*---------------------------------------------------------------*
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.
*---------------------------------------------------------------*
<PAGE>
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
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements.
LOGIC DEVICES INCORPORATED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<C> <C>
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
</TABLE>
<PAGE>
LOGIC DEVICES INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
Three months ended June 30, 1995 and 1994
(unaudited)
<TABLE>
<CAPTION>
<C> <C>
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
</TABLE>
<PAGE>
LOGIC DEVICES INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
Six Months ended June 30, 1995 and 1994
(unaudited)
<TABLE>
<CAPTION>
<C> <C>
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
</TABLE>
<PAGE>
LOGIC DEVICES INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1995 and 1994
(unaudited)
<TABLE>
<CAPTION>
<C> <C>
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
</TABLE>
<PAGE>
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.
<PAGE>
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").
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
(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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 284,500
<SECURITIES> 0
<RECEIVABLES> 4,476,200
<ALLOWANCES> 0
<INVENTORY> 7,137,500
<CURRENT-ASSETS> 12,667,300
<PP&E> 9,368,700
<DEPRECIATION> 7,247,000
<TOTAL-ASSETS> 15,657,400
<CURRENT-LIABILITIES> 4,467,200
<BONDS> 0
<COMMON> 6,794,300
0
77,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 15,657,400
<SALES> 7,958,000
<TOTAL-REVENUES> 7,958,000
<CGS> 4,464,700
<TOTAL-COSTS> 6,763,000
<OTHER-EXPENSES> 193,500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 193,500
<INCOME-PRETAX> 1,001,500
<INCOME-TAX> 322,700
<INCOME-CONTINUING> 678,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 678,800
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
