000 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 6. Exhibits and Reports on Form 8-K 13 Signatures 14
2 of 14 pages PART I - FINANCIAL INFORMATION Item 1. Financial Statements
LOGIC DEVICES INCORPORATED CONSOLIDATED BALANCE SHEETS July 1, October 1, 2001 2000 ----------------- ------------------ (unaudited) ASSETS Current assets: Cash and cash equivalents $ 357,300 $ 753,300 Accounts receivable, net of allowance 2,643,900 1,648,800 Inventories 12,173,200 12,182,300 Prepaid expenses and other assets 250,200 235,300 ----------------- ------------------ Total current assets 15,424,600 14,819,700 Property and equipment, net 1,817,000 2,423,700 Other assets 202,400 345,100 ----------------- ------------------ $ 17,444,000 $ 17,588,500 ================= ================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank borrowings $ - $ - Accounts payable 188,500 192,100 Accrued payroll and vacation 150,400 159,400 Accrued commissions 40,000 115,300 Other accrued expenses 12,200 38,600 Current portion, capital lease obligations 76,400 194,200 Income taxes payable 900 5,200 ----------------- ------------------ Total current liabilities 468,400 704,800 Capital lease obligations, net of current portion 7,200 38,300 ----------------- ------------------ Total liabilities 475,600 743,100 ----------------- ------------------ Shareholders' equity: Common stock 18,522,700 18,522,700 Accumulated deficit (1,554,300) (1,677,300) ----------------- ------------------ Total shareholders' equity 16,968,400 16,845,400 ----------------- ------------------ $ 17,444,000 $ 17,588,500 ================= ==================
3 of 14 pages
LOGIC DEVICES INCORPORATED CONSOLIDATED STATEMENTS OF INCOME Three months ended July 1, 2001 and July 2, 2000 (unaudited) 2001 2000 ----------------- ------------------ Net revenues $ 2,490,000 $ 2,990,000 Cost of revenues 1,159,100 1,538,700 ----------------- ------------------ Gross margin 1,330,900 1,451,300 ----------------- ------------------ Operating expenses: Research and development 528,900 425,500 Selling, general and administrative 780,200 830,900 ----------------- ------------------ Total operating expenses 1,309,100 1,256,400 ----------------- ------------------ Income from operations 21,800 194,900 Other expense, net 8,000 48,000 ----------------- ------------------ Income before income taxes 13,800 146,900 Income tax provision - - ----------------- ------------------ Net income $ 13,800 $ 146,900 ================= ================== Basic income per common share $ - $ 0.02 ================= ================== Weighted average common shares outstanding 6,841,888 6,841,888 ================= ================== Diluted income per common share $ - $ 0.02 ================= ================== Weighted average common shares outstanding 6,841,888 6,844,884 ================= ==================
4 of 14 pages
LOGIC DEVICES INCORPORATED CONSOLIDATED STATEMENTS OF INCOME Nine months ended July 1, 2001 and July 2, 2000 (unaudited) 2001 2000 ----------------- ------------------ Net revenues $ 8,087,600 $ 8,768,600 Cost of revenues 4,323,500 4,325,500 ----------------- ------------------ Gross margin 3,764,100 4,443,100 ----------------- ------------------ Operating expenses: Research and development 1,343,100 1,308,100 Selling, general and administrative 2,271,000 2,615,400 ----------------- ------------------ Total operating expenses 3,614,100 3,923,500 ----------------- ------------------ Income from operations 150,000 519,600 Other expense, net 16,600 190,500 ----------------- ------------------ Income before income taxes 133,400 329,100 Income tax provision 10,400 800 ----------------- ------------------ Net income $ 123,000 $ 328,300 ================= ================== Basic income per common share $ 0.02 $ 0.05 ================= ================== Weighted average common shares outstanding 6,841,888 6,748,471 ================= ================== Diluted income per common share $ 0.02 $ 0.04 ================= ================== Weighted average common shares outstanding 6,841,888 6,761,805 ================= ==================
5 of 14 pages
LOGIC DEVICES INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine months ended July 1, 2001 and July 2, 2000 (unaudited) 2001 2000 ----------------- ----------------- Cash flows from operating activities: Net income $ 123,000 $ 328,300 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 915,800 1,100,700 Gain on disposal of equipment - (12,200) Allowance for doubtful accounts - (150,000) Changes in operating assets and liabilities: Accounts receivable (995,100) 2,103,500 Inventories 9,100 (365,800) Prepaid expenses and other assets (14,900) 16,600 Income taxes receivable - 68,000 Accounts payable (3,600) (540,400) Accrued payroll and vacation (9,000) (71,300) Accrued commissions (75,300) - Other accrued expenses (26,500) 21,300 Income taxes payable (4,300) 16,200 ----------------- ----------------- Net cash (used in) provided by operating activities (80,800) 2,514,900 ----------------- ----------------- Cash flows from investing activities: Capital expenditures (140,100) (193,500) Proceeds from disposal of equipment - 600 Other assets (400) 10,400 ----------------- ----------------- Net cash used in investing activities (140,500) (182,500) ----------------- ----------------- Cash flows from financing activities: Proceeds from bank borrowing 500,000 - Repayment of bank borrowing (500,000) (1,745,000) Repayment of capital lease obligations (174,700) (168,400) Repayment of notes payable, related party - (250,000) Proceeds from exercise of warrants - 146,900 Proceeds from exercise of stock options - 242,400 ----------------- ----------------- Net cash used in financing activities (174,700) (1,774,100) ----------------- ----------------- Net change in cash and cash equivalents (396,000) 558,300 Cash and cash equivalents, beginning of period 753,300 237,700 ----------------- ----------------- Cash and cash equivalents, end of period $ 357,300 $ 796,000 ================= =================
6 of 14 pages LOGIC DEVICES INCORPORATED Notes to Consolidated Financial Statements July 1, 2001 and October 1, 2000 (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. All adjustments for the quarter ended July 1, 2001 were of a recurring nature. Certain items were reclassified in the consolidated financial statements for the quarter ended July 2, 2000 to conform to the basis used in the audited consolidated financial statements for the fiscal year ended October 1, 2000. 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 accounting principles generally accepted in the United States of America. 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 years ended October 1, 2000 and October 3, 1999, 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 1, 2001 are not necessarily indicative of the results to be expected for the full year. B. INVENTORY A summary of inventories follows: July 1, October 1 2001 2000 ----------------- ------------------ Raw materials $ 4,991,000 $ 3,826,400 Work-in-process 3,652,000 5,573,900 Finished goods 3,530,200 2,782,000 ----------------- ------------------ $ 12,173,200 $ 12,182,300 ================= ================== Based on forecasted sales levels, the Company has on-hand inventory aggregating approximately 15 months of sales. 7 of 14 pages LOGIC DEVICES INCORPORATED Notes to Consolidated Financial Statements July 1, 2001 and October 1, 2000 (unaudited) C. FINANCING On July 27, 2000, the Company obtained a line of credit from Comerica Bank - California, with an availability of up to $2,000,000. The line of credit bears interest at prime (7.0% at July 1, 2001) plus 0.25%, matures on July 31, 2001, is secured by all of the Company's assets, and is guaranteed, in part, by a federal agency. The line of credit requires the Company to maintain a quarterly minimum quick ratio of 1.1/1.0, a quarterly debt to tangible net worth of no more than 0.6/1.0, a quarterly tangible net worth of at least $16.5 million plus 50% of the quarter's net profit, and annual profitability. On July 1, 2001, the Company had no outstanding balance on its line of credit, and was in compliance with the covenants. As of July 26, 2001, Company has renewed this line of credit with similar terms. Under the terms of its line of credit, 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 bank loan agreements, the Company does not intend to pay cash dividends in the near future. 8 of 14 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 1, 2000 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 Like many companies in the technology sector, the Company experienced a continued downturn in its revenues, resulting from a continued reduction of revenues from discontinued products, the general downturn in the economy, and the broad-based inventory correction within the industry. Net revenues decreased 17% from $2,990,000 for the quarter ended July 2, 2000 to $2,490,000 for the quarter ended July 1, 2001. Expenses Cost of revenues decreased 25% from $1,538,700 for the quarter ended July 2, 2000, to $1,159,100 for the quarter ended July 1, 2001. While the gross profit decreased by 8% from $1,451,300 in 2000 to $1,330,900 in 2001, as a percentage of revenues, gross profit increased 5%, due to a large sale of "last time buy" military products and the continued shift to higher-margin proprietary products. Research and development expense increased from $425,500 (14% of revenues) in the 2000 period to $528,900 (21% of revenues) in the 2001 period. This increase resulted from efforts to increase staffing levels. The Company is committed to new product development as a means to increase revenues in future fiscal years. Selling, general and administrative expense decreased from $830,900 in the 2000 period to $780,200 in the 2001 period, due to the end of operating leases and increased efforts to control costs, such as reducing administrative staffing levels. 9 of 14 pages Due to the aforementioned factors, the Company's income from operations decreased from $194,900 for the 2000 period to $21,800 for the 2001 period. During the 2000 period, the Company incurred $48,000 of other expense, principally consisting of interest expense, compared to $8,000 of other expense for the 2001 period, due to the reduction in bank borrowings. As a result of the foregoing, the Company earned net income of $13,800 for the quarter ended July 1, 2001, versus net income of $146,900 for the quarter ended July 2, 2000. Liquidity and Capital Resources Cash Flows For the nine months ended July 1, 2001, the Company used net cash of $80,800 in operations. While the Company's inventory appears flat, there was a large fluctuation during the nine-month period. As noted in the Form 10-Q/A for the quarter ended April 1, 2001, dated May 31, 2001, the Company had a $672,500 increase in inventory during the first six months. During the three months ended July 1, 2001, the Company was able to reduce this inventory down to a net reduction of $9,100 through the first nine months of fiscal 2001. Accounts receivable increased $995,100 during the nine months as some customers are paying in 45-60 days rather than the Company's normal net 30 terms, due to the downturn in the economy. The Company also paid down accrued expenses totaling $101,800, spent $140,100 in capital expenditures, and repaid capital leases aggregating $174,700. For the nine months ended July 2, 2000, the Company had $2,514,900 in net cash provided by operations. The Company's efforts to improve collections showed results as accounts receivable were reduced by $2,103,500. During the nine-month period, the Company also paid down accounts payable totaling $540,400, spent $193,500 on 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 cash from the exercise of warrants and stock options totaling $146,900 and $242,400, respectively. Working Capital Over prior periods, the Company, as a nature of its business, has maintained high levels of inventory and accounts receivable. While the Company believes this is a cost of doing business as a fabless operation, it endeavors to reduce both inventory and accounts receivable. 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. During the quarter ended December 31, 2000, when wafer fabricating capacity was tight, the Company felt it was necessary to take advantage of available capacity from its primary supplier to prepare for future sales of newer products. Other than this instance, the Company continues to focus its sales efforts on reducing inventory 10 of 14 pages levels. The Company is beginning to see the benefits of these efforts as it reduced inventory from $12,854,800 to $12,173,200 during the quarter ended July 1, 2001. The Company is continuing its shift in product offerings to higher-margin proprietary products and is 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 has consistently been correlated to the Company's previous quarter revenue level. Because of the Company's customer scheduled backlog requirements, up to two-thirds of the quarterly revenues may be shipped in the last month of a quarter. Therefore, a large portion of the quarter-end accounts receivable balance is often not yet due per the Company's normal net 30 day terms. The Company continues to closely analyze the credit status of its customers, to accelerate its collection efforts, and to work closely with customers to spread their orders and shipments throughout the quarter, which reduces the ending accounts receivable balance. Financing The Company has a $2,000,000 line of credit with Comerica Bank-California, which bears interest at the bank's prime rate (7.0% at July 1, 2001) plus 0.25%, is secured by all the Company's assets, and is partially guaranteed by a federal agency. The line of credit requires the Company to maintain a quarterly minimum quick ratio of not less than 1.10 to 1.00, a quarterly maximum debt to tangible net worth ratio of no more than 0.60 to 1.00, a quarterly tangible net worth of at least $16.5 million plus 50% of the quarter's profits, and annual profitability. On July 1, 2001, the Company was in compliance with these covenants and had no outstanding balance. This line of credit matures on July 31, 2001, and has been renewed with similar terms. Under the terms of its line of credit, 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 bank loan agreements, the Company does not expect to pay cash dividends in the near future. While the Company will continue to evaluate debt and equity financing opportunities, it believes its financing arrangements and cash flow generated from operations provide a sufficient base of liquidity for funding operations and capital needs to support the Company's operations. 11 of 14 pages 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 accounting principles generally accepted in the United States of America. 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 14 pages PART II - OTHER INFORMATION Item 1. Legal Proceedings Not applicable. 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) No reports on Form 8-K have been filed during the quarter for which this report is filed. 13 of 14 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: July 26, 2001 By /s/ William J. Volz ------------------------- ----------------------------- William J. Volz President and Principal Executive Officer Date: July 26, 2001 By /s/ Kimiko Lauris ------------------------- ------------------------------ Kimiko Lauris Chief Financial Officer and Principal Financial and Accounting Officer 14 of 14 pages -----END PRIVACY-ENHANCED MESSAGE-----