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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, 1998
Commission File Number
0-17187
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Logic Devices Incorporated
(Exact name of registrant as specified in its charter)
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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)
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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 14, 1998, 6,121,750 shares of
Common Stock, without par value, were outstanding.
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1 of 25 pages
<PAGE>
Logic Devices Incorporated
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1998 3
and December 31, 1997
Consolidated Statements of Income for the three months 4
ended June 30, 1998 and 1997
Consolidated Statements of Income for the six months 5
ended June 30, 1998 and 1997
Consolidated Statements of Cash Flows for the 6
six months ended June 30, 1998 and 1997
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 13
Security Holders
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit 10.1 17
Exhibit 11 25
Exhibit 27 26
2 of 25 pages
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Logic Devices Incorporated
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 11,100 $ 87,900
Accounts receivable, net of allowance 7,014,900 6,781,800
Inventories 13,733,300 12,399,100
Prepaid expenses 411,700 412,000
Income taxes receivable 522,000 522,000
Deferred income taxes 621,900 621,900
Total current assets 22,314,900 20,824,700
Equipment and leasehold improvements,net 5,451,300 5,110,000
Other Assets 1,368,800 1,558,300
$ 29,135,000 $ 27,493,000
Liabilities and Shareholders' Equity
Current liabilities:
Bank borrowings 5,000,000 3,525,000
Current portion of long-term
debt obligations 378,900 658,500
Accounts payable 1,617,400 1,011,400
Accrued expenses 251,300 446,300
Total current liabilities 7,247,600 5,641,200
Long-term debt obligations,
less current portion 736,200 705,300
Deferred income taxes 419,500 419,500
Total liabilities 8,403,300 6,766,000
Shareholders' equity:
Common stock 17,341,900 17,341,900
Common stock subscribed (307,500) (307,500)
Retained earnings 3,697,300 3,692,600
Total shareholders' equity 20,731,700 20,727,000
$ 29,135,000 $ 27,493,000
</TABLE>
3 of 25 pages
<PAGE>
Logic Devices Incorporated
Consolidated Statements of Income
Three months ended June 30, 1998 and 1997
(unaudited)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Net sales $ 3,298,700 $ 3,021,500
Cost of sales 1,724,300 2,033,600
Gross margin 1,574,400 987,900
Operating expenses:
Research and development 332,800 364,400
Selling, general and administrative 1,077,200 865,400
Operating expenses 1,410,000 1,229,800
Income (loss) from operations 164,400 (241,900)
Other expense (income), net 163,700 86,000
Income (loss) before taxes 700 (327,900)
Income taxes - (130,000)
Net income (loss) $ 700 $ (197,900)
Net income (loss) per common share $ 0.00 $ (0.03)
Weighted average common share equivalents 6,121,750 6,121,750
outstanding
</TABLE>
4 of 25 pages
<PAGE>
Logic Devices Incorporated
Consolidated Statements of Income
Six months ended June 30, 1998 and 1997
(unaudited)
[CAPTION]
<TABLE>
1998 1997
<S> <C> <C>
Net sales $ 6,543,700 $ 5,824,500
Cost of sales 3,594,200 3,794,600
Gross margin 2,949,500 2,029,900
Operating expenses:
Research and development 716,000 756,400
Selling, general and administrative 1,953,700 1,822,800
Operating expenses 2,669,700 2,579,200
Income (loss) from operations 279,800 (549,300)
Other expense (income), net 274,300 127,800
Income (loss) before taxes 5,500 (677,100)
Income taxes 800 (268,000)
Net income (loss) $ 4,700 $ (409,100)
Net income (loss) per common share $ 0.00 $ (0.07)
Weighted average common share equivalents 6,121,750 6,121,750
outstanding
</TABLE>
5 of 25 pages
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Logic Devices Incorporated
Consolidated Statements of Cash Flows
Six months ended June 30, 1998 and 1997
(unaudited)
[CAPTION]
<TABLE>
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 4,700 $ (409,100) )
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 727,100 655,300
Change in operating assets and liabilities:
Accounts receivable, net (233,100) 48,300
Inventories (1,334,300) 318,300
Prepaid expenses and other assets 200 (123,200)
Accounts payable 606,500 (583,800)
Accrued expenses (195,000) (170,600)
Income taxes payable - 86,800
Net cash provided by (used in)
operating activities (423,900) (178,000) )
Cash flows from investing activities:
Capital expenditures (1,068,400) (1,019,600)
Increase (decrease) in other assets 189,400 38,400
Net cash (used in) investing
activities (879,000) (981,200) )
Cash flows from financing activities:
Bank borrowing, net 1,475,000 950,000
Repayment of long-term obligations (248,900) (27,500) )
Net cash provided by (used in)
financing activities 1,226,100 922,500
Net (decrease) in cash (76,800) (236,700)
Cash and cash equivalents at
beginning of period $ 87,900 $ 670,900
Cash and cash equivalents at
end of period $ 11,100 $ 434,200
</TABLE>
6 of 25 pages
<PAGE>
Logic Devices Incorporated
Notes to Consolidated Financial Statements
June 30, 1998 and December 31, 1997
(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 has 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, 1997
and 1996, 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, 1998 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,
1998 1997
Raw materials $ 2,814,400 $ 2,824,400
Work-in-process 8,024,200 6,468,900
Finished goods 2,894,700 3,105,800
$ 13,733,300 $ 12,399,100
Based on forecasted 1998 sales levels, the Company has on hand
inventories aggregating approximately twelve months of sales.
7 of 25 pages
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Logic Devices Incorporated
Notes to Consolidated Financial Statements
June 30, 1998 and December 31, 1997
(unaudited)
(C) Financing
On May 19, 1998, the Company renewed its $6,000,000
revolving line of credit with Sanwa Bank extending the maturity
to May 31, 1999. The line of credit bears interest at the Bank's
prime rate (8.50% at June 30, 1998) plus 1.00%. The line of
credit requires the Company to maintain a minimum tangible net
worth of $20,000,000, a maximum ratio of debt to tangible net
worth of not more than 0.50 to 1.00, a minimum current ratio of
not less than 2.00 to 1.00, a minimum quick ratio of not less
than 1.10 to 1.00 increasing to 1.20 to 1.00 at September 30,
1998 and increasing again to 1.35 to 1.00 at December 31, 1998
and thereafter, and profitability on a quarterly basis. As of December 31,
1997 and June 30, 1998, the Company was not in compliance with the quick
ratio under the borrowings. The Company obtained a waiver as to
this covenant from the Bank for December 31, 1997 and for June 30, 1998.
The line of credit facility is secured by all of the assets of the Company.
As of June 30, 1998, $1,000,000 was available under the line of
credit facility.
Under the terms of its line of credit facility, the Company
is precluded from paying any cash dividends without the consent
of the lender even if the Company is in compliance with all of
the financial covenants but is allowed to pay stock dividends
whether or not there was any other covenant violation. Regardless
of any such restrictions in its bank loan agreements, the Company
does not intend to pay cash dividends in the near future and
anticipates reinvesting its cash flow back into operations.
8 of 25 pages
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Revenues
Net revenues were $3,298,700 for the three months ended June
30, 1998, an increase of 10% from $3,021,500 for the three months
ended June 30, 1997. The increase in revenues for the period was
attributed to an increase in sales on the Company's DSP products.
Sales of the Company's SRAM products decreased slightly for the
1998 period.
Expenses
Cost of revenues decreased 16%, from $2,033,600 in the three
months ended June 30, 1997 to $1,724,300 in the three months
ended June 30, 1998. Gross profit increased by 60%, from $987,900
in 1997 to $1,574,400 in 1998. This increase was the result of
increased sales volume for the period, which spreads fixed
overhead costs over more units. As a percentage of net revenues,
gross profit margin increased from 33% in the three months ended
June 30, 1997 to 48% in the three months ended June 30, 1998.
Research and development expense decreased slightly during
the period from $364,400 (12% of net revenues) in the 1997 period
to $332,800 (10% of net revenues) in the 1998 period. The Company
is continuing its new product development efforts and tooling to
new foundry technologies. In 1997, the Company invested heavily
in new product development. The Company plans to continue its
substantial investments in new product research and development
throughout 1998.
Selling, general and administrative expense increased from
$865,400 (29% of net revenues) in the 1997 period to $1,077,200
(33% of net revenues) in the 1998 period. This was the result of
increased expenditures for marketing and field sales activities.
The Company had income from operations for the 1998 period
of $164,400 versus a loss of $241,900 in 1997, due to the above
mentioned factors.
For the 1998 period, the Company incurred $163,700 in other
expense consisting of interest expense versus other expense of
$86,000 in 1997.
As a result of the foregoing, the Company enjoyed net
income of $700 in the 1998 period versus a net loss of $197,900
in the 1997 period.
9 of 25 pages
<PAGE>
Liquidity and Capital Resources
Cash Flows
For the six months ended June 30, 1998, the Company had
after-tax cash earnings (defined as net income plus non-cash
depreciation charges) of $861,300 versus $246,200 for the 1997
period. Although the Company has historically relied on after-tax
earnings as the Company's primary source of financing for working
capital needs and for capital expenditures, the Company used bank
borrowing during both the 1997 and 1998 periods.
During the 1998 period, after-tax cash earnings of $861,300
and increases in net indebtedness of $1,475,000, funded increases
in accounts receivables of $233,100, inventories of $1,334,300,
accounts payable of $606,500 and a decrease in accrued expenses
of $195,000. This resulted in total net cash used in operations
of $423,900. The Company invested $879,000 in capital
expenditures and other assets during the period. The Company
expects to receive an income tax refund of approximately $660,000
in the third quarter of 1998.
During the 1997 period, after-tax cash earnings of $246,200
and increases in bank borrowings of $950,000 and decreases in
inventories of $318,300, funded decreases in accounts payable of
$583,800 and accrued and prepaid expenses of $293,800 which
resulted in net cash used by operations of $178,000. The Company
invested $981,200 in capital expenditures and other assets during
the period. The Company received an income tax refund of approximately
$350,000 in the second quarter of 1997 and approximately 500,000 in the
third quarter of 1997.
Working Capital
The Company's investment in inventories and accounts
receivable has been significant and will continue to be
significant in the future. Over prior periods, the Company, as a
nature of its business, has maintained these high levels of
inventories and accounts receivable.
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 turn over 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.
The Company looks at its inventories in relationship to its
sales which have ranged from 140 days to 365 days within the
periods between 1998 and 1992. This inventory to sales ratio is a
more stable measure of inventory levels, versus the traditional
inventory turnover measure because, at the times when the Company
is experiencing supply disruptions, and therefore lower inventory
levels, the Company is also experiencing increased costs of goods
due to inefficiencies in its operations stemming from sporadic
deliveries which skews the numerator and denominator in different
directions for inventory turns calculations. The lowest days on
hand of inventory to sales has been experienced when the Company
has had supply disruptions as in 1992 and 1993.
10 of 25 pages
<PAGE>
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 reducing inventory levels over the past several
quarters.
The Company's accounts receivable level has been
consistently correlated to the Company's previous quarter revenue
level. Because of the Company's customer scheduled backlog
requirements, up to 80% of the quarterly revenues are shipped 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
(which make up 66% and 52% of the Company revenues in 1998 and
1997, respectively), generally 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. This has been
consistent over prior periods. The Company is currently working
to accelerate accounts receivable collections.
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 is in the process of diversifying its supplier base
to reduce the risk of supply disruption. However, this will
require a significant investment in product development to tool
with new suppliers. The Company believes that as it expands its
customer base it will be able to even out the flow of its
shipments within its quarterly reporting periods.
Financing
On May 19, 1998, the Company renewed its $6,000,000
revolving line of credit with Sanwa Bank extending the maturity
to May 31, 1999. The line of credit bears interest at the bank's
prime rate (8.50% at June 30, 1998) plus 1.00%. The line of
credit requires the Company to maintain a minimum tangible net
worth of $20,000,000, a maximum ratio of debt to tangible net
worth of not more than 0.50 to 1.00, a minimum current ratio of
not less than 2.00 to 1.00, a minimum quick ratio of not less
than 1.10 to 1.00 increasing to 1.20 to 1.00 at September 30,
1998 and increasing again to 1.35 to 1.00 at December 31, 1998
and thereafter, and profitability on a quarterly basis. As of
December 31, 1997 and June 30, 1998, the Company was not in
compliance with the quick ratio under the borrowings. The Company
obtained a waiver as to this covenant from the Bank for December 31, 1997
and for June 30, 1998. The line of credit facility is secured by all of
the assets of the Company. As of June 30, 1998, $1,000,000 was
available under the line of credit facility.
Under the terms of its line of credit facility, the Company
is precluded from paying any cash dividends without the consent
of the lender even if the Company is in compliance with all of
the financial covenants but is allowed to pay stock dividends
whether or not there was any other covenant violation. Regardless
of any such restrictions in its bank loan agreements, the Company
does not intend to pay cash dividends in the near future and
anticipates reinvesting its cash flow back into operations.
11 of 25 pages
<PAGE>
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.
12 of 25 pages
<PAGE>
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Shareholders' meeting was held on June 16, 1998 at 2:00
p.m. at the Company's headquarters located at 1320 Orleans Drive,
Sunnyvale, California. There were two items to be voted on at the
meeting: first, was the election of the Board of Directors and,
second was the approval of the 1998 Director Stock Incentive Plan.
There were 5,609,088 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 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. Thereafter, all shareholders will be
entitled to cumulate votes. The votes for each nominee are as set
forth in the following table:
[CAPTION]
<TABLE>
Votes Votes
Nominee in Favor Against Abstention
<S> <C> <C> <C>
Howard L. Farkas 5,592,826 300 15,962
Burton W. Kanter 5,592,826 300 15,962
Albert Morrison, Jr. 5,592,826 300 15,962
William J. Volz 5,592,926 200 15,962
Bruce B. Lusignan 5,593,026 100 15,962
</TABLE>
Shareholders were permitted and asked to vote on the approval of the
1998 Director Stock Incentive Plan. Of the 5,609,088 shares
represented at the meeting, there were 2,778,162 broker non-votes and
2,680,049 shares (excluding the shares held by the Company's
directors) were voted on the plan as follows:
<TABLE>
For Against Withheld
<C> <C> <C>
2,181,882 498,167 3,200
</TABLE>
Having received the affirmative vote of a majority of the shares
represented and voting on the proposal (which shares voting
affirmatively also constituted at least a majority of the required
quorum), the proposal was approved.
13 of 25 pages
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a)B (1) Exhibit 10.1 - 1998 Director Stock
Incentive Plan; Form of Stock Option Agreement
(2) Exhibit 11 - Computation of Earnings Per Common Share
(3) Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter
for which this report is filed.
14 of 25 pages
<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 14, 1998 By /s/ William J. Volz
William J. Volz
President and Principal
Executive Officer
Date: August 14, 1998 By /s/ Mary C. deRegt
Mary C. deRegt
Chief Financial Officer
Principal Financial and
Accounting Officer
15 of 25 pages
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EXHIBIT 10.1
THE LOGIC DEVICES INCORPORATED
1998 DIRECTOR STOCK INCENTIVE PLAN
TABLE OF CONTENTS
Purpose of the Plan 16
Definitions 17
Administration of the Plan 17
Shares Subject to the Plan 18
Stock Options 18
Amendment or Termination of the Plan 19
Term of Plan 19
Rights as Shareholder 19
Merger or Consolidation 20
Changes in Capital and Corporate Structure 20
Service 20
Withholding of Tax 20
Delivery and Registration of Stock 20
1. PURPOSE OF THE PLAN
The LOGIC DEVICES INCORPORATED 1998 DIRECTOR STOCK INCENTIVE
PLAN (hereinafter referred to as the "Plan") is intended to
provide a means whereby directors of LOGIC DEVICES INCORPORATED
and its Related Corporations may sustain a sense of
proprietorship and personal involvement in the continued
development and financial success of the Company, and to
encourage them to remain with and devote their best efforts to
the business of the Company, thereby advancing the interests of
the Company and its shareholders. Accordingly, the Company may
permit certain directors to acquire Shares or otherwise
participate in the financial success of the Company, on the terms
and conditions established herein.
16 of 25 pages
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2. DEFINITIONS
The following terms shall be defined as set forth below:
a. BOARD. Shall mean the Board of Directors of the Company.
b. CODE. Shall mean the Internal Revenue Code of 1986, and any
amendments thereto.
c. COMPANY. Shall mean LOGIC DEVICES INCORPORATED and its
Related Corporations.
d. ERISA. Shall mean the Employee Retirement Income Security
Act of 1974, and any amendment thereto.
e. NON-QUALIFIED OPTIONS. Shall mean an award under the Plan
that is not an Incentive Stock Option within the meaning of Code
section 422.
f. RELATED CORPORATION. Shall mean a corporation which would
be a parent or subsidiary corporation with respect to the Company
as defined in section 424(e) or (f), respectively, of the Code.
g. RULE 16B-3. Shall mean Rule 16b-3 of the `34 Act, and any
amendments thereto.
h. SHARES. Shall mean shares of common stock of the Company.
i. '33 ACT. Shall mean the Securities Act of 1933, and any
amendments thereto.
j. '34 ACT. Shall mean the Securities Exchange Act of 1934 and
any amendments thereto.
3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board. The Board shall
have sole authority to:
i. establish the conditions of each such option;
ii. prescribe any legend to be affixed to certificates
representing such option;
iii. interpret the Plan; and
iv. adopt such rules, regulations, forms and agreements, not
inconsistent with the provisions of the Plan, as it may deem
advisable to carry out the Plan.
All decisions made by the Board in administering the Plan shall
be final.
17 of 25 pages
<PAGE>
4. SHARES SUBJECT TO THE PLAN
The aggregate number of Shares that may be obtained by directors
under the Plan shall be 550,000 Shares. Any Shares that remain
unissued at the termination of the Plan shall cease to be subject
to the Plan, however, if during the term of the Plan, any options
not exercised expire, the Shares with respect to such options
shall be available for subsequent option grants under the Plan.
If the total number of Shares at the time of grant is not
sufficient to provide for the automatic grants to non-employee
directors under Section 5(c) below, then the available shares
shall be allocated proportionately among the automatic grants to
be made at that time.
5. STOCK OPTIONS
a. TYPE OF OPTIONS. The Company may issue options that
constitute Non-Qualified Options to directors under the Plan.
The grant of each option shall be confirmed by a stock option
agreement that shall be executed by the Company and the optionee
as soon as practicable after such grant. The stock option
agreement shall expressly state or incorporate by reference the
provisions of the Plan and state that the option is a Non-
Qualified Option.
b. ONE-TIME GRANTS. Upon approval of the Plan by the
shareholders of the Company, two non-employee directors, Mr.
Howard Farkas and Mr. Burton Kanter, shall each be automatically
awarded Non-Qualified Options to purchase 75,000 Shares, and Mr.
William Volz, an employee director, shall be automatically
awarded a Non-Qualified Option to purchase 200,000 Shares.
c. ANNUAL GRANTS. Upon approval of the Plan by the shareholders
of the Company, each individual who is re-elected as a non-
employee member of the Board shall, each time such individual is
re-elected, receive a Non-Qualified Option to purchase 10,000
Shares, such annual grants to commence with the 1998 Annual
Shareholders meeting and continuing in effect for each subsequent
Annual Meeting of the Company's shareholders.
d. TERMS OF OPTIONS. Except as provided in Subparagraphs (e)
and (f) below, each option granted under the Plan shall be
subject to the terms and conditions set forth by the Board in the
stock option agreement including, but not limited to, option
price (which price shall be no less than the Fair Market Value of
the Shares as of the date of grant) and option term.
e. ADDITIONAL TERMS APPLICABLE TO ALL OPTIONS. Each option
shall be subject to the following terms and conditions:
i. WRITTEN NOTICE. An option may be exercised only by giving
written notice to the Company specifying the number of Shares to
be purchased.
ii. METHOD OF EXERCISE. The aggregate option price shall be
paid in any one or a combination of cash, personal check, by
offsetting any other amounts owed to the optionee by the Company,
Shares already owned (valued at Fair Market Value on the date of
exercise) or Plan awards which the optionee has an immediate
right to exercise (i.e., on a "net issuance" basis).
18 of 25 pages
<PAGE>
iii. TERM OF OPTION. No option may be exercised more than five
(5) years after the date of grant.
iv. DISABILITY OR DEATH OF OPTIONEE. If an optionee terminates
membership on the Board due to Disability or death prior to
exercise in full of any options, he or she or his or her
beneficiary, executor, administrator or personal representative
shall have the right to exercise the options within the five (5)
years from the date of grant.
v. TRANSFERABILITY. Subject to applicable securities laws,
there shall be no limits on transferability; provided however,
that the Board may elect to make certain options
non-transferable or limit transferability to transfers under the
laws of descent and distribution and/or infra-family transfers
for estate planning purposes or pursuant to a Qualified Domestic
Relations Order.
f. VALUATION. For purposes of establishing the option price
and for all other valuation purposes under the Plan, the Fair
Market Value per share of the common stock of the Company on any
relevant date shall be determined according to the following
rules:
i. If the common stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the NASDAQ
National Market, then the fair market value will be deemed equal
to the closing selling price per share of common stock on the
NASDAQ National Market on the date in question.
ii. If the common stock is at the time listed or admitted to
trading on any national securities exchange, then the fair market
value will be the closing selling price per share of common stock
on the date in question on the securities exchange serving as the
primary market for the common stock, as such price is officially
quoted on such exchange.
6. AMENDMENT OR TERMINATION OF THE PLAN
The Board may amend, suspend or terminate the Plan or any portion
thereof at any time, but (except as provided in Paragraph 10
hereof) no amendment shall be made without approval of the
shareholders of the Company which shall: (i) materially increase
the aggregate number of Shares with respect to which awards may
be made under the Plan; or (ii) change the class of persons
eligible to participate in the Plan; provided, however, that no
such amendment, suspension or termination shall impair the rights
of any individual, without his or her consent, in any award
theretofore made pursuant to the Plan.
7. TERM OF PLAN
The Plan shall be effective upon the date of its approval by the
shareholders of the Company. Unless sooner terminated under the
provisions of Paragraph 6, options shall not be granted under the
Plan after June 16, 2008.
19 of 25 pages
<PAGE>
8. RIGHTS AS SHAREHOLDER
Upon delivery of any Share to a director, such director shall
have all of the rights of a shareholder of the Company with
respect to such Share, including the right to vote such Share and
to receive all dividends or other distributions paid with respect
to such Share.
9. MERGER OR CONSOLIDATION
In the event the Company is merged or consolidated with another
corporation and the Company is not the surviving corporation, the
surviving corporation may agree to exchange options issued under
this Plan for options (with the same aggregate option price) to
acquire and participate in the number of shares in the surviving
corporation that have a fair market value equal to the fair
market value (determined on the date of such merger or
consolidation) of Shares that the grantee is entitled to acquire
and participate in under this Plan on the date of such merger or
consolidation.
10. CHANGES IN CAPITAL AND CORPORATE STRUCTURE
In the event any change is made to the common stock issuable
under the Plan by reason of any stock split, stock dividend,
combination of shares, exchange of shares or other change in the
corporate structure of the Company effected without receipt of
consideration, appropriate adjustments will be made to (i) the
aggregate number and/or class of shares of common stock available
for issuance under the Plan, (ii) the number of shares of common
stock to be made the subject of each subsequent automatic grant
and (iii) the number and/or class of shares of common stock
purchasable under each outstanding option and the exercise price
payable per share so that no dilution or enlargement of benefits
will occur under such option.
11. SERVICE
An individual shall be considered to be in the service of the
Company or a Related Corporation as long as he or she remains a
director of the Company or such Related Corporation. Nothing
herein shall confer on any individual the right to continued
service with the Company or a Related Corporation or affect the
right of the Company or such Related Corporation to terminate
such service.
12. WITHHOLDING OF TAX
To the extent the award, issuance or exercise of Shares results
in the receipt of compensation by a director of the Company, the
Company is authorized to withhold from any other cash
compensation then or thereafter payable to such director any tax
required to be withheld by reason of the receipt of the
compensation. Alternatively, the director may tender a personal
check in the amount of tax required to be withheld.
20 of 25 pages
<PAGE>
13. DELIVERY AND REGISTRATION OF STOCK
The Company's obligation to deliver Shares with respect to an
award shall, if the Board so requests, be conditioned upon the
receipt of a representation as to the investment intention of the
individual to whom such Shares are to be delivered, in such form
as the Board shall determine to be necessary or advisable to
comply with the provisions of the `33 Act or any other federal,
state or local securities legislation or regulation. It may be
provided that any representation requirement shall become
inoperative upon a registration of the Shares or other action
eliminating the necessity of such representation under securities
legislation. The Company shall not be required to deliver any
Shares under the Plan prior to (i) the admission of such Shares
to listing on any automated quotation system or stock exchange on
which Shares may then be listed, and (ii) the completion of such
registration or, other qualification or exemption of such Shares
under any state or federal law, rule or regulation, as the Board
shall determine to be necessary or advisable.
21 of 25 pages
<PAGE>
LOGIC DEVICES INCORPORATED
1998 DIRECTOR STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT
1. A STOCK OPTION to acquire ____________ shares (hereinafter
referred to as "Shares") of Common Stock of Logic Devices
Incorporated (hereinafter referred to as the "Company") is hereby
granted to __________________ (hereinafter referred to
as the "Optionee"), subject in all respects to the terms and
conditions of the LOGIC DEVICES INCORPORATED 1998 DIRECTOR STOCK
INCENTIVE PLAN (hereinafter referred to as the "Plan") and such
other terms and conditions as are set forth herein.
2. This Option is intended to be a non-qualified option which
does not meet the requirements of an incentive stock option under
Section 422 of the Internal Revenue Code of 1986, as amended.
3. The Option price as determined pursuant to the Plan is
_________________ ($_____) per Share.
(a) This Option may be immediately exercised.
(b) This Option may not be exercised more than five (5) years
after the date of grant indicated below and may be exercised
during such term only in accordance with the terms and conditions
set forth in the Plan.
(c) If the Optionee dies or becomes Disabled and terminates his
membership on the Board of Directors of the Company (the
"Board"), then he, or in the case of his death, his beneficiary,
executor, administrator or personal representative, shall have
the right to exercise the Option within five (5) years of the
date of grant indicated below.
4. This Option may not be exercised if the issuance of Shares
upon such exercise would constitute a violation of any applicable
federal or state securities law, or any other valid law or
regulation. As a condition to the exercise of this Option, the
Optionee shall represent to the Company that the Shares being
acquired under this Option are for investment and not with a
present view for distribution or resale, unless counsel for the
Company is then of the opinion that such a representation is not
required under any applicable law, regulation or rule of any
governmental agency.
5. This Option may be transferred in any manner. The terms of
this Option shall be binding upon the Optionee's executors,
administrators, heirs, assigns and successors.
6. The Option may be exercised by payment of the Exercise Price
in any one or a combination of cash, personal check, by
offsetting any other amounts owed the Optionee by the Company,
Shares already owned (valued at Fair Market Value on the date of
exercise) or Options which the Optionee has an immediate right to
exercise (i.e., on a "net issuance" basis).
7. The Board shall make all determinations concerning rights to
benefits under the Plan.
Date of Grant: _______________, 1998
LOGIC DEVICES INCORPORATED
By: ______________________
22 of 25 pages
<PAGE>
ATTEST:
The Optionee acknowledges that he has received a copy of the
Plan and is familiar with the terms and conditions set forth
therein. The Optionee agrees to accept as binding, conclusive,
and final all decisions and interpretations of the Board. As a
condition to the exercise of this Option, the Optionee authorizes
the Company to withhold from any regular cash compensation
payable by the Company any taxes required to be withheld under
any federal, state or local law as a result of exercising this
Option.
Dated: _______________________, 1998
By: ___________________
23 of 25 pages
<PAGE>
EXHIBIT 11
Logic Devices Incorporated
Computation of Earnings per Common Share
(unaudited)
Six months ended June 30, 1998 and 1997
[CAPTION]
<TABLE>
1998 1997
<S> <C> <C>
Weighted average shares of common stock 6,121,750 6,121,750
outstanding
Dilutive effect of common stock options - -
Dilutive effect of common stock warrants - -
Weighted average common and
common share equivalents 6,121,750 6,121,750
Net income (loss) $ 4,700 $ (401,900) )
Net income (loss) per common
share equivalent $ 0.00 $ (0.06)
</TABLE>
24 of 25 pages
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 11,100
<SECURITIES> 0
<RECEIVABLES> 7,184,400
<ALLOWANCES> 169,500
<INVENTORY> 13,733,300
<CURRENT-ASSETS> 22,314,900
<PP&E> 5,451,300
<DEPRECIATION> 399,000
<TOTAL-ASSETS> 29,135,000
<CURRENT-LIABILITIES> 7,247,600
<BONDS> 0
0
0
<COMMON> 17,341,900
<OTHER-SE> (307,500)
<TOTAL-LIABILITY-AND-EQUITY> 29,135,000
<SALES> 3,298,700
<TOTAL-REVENUES> 3,298,700
<CGS> 1,724,300
<TOTAL-COSTS> 1,410,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 163,700
<INCOME-PRETAX> 700
<INCOME-TAX> 0
<INCOME-CONTINUING> 700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 700
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
<PAGE>
</TABLE>
