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
March 31, 1999
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 classes of common stock, as of the latest
practicable date. On April 30, 1999, 6,632,388 shares of
Common Stock, without par value, were outstanding.
Logic Devices Incorporated
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1999
and September 30, 1998 3
Consolidated Statements of Income for the three
months ended March 31, 1999 and 1998 4
Consolidated Statements of Income for the six
months ended March 31, 1999 and 1998 5
Consolidated Statements of Cash Flows for the
six months ended March 31, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II. Other Information
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
Exhibit 10.1 19
Exhibit 10.2 23
Exhibit 10.3 27
Exhibit 11 28
Exhibit 27 29
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Logic Devices Incorporated
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, September 30,
1999 1998
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 170,300 $ 142,900
Accounts receivable, net of allowance 4,217,500 4,553,400
Inventories 12,188,500 12,535,600
Prepaid expenses 488,100 372,100
Income taxes receivable 90,000 90,000
Total current assets 17,154,400 17,694,000
Equipment and leasehold improvements,net 4,253,100 4,935,500
Other Assets 680,400 969,400
$22,087,900 $23,598,900
Liabilities and Shareholders' Equity
Current liabilities:
Bank borrowings 4,250,000 5,350,000
Notes payable 252,000 -
Current portion of long-term
debt obligations 361,900 562,400
Accounts payable 1,350,200 1,585,400
Accrued expenses 403,300 565,700
Total current liabilities 6,617,400 8,063,500
Long-term debt obligations,
less current portion 280,300 392,100
Total liabilities 6,897,700 8,455,600
Shareholders' equity:
Common stock 18,091,900 18,091,900
Common stock subscribed (307,500) (307,500)
Retained earnings (2,594,200) (2,641,100)
Total shareholders' equity 15,190,200 15,143,300
$22,087,900 $23,598,900
</TABLE>
Logic Devices Incorporated
Consolidated Statements of Income
Three months ended March 31, 1999 and 1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Net sales $ 3,256,100 $ 3,245,000
Cost of sales 1,812,500 1,869,900
Gross margin 1,443,600 1,375,100
Operating expenses:
Research and development 359,900 383,200
Selling, general and administrative 910,900 876,500
Operating expenses 1,270,800 1,259,700
Income from operations 172,800 115,400
Other expense (income), net 132,600 110,600
Income before taxes 40,200 4,800
Income taxes - 800
Net income $ 40,200 $ 4,000
Net income per common share $ 0.01 $ 0.00
Weighted average common share 6,632,388 6,121,750
equivalents outstanding
</TABLE>
Logic Devices Incorporated
Consolidated Statements of Income
Six months ended March 31, 1999 and 1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Net sales $ 6,327,000 $ 6,757,100
Cost of sales 3,492,800 4,073,000
Gross margin 2,834,200 2,684,100
Operating expenses:
Research and development 729,000 641,100
Selling, general and administrative 1,794,900 1,770,900
Operating expenses 2,523,900 2,412,000
Income from operations 310,300 272,100
Other expense (income), net 262,600 344,300
Income (loss) before taxes 47,700 (72,200)
Income taxes (benefit) 800 (84,200)
Net income $ 46,900 $ 12,000
Net income per common share $ 0.01 $ 0.01
Weighted average common share
equivalents outstanding 6,632,388 6,121,750
</TABLE>
Logic Devices Incorporated
Consolidated Statements of Cash Flows
Six months ended March 31, 1999 and 1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income $ 46,900 $ 12,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 900,200 853,000
Change in operating assets and liabilities:
Accounts receivable, net 335,900 (1,816,700)
Inventories 347,100 357,900
Prepaid expenses and other assets (116,000) 549,100
Income taxes receivable - (522,000)
Deferred income taxes - 299,000
Accounts payable (235,200) 798,600
Accrued expenses (162,400) 33,200
Net cash provided by
operating activities 1,116,500 564,100
Cash flows from investing activities:
Capital expenditures (202,500) (1,363,100)
Decrease (increase) in other assets 273,700 (710,700)
Net cash provided by (used in)
investing activities 71,200 (2,073,800)
Cash flows from financing activities:
Bank borrowing, net (1,100,000) 1,225,000
Notes payable 252,000 -
Repayment of long-term obligations (312,300) (59,000)
Net cash (used in) provided by
financing activities (1,160,300) 1,166,000
Net increase (decrease) in cash and cash
equivalents 27,400 (343,700)
Cash and cash equivalents at beginning
of period $ 142,900 $ 365,700
Cash and cash equivalents at end of period $ 170,300 $ 22,000
</TABLE>
Logic Devices Incorporated
Notes to Consolidated Financial Statements
March 31, 1999 and September 30, 1998
(unaudited)
(A) Basis of Presentation
The accompanying unaudited interim consolidated financial
statements reflect all adjustments which are, in the opinion of
management, necessary to present fairly the consolidated
financial position, results of operations and cash flows 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, 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 September 30, 1998 and December 31, 1997, 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 March 31, 1999 are not necessarily indicative of the
results to be expected for the full year.
(B) Inventories
A summary of inventories follows:
<TABLE>
<CAPTION>
March 31, September 30,
1999 1998
<S> <C> <C>
Raw materials $ 3,666,900 $ 2,599,900
Work-in-process 5,482,200 5,373,600
Finished goods 3,039,400 4,562,100
$ 12,188,500 $ 12,535,600
</TABLE>
Based on forecasted 1999 sales levels, the Company has on hand
inventories aggregating approximately twelve months of sales.
Logic Devices Incorporated
Notes to Consolidated Financial Statements
March 31, 1999 and September 30, 1998
(unaudited)
(C) Financing
Until March 11, 1999, the Company had a $6,000,000
revolving line of credit with Sanwa Bank, which had a
maturity date of May 31, 1999. The line of credit bore
interest at the Bank's prime rate plus 1.00% and was
secured by all the assets of the Company. The line of
credit required 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, 1998 and September 30, 1998,
the Company was not in compliance with certain
covenants under the borrowings. The Company was not in
compliance with the then existing net worth (minimum of
$20,000,000), net after tax profit (minimum $1.00 per
quarter), or quick ratio (1.20 to 1.00 at September 30,
1998 and 1.35 to 1.00 at December 31, 1998) covenants
as of September 30, 1998 and December 31, 1998 or the
debt to net worth ratio (0.50 to 1.00) as of September
30, 1998. The Company has received waivers from the
Bank for these covenants as of such dates.
On March 11, 1999, the Company accepted a proposal
from the Bank to amend the terms of its revolving line
of credit facility. This agreement now expires on
August 1, 1999. Under the amendment, the maximum
borrowing amount was $4,500,000 and is reduced at
future dates prior to maturity. The maximum borrowing
amount was $4,500,000 from March 11, 1999 through March
30, 1999, reduced to $4,250,000 from March 31, 1999
through June 29, 1999, and will be reduced to
$3,000,000 from June 30, 1999 through August 1, 1999.
The line of credit now bears interest at the Bank's
prime rate (7.75% at March 31, 1999) plus 2.00%. The
line of credit requires the Company to maintain a
minimum tangible net worth of $14,000,000 and a minimum
quick ratio of not less than 0.55 to 1.00 through and
including March 31, 1999, and at June 30, 1999 and
thereafter a ratio of not less than 0.65 to 1.00. The
Company is required to have a minimum net profit after
tax of not less than $250,000 at the fiscal quarter
ending June 30, 1999. The Company is required to have
total inventory of not more than $10,000,000 on June
30, 1999. All other material terms of the facility
remained unchanged. As of March 31, 1999, the Company
was in compliance with current financial covenants
under the borrowings, although it did borrow funds from
third parties (as discussed below), which was not in
compliance with a covenant which restricts the ability
of the Company to incur additional indebtedness.
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.
On February 24, 1999, the Company received loans in the
aggregate principal amount of $250,000 from William J. Volz,
President and a director of the Company, and The Holding
Company. The president of The Holding Company is Burton W.
Kanter, a director of the Company. Mr. Kanter does not have
any beneficial ownership interest in The Holding Company
although certain of his family members do have beneficial
ownership interests through various trusts. The loans are
unsecured and bear interest to maturity at the rate which is
the reference or equivalent rate of interest quoted,
published or announced by the Bank plus 2.00%. The loans
had an original maturity of March 31, 1999, but the holders
of the loans have extended the maturity date to May 31,
1999. The proceeds from these loans were applied to the
Company's working capital needs.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Revenues
Net revenues were $3,256,100 for the three months ended
March 31, 1999, an increase of 1% from $3,245,000 for the
three months ended March 31, 1998. The increase in revenues
for the period was attributed to an increase in sales on the
Company's digital signal processing (DSP) products.
Expenses
Cost of revenues decreased 3%, from $1,869,900 in the
three months ended March 31, 1998 to $1,812,500 in the three
months ended March 31, 1999. Gross profit increased by 5%,
from $1,375,100 in 1998 to $1,443,600 in 1999. This increase
was the result of a change in the sales mix to higher margin
proprietary products. As a percentage of net revenues,
gross profit margin increased from 43% in the three months
ended March 31, 1998 to 45% in the three months ended March
31, 1999.
Research and development expense decreased slightly
during the period from $383,200 (12% of net revenues) in the
1998 period to $359,900 (11% of net revenues) in the 1999
period. The Company plans to continue its substantial
investments in new product research and development
throughout 1999.
Selling, general and administrative expense increased
from $876,500 (27% of net revenues) in the 1998 period to
$910,900 (28% of net revenues) in the 1999 period. This was
the result of increased expenditures for marketing and field
sales activities.
The Company had income from operations for the 1999
period of $172,800 versus income of $115,400 in the 1998
period, due to the above mentioned factors.
For the 1999 period, the Company incurred $132,600 in
other expense consisting of interest expense versus other
expense of $110,600 in the 1998 period.
As a result of the foregoing, the Company enjoyed
net income of $40,200 in the 1999 period versus a net income
of $4,000 in the 1998 period.
Liquidity and Capital Resources
Cash Flows
For the six months ended March 31, 1999, the Company
had after-tax cash earnings (defined as net income plus non-
cash depreciation charges) of $947,100 versus $865,000 for
the 1998 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 also used borrowings during both
the 1998 and 1999 periods.
During the 1999 period, after-tax cash earnings of
$947,100 plus an increase in notes payable of $252,000,
decreases in accounts receivable of $335,900 and decreases
in inventories of $347,100 funded decreases in accounts
payable of $235,200 and accrued expenses of $162,400. This
resulted in total net cash provided by operations of
$1,116,500. The Company invested $202,500 in capital
expenditures, decreased other assets by $273,700 and reduced
bank indebtedness by $1,100,000 and other long-term
obligations by $312,300 during the period. The Company
received an income tax refund of approximately $90,000 in
the third fiscal quarter of 1999.
During the 1998 period, after-tax cash earnings of
$865,000, increases in bank borrowings of $1,225,000,
increases in accounts payable of $798,600, increases in
accrued expenses of $33,200, and decreases in accounts
receivable of $1,816,700, funded increases in inventory of
$357,900 and prepaid expenses of $549,100. This resulted in
total net cash provided by operations of $564,100. The
Company invested $2,073,800 in capital expenditures and
other assets during the period. The Company had an income
tax receivable of $522,000 for which the Company received a
refund in the second quarter of 1998.
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 is shifting its product offerings to higher
margin proprietary products and reducing the total number of
products which it offers. As this transition progresses,
the Company expects to improve its sales to inventory ratio.
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 making a large portion of the quarterly shipments
reflected in accounts receivable not due by the end of such
quarter because of 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 1999 and 1998, 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. The Company is reducing its dependence on
distributors to accelerate accounts receivable collections.
Although current levels of inventory and accounts
receivable impact the Company's liquidity, the Company
believes that these items are a cost of doing business given
the Company's fabless operation. The Company is in the
process of restructuring its sales channels to reduce the
levels of accounts receivable and inventory which it must
carry.
Financing
Until March 11, 1999, the Company had a $6,000,000
revolving line of credit with Sanwa Bank, which had a
maturity date of May 31, 1999. The line of credit bore
interest at the Bank's prime rate plus 1.00% and was
secured by all the assets of the Company. The line of
credit required 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, 1998 and September 30, 1998,
the Company was not in compliance with certain
covenants under the borrowings. The Company was not in
compliance with the then existing net worth (minimum of
$20,000,000), net after tax profit (minimum $1.00 per
quarter), or quick ratio (1.20 to 1.00 at September 30,
1998 and 1.35 to 1.00 at December 31, 1998) covenants
as of September 30, 1998 and December 31, 1998 or the
debt to net worth ratio (0.50 to 1.00) as of September
30, 1998. The Company has received waivers from the
Bank of these covenants as of such dates.
On March 11, 1999, the Company accepted a proposal
from the Bank to amend the terms of its revolving line
of credit facility. This agreement now expires on
August 1, 1999. Under the amendment, the maximum
borrowing amount was $4,500,000 and is reduced at
future dates prior to maturity. The maximum borrowing
amount was $4,500,000 from March 11, 1999 through March
30, 1999, reduced to $4,250,000 from March 31, 1999
through June 29, 1999, and will be reduced to
$3,000,000 from June 30, 1999 through August 1, 1999.
The line of credit now bears interest at the Bank's
prime rate (7.75% at March 31, 1999) plus 2.00%. The
line of credit requires the Company to maintain a
minimum tangible net worth of $14,000,000 and a minimum
quick ratio of not less than 0.55 to 1.00 through and
including March 31, 1999, and at June 30, 1999 and
thereafter a ratio of not less than 0.65 to 1.00. The
Company is required to have a minimum net profit after
tax of not less than $250,000 at the fiscal quarter
ending June 30, 1999. The Company is required to have
total inventory of not more than $10,000,000 on June
30, 1999. All other material terms of the facility
remained unchanged. As of March 31, 1999, the Company
was in compliance with revised financial covenants
under the borrowings, although it did borrow funds from
third parties (as discussed below), which was not in
compliance with a covenant which restricts the ability
of the Company to incur additional indebtedness.
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.
On February 24, 1999, the Company received loans in the
aggregate principal amount of $250,000 from William J. Volz,
President and a director of the Company, and The Holding
Company. The president of The Holding Company is Burton W.
Kanter, a director of the Company. Mr. Kanter does not have
any beneficial ownership interest in The Holding Company
although certain of his family members do have beneficial
ownership interests through various trusts. The loans are
unsecured and bear interest to maturity at the rate which is
the reference or equivalent rate of interest quoted,
published or announced by the Bank plus 2.00%. The loans
had an original maturity of March 31, 1999, but the holders
of the loans have extended the maturity date to May 31,
1999. The proceeds from these loans were applied to the
Company's working capital needs.
The reduced maximum borrowing amounts under the
Company's revolving line of credit with the Bank, as well as
the maturity of the facility on August 1, 1999 will require
the Company to repay principal amounts under the line of
credit, and the Company may not have sufficient funds from
operations to make those repayments. Furthermore, the loans
in aggregate principal amounts of $250,000 mature on May 31,
1999. Additional financing may be necessary to make some or
all of such repayments. Such financing has not been
identified as of the date of this report.
Year 2000 Compliance
The year 2000 creates the potential for date related
data to cause computer processing errors or system shut-
downs because computer-controlled systems have historically
used two digits rather than four to define years. For
example, computer programs that contain time data sensitive
software may recognize a date using two digits of "00" as
the year 1900 rather than the year 2000. The
miscalculations and systems failures that may be caused by
such date misrecognition could disrupt the operations of the
Company. Since the risk relates to computer-controlled
systems, the year 2000 issue affects computer software,
computer hardware, and any other equipment with imbedded
technology that involves date sensitive functions. The
Company has determined to assess the scope of its Year 2000
problems, to remediate the problem, and to plan for the
contingency of remediation failure separately for each of
its internal computer software programs, its computer
hardware, its machinery which includes imbedded computer
technology, its suppliers and its products.
The Company completed its assessment of all aspects of
its operations other than its customers and suppliers prior
to the beginning of the fiscal quarter ending December 31,
1998. As a result of its assessment, the Company has
determined that none of its products have date sensitive
functions and, accordingly, that no products will require
modification or replacement.
The Company is still in the process of determining the
extent to which its customers and suppliers may be impacted
by year 2000 computer processing problems. This assessment
has been slower than the Company's other assessment efforts
since it necessarily involves obtaining information from
third parties, and the Company's suppliers are foreign
operations which may have local customs or attitudes
regarding disclosure which differ from those in the United
States. Conversely, because the Company relies on third
parties to manufacture its chips and assemble its products,
the Company's production may be slowed or other of its
operations may be adversely impacted by the Year 2000
problems of its suppliers. The Company has received
assurances from its major suppliers, including the silicon
foundaries supplying the Company with silicon wafers, that
they are Year 2000 compliant. The Company does not believe
it has any technological interfaces with customers that will
be affected by the Year 2000 issue.
The Company completed remediation of its computer
hardware, internal computer software programs and equipment
with imbedded technology in March 1998. Through December
31, 1998, the Company has spent approximately $50,000
modifying or replacing its internal computer software
programs, its computer hardware, and machinery with embedded
computer technology, primarily to upgrade software and to
modify maintenance agreements. Since it believes
remediation of such systems has been completed, the Company
does not expect to expend any material amounts on such
remediation in the future. However, if the Company has
failed to properly assess any of the year 2000 problems or
failed to fully remedy any identified year 2000 problems of
its computer hardware, computer software programs, or
machinery with embedded technology, the Company may be
forced to spend more than anticipated on such remediation in
the future.
Until its assessment efforts are complete, the Company
will not be able to reasonably estimate the future costs of
eliminating problems caused by the Year 2000 problems of its
suppliers, whether by investing in new technology or
software to interface with these parties or finding
alternative sources of supply. Beginning June 1, 1999, the
Company expects to shift production away from suppliers that
have not demonstrated Year 2000 compliance to the Company's
satisfaction and to the Company's current suppliers that are
Year 2000 compliant. If such current suppliers are unable
to satisfy increased production burdens, the Company expects
to engage new suppliers that are Year 2000 compliant. There
can be no assurance that the Company will be able to shift
additional production to any of its current suppliers or to
new suppliers without additional costs or at all. Shifts to
new suppliers typically require capital outlays and
increased time requirements for production, either of which
may adversely affect the results of operations of the
Company.
Item 3. Quantitative and Qualitative Disclosures about
Market Risk.
Not Applicable.
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.
The Annual Shareholders' meeting was held on March 31, 1999 at 8:00
a.m. at the Company's headquarters located at 1320 Orleans Drive,
Sunnyvale, California. There was one item to be voted on at the
meeting, which was the election of the Board of Directors. There
were 6,341,807 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:
<TABLE>
Votes Votes
in Favor Against Abstention
<S> <C> <C> <C>
Howard L. Farkas 6,341,107 0 700
Burton W. Kanter 6,341,107 0 700
Albert Morrison, Jr. 6,341,107 0 700
William J. Volz 6,341,107 0 700
Bruce B. Lusignan 6,341,107 0 700
</TABLE>
Item 5. Other Information.
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K.
Exhibits: See the Index to Exhibits, which appears at page 18 of this report.
(a) (1) Exhibit 10.1 - Promissory Note to William J. Volz
(2) Exhibit 10.2 - Promissory Note to The Holding Company
(3) Exhibit 10.3 - Promissory Note Extension
(4) Exhibit 11 - Computation of Earnings Per Common Share
(5) Exhibit 27 - Financial Data Schedule
Reports on Form 8-k:
(b) No reports on Form 8-K have been filed during the quarter
for which this report is filed.
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: April 30, 1999 By /s/ William J. Volz
William J. Volz
President and Principal
Executive Officer
Date: April 30, 1999 By /s/ Mary C. deRegt
Mary C. deRegt
Chief Financial Officer
Principal Financial and
Accounting Officer
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
10.1 Note payable to William J. Volz
10.2 Note payable to The Holding Company
10.3 Extension to Notes payable
EXHIBIT 10.1
PROMISSORY NOTE
$100,000.00 U.S.D. February 24, 1999
Sunnyvale, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order
of William J. Volz ("Payee"), in lawful money of the United States of
America in the manner and at the times provided hereinafter, (i)
Principal (as hereinafter defined); (ii) Interest (as hereinafter
defined) and Default Interest (as hereinafter defined), if any; and
(iii) all other amounts due and payable pursuant to and in accordance
with the terms of this Note.
A. Definitions.
The following terms as used herein shall have the following meanings:
1. "Default Interest" shall mean interest computed at the Reference
Rate, as defined below, plus four percent (4%) per annum, on (i) the
entire principal balance of this Note from time to time unpaid from
and after such amount becomes due and payable (whether by maturity,
acceleration or otherwise), and (ii) any and all other unpaid amounts
due pursuant to the terms and provisions of this Note (including, but
not limited to, accrued but unpaid Interest) from and after the
respective date(s) on which those amounts become due and payable,
whether by maturity, acceleration, or otherwise; in each case from
and after any applicable grace period has expired. Default Interest
shall be adjusted concurrently with any change in the Reference Rate.
Default Interest shall be computed for the actual number of days
elapsed, predicated on a year consisting of three hundred and sixty
(360) days, and shall be payable on demand. Notwithstanding anything
to the contrary contained herein, for any period in which Default
Interest is accruing on the entire unpaid principal balance
hereunder, Interest shall not accrue.
2. "Interest" shall mean interest computed at a variable rate equal
to the Reference Rate plus two percent (2%) per annum on the entire
principal balance of this Note from time to time unpaid. Interest
shall be adjusted concurrently with any change in the Reference Rate.
Interest shall be computed on the actual number of days elapsed,
predicated on a year consisting of three hundred and sixty (360)
days.
3. "Maturity Date" shall mean March 31, 1999.
4. "Principal" shall mean One Hundred Thousand Dollars
($100,000.00) or so much thereof as may from time to time be
outstanding hereunder.
5. "Reference Rate" shall mean that rate which is quoted, published
or announced from time to time by Sanwa Bank California as its
reference or equivalent rate of interest.
B. Manner of Payment; Maturity.
1. Manner of Payment. Payment of principal, Interest, Default
Interest and any other amounts due hereunder shall be made in lawful
money of the United States of America.
2. Interest Accrual. Interest shall accrue commencing on the date
hereof on the Principal and shall be payable on the Maturity Date.
3. Other; Maturity. Default Interest shall be payable on demand.
All outstanding and unpaid Principal and Interest shall be due and
payable on the Maturity Date, unless otherwise specified herein or
unless accelerated in accordance with the terms or provisions hereof.
C. Prepayment.
This Note may be prepaid, in whole or in part, at any time by the
undersigned without premium or penalty. Any prepayment pursuant to
this Paragraph C shall be accompanied by payment of any Interest and
Default Interest, if any, accrued and unpaid through the date of
such prepayment.
D. Acceleration.
Notwithstanding anything to the contrary contained herein, upon the
occurrence of any one or more of: (i) a default in the payment of any
amounts due hereunder (without the need for written or other notice
of any sort of such default from Payee to the undersigned), occurring
on or prior to the Maturity Date, or (ii) any other default
hereunder, and the expiration of any grace period applicable to any
such default as set forth herein; then at the sole option and
discretion of Payee, and without further demand or notice of any
kind, the following shall become immediately due and payable:
1. the principal sum remaining unpaid hereunder;
2. unpaid Interest;
3. Default Interest; and
4. all other indebtedness evidenced by this Note.
E. Default.
The following shall constitute events of default hereunder: (i)
a default in the payment of any amounts due hereunder (without the
need for written or other notice of any sort of such default from
Payee to the undersigned), occurring on or prior to the Maturity
Date; (ii) the assignment for the benefit of creditors by the
undersigned; (iii) the application for the appointment of a receiver
for the undersigned or for property of the undersigned; (iv) the
filing of a petition in bankruptcy by or against the undersigned; (v)
the issuance of an attachment or the entry of a judgment against the
undersigned; (vi) a default by the undersigned with respect to any
other indebtedness due to Payee; (vii) the merger, consolidation,
termination of existence, dissolution or insolvency of the
undersigned; or (viii) the good faith determination by Payee that he
deems himself insecure or that a material adverse change in the
financial condition of the undersigned has occurred since the date
hereof and that Payee's prospect of payment hereunder has been
impaired.
F. Remedies.
If the undersigned fails to pay any amounts when due hereunder,
whether by maturity, acceleration or otherwise, or if there occurs
any event which entitles Payee to accelerate the indebtedness due
under this Note and any grace period applicable to any such failure
to pay or event as set forth herein expires, then Payee shall have
all of the rights and remedies provided to him at law or in equity.
The remedies of Payee, as provided herein, shall be cumulative and
concurrent, and may be pursued singularly, successively, or together,
at the sole discretion of Payee, and may be exercised as often as
occasion therefor shall arise. A waiver or release with reference to
any one event shall not be construed as continuing, as a bar to, or
as a waiver or release of, any subsequent right, remedy, or recourse
as to a subsequent event. Payee may resort for payment hereunder to
any of the security for, or any guaranty of, this Note whether or not
Payee shall have resorted for payment hereunder to any other security
for or guaranty of this Note. No act or omission of Payee, including
specifically any failure to exercise any right, remedy or recourse,
shall be deemed to be a waiver or release of the same, such waiver or
release to be effected only through a written document executed by
Payee and then only to the extent specifically recited therein. If
this Note is placed in the hands of an attorney for collection or is
collected on advice of counsel or through any legal proceeding, the
undersigned promises to pay, to the extent permitted by law, court
costs and reasonable attorneys' fees incurred by Payee. The
undersigned hereby waives presentment, demand, notice of dishonor or
nonpayment, protest and notice of protest in connection herewith.
G. Miscellaneous.
1. If any provision of this Note is unenforceable, invalid or
contrary to law, or its inclusion herein would affect the validity,
legality or enforcement of this Note, such provision shall be limited
to the extent necessary to render the same valid or shall be excised
from this Note, as the circumstances require, and this Note shall be
construed as if said provision had been incorporated herein as so
limited or as if said provision had not been included herein, as the
case may be.
2. Time is of the essence of this Note.
3. After the Maturity Date or following the occurrence of an event
which entitles Payee to accelerate the indebtedness evidenced hereby,
all payments received on account of the indebtedness evidenced hereby
shall be applied, in whatever order, combination and amounts as
Payee, in his sole and absolute discretion, decides, to all costs,
expenses, and other indebtedness, if any, owing to Payee by reason of
this Note; Default Interest; Interest; and principal.
4. This Note, and the terms and provisions hereof, shall be binding
upon the undersigned and its successors, administrators, and assigns,
and shall inure to the benefit of any holder hereof.
5. All amounts due hereunder shall be paid without deduction, set-
off or counterclaim, the undersigned expressly waiving any such
rights to deduction, set-off or counterclaim.
6. Notwithstanding any provision to the contrary contained in this
Note or in any of the other documents or instruments referred to in
this Note, if at any time or times the interest and any sums
considered for such purpose to be interest, payable under or by
reason of this Note or any such other documents or instruments,
should exceed the maximum which, by the laws of the State having
jurisdiction, may be charged with respect to the loan evidenced
hereby, given the nature and all of the pertinent circumstances of
such loan, then all such sums in excess of such maximum shall be
deemed not to be interest, but rather to be payments on account of
principal, and without further agreement of the parties shall be so
applied without regard to any other provision of this Note, provided
that Payee may elect instead that no sums shall be payable in excess
of such maximum, whereupon this Note and such other documents and
instruments shall be deemed amended accordingly without further
action by any party.
7. This Note shall inure to the benefit of Payee and his successors
and assigns. This Note has been negotiated and delivered at
Sunnyvale, California, and shall be governed by and construed in
accordance with the internal laws of the State of California without
reference to (i) its judicially or statutorily pronounced rules
regarding conflict of laws or choice of law; (ii) where any
instrument is executed or delivered; (iii) where any payment or other
performance required by any such instrument is made or required to be
made; (iv) where any breach of any provision of any such instrument
occurs, or any cause of action otherwise accrues; (v) where any
action or other proceeding is instituted or pending; (vi) the
nationality, citizenship, domicile, principal place of business, or
jurisdiction or organization or domestication of any party; (vii)
whether the laws of the forum jurisdiction otherwise would apply the
laws of a jurisdiction other than the State of California; or (viii)
any combination of the foregoing.
The undersigned will upon demand pay to Payee the amount of any
and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which Payee
may incur in connection with (i) the administration of this Note,
(ii) the exercise or enforcement of any of the rights of Payee
hereunder or (iii) the failure by the undersigned to perform or
observe any of the provisions hereof.
LOGIC DEVICES INCORPORATED
By: /s/ Mary C. deRegt
Signature
Mary C.deRegt
Print Name
EXHIBIT 10.2
PROMISSORY NOTE
$150,000.00 U.S.D. February 24, 1999
Sunnyvale, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order
of The Holding Company, a Delaware corporation ("Payee"), in lawful
money of the United States of America in the manner and at the times
provided hereinafter, (i) Principal (as hereinafter defined); (ii)
Interest (as hereinafter defined) and Default Interest (as
hereinafter defined), if any; and (iii) all other amounts due and
payable pursuant to and in accordance with the terms of this Note.
A. Definitions.
The following terms as used herein shall have the following meanings:
1. "Default Interest" shall mean interest computed at the Reference
Rate, as defined below, plus four percent (4%) per annum, on (i) the
entire principal balance of this Note from time to time unpaid from
and after such amount becomes due and payable (whether by maturity,
acceleration or otherwise), and (ii) any and all other unpaid amounts
due pursuant to the terms and provisions of this Note (including, but
not limited to, accrued but unpaid Interest) from and after the
respective date(s) on which those amounts become due and payable,
whether by maturity, acceleration, or otherwise; in each case from
and after any applicable grace period has expired. Default Interest
shall be adjusted concurrently with any change in the Reference Rate.
Default Interest shall be computed for the actual number of days
elapsed, predicated on a year consisting of three hundred and sixty
(360) days, and shall be payable on demand. Notwithstanding anything
to the contrary contained herein, for any period in which Default
Interest is accruing on the entire unpaid principal balance
hereunder, Interest shall not accrue.
2. "Interest" shall mean interest computed at a variable rate equal
to the Reference Rate plus two percent (2%) per annum on the entire
principal balance of this Note from time to time unpaid. Interest
shall be adjusted concurrently with any change in the Reference Rate.
Interest shall be computed on the actual number of days elapsed,
predicated on a year consisting of three hundred and sixty (360)
days.
3. "Maturity Date" shall mean March 31, 1999.
4. "Principal" shall mean One Hundred Thousand Fifty and no/100
Dollars ($150,000.00) or so much thereof as may from time to time be
outstanding hereunder.
5. "Reference Rate" shall mean that rate which is quoted, published
or announced from time to time by Sanwa Bank California as its
reference or equivalent rate of interest.
B. Manner of Payment; Maturity.
1. Manner of Payment. Payment of principal, Interest, Default
Interest and any other amounts due hereunder shall be made in lawful
money of the United States of America.
2. Interest Accrual. Interest shall accrue commencing on the date
hereof on the Principal and shall be payable on the Maturity Date.
3. Other; Maturity. Default Interest shall be payable on demand.
All outstanding and unpaid Principal and Interest shall be due and
payable on the Maturity Date, unless otherwise specified herein or
unless accelerated in accordance with the terms or provisions hereof.
C. Prepayment.
This Note may be prepaid, in whole or in part, at any time by the
undersigned without premium or penalty. Any prepayment pursuant to
this Paragraph C shall be accompanied by payment of any Interest and
Default Interest, if any, accrued and unpaid through the date of
such prepayment.
D. Acceleration.
Notwithstanding anything to the contrary contained herein, upon the
occurrence of any one or more of: (i) a default in the payment of any
amounts due hereunder (without the need for written or other notice
of any sort of such default from Payee to the undersigned), occurring
on or prior to the Maturity Date, or (ii) any other default
hereunder, and the expiration of any grace period applicable to any
such default as set forth herein; then at the sole option and
discretion of Payee, and without further demand or notice of any
kind, the following shall become immediately due and payable:
1. the principal sum remaining unpaid hereunder;
2. unpaid Interest;
3. Default Interest; and
4. all other indebtedness evidenced by this Note.
E. Default.
The following shall constitute events of default hereunder: (i)
a default in the payment of any amounts due hereunder (without the
need for written or other notice of any sort of such default from
Payee to the undersigned), occurring on or prior to the Maturity
Date; (ii) the assignment for the benefit of creditors by the
undersigned; (iii) the application for the appointment of a receiver
for the undersigned or for property of the undersigned; (iv) the
filing of a petition in bankruptcy by or against the undersigned; (v)
the issuance of an attachment or the entry of a judgment against the
undersigned; (vi) a default by the undersigned with respect to any
other indebtedness due to Payee; (vii) the merger, consolidation,
termination of existence, dissolution or insolvency of the
undersigned; or (viii) the good faith determination by Payee that it
deems itself insecure or that a material adverse change in the
financial condition of the undersigned has occurred since the date
hereof and that Payee's prospect of payment hereunder has been
impaired.
F. Remedies.
If the undersigned fails to pay any amounts when due hereunder,
whether by maturity, acceleration or otherwise, or if there occurs
any event which entitles Payee to accelerate the indebtedness due
under this Note and any grace period applicable to any such failure
to pay or event as set forth herein expires, then Payee shall have
all of the rights and remedies provided to him at law or in equity.
The remedies of Payee, as provided herein, shall be cumulative and
concurrent, and may be pursued singularly, successively, or together,
at the sole discretion of Payee, and may be exercised as often as
occasion therefor shall arise. A waiver or release with reference to
any one event shall not be construed as continuing, as a bar to, or
as a waiver or release of, any subsequent right, remedy, or recourse
as to a subsequent event. Payee may resort for payment hereunder to
any of the security for, or any guaranty of, this Note whether or not
Payee shall have resorted for payment hereunder to any other security
for or guaranty of this Note. No act or omission of Payee, including
specifically any failure to exercise any right, remedy or recourse,
shall be deemed to be a waiver or release of the same, such waiver or
release to be effected only through a written document executed by
Payee and then only to the extent specifically recited therein. If
this Note is placed in the hands of an attorney for collection or is
collected on advice of counsel or through any legal proceeding, the
undersigned promises to pay, to the extent permitted by law, court
costs and reasonable attorneys' fees incurred by Payee. The
undersigned hereby waives presentment, demand, notice of dishonor or
nonpayment, protest and notice of protest in connection herewith.
G. Miscellaneous.
1. If any provision of this Note is unenforceable, invalid or
contrary to law, or its inclusion herein would affect the validity,
legality or enforcement of this Note, such provision shall be limited
to the extent necessary to render the same valid or shall be excised
from this Note, as the circumstances require, and this Note shall be
construed as if said provision had been incorporated herein as so
limited or as if said provision had not been included herein, as the
case may be.
2. Time is of the essence of this Note.
3. After the Maturity Date or following the occurrence of an event
which entitles Payee to accelerate the indebtedness evidenced hereby,
all payments received on account of the indebtedness evidenced hereby
shall be applied, in whatever order, combination and amounts as
Payee, in its sole and absolute discretion, decides, to all costs,
expenses, and other indebtedness, if any, owing to Payee by reason of
this Note; Default Interest; Interest; and principal.
4. This Note, and the terms and provisions hereof, shall be binding
upon the undersigned and its successors, administrators, and assigns,
and shall inure to the benefit of any holder hereof.
5. All amounts due hereunder shall be paid without deduction, set-
off or counterclaim, the undersigned expressly waiving any such
rights to deduction, set-off or counterclaim.
6. Notwithstanding any provision to the contrary contained in this
Note or in any of the other documents or instruments referred to in
this Note, if at any time or times the interest and any sums
considered for such purpose to be interest, payable under or by
reason of this Note or any such other documents or instruments,
should exceed the maximum which, by the laws of the State having
jurisdiction, may be charged with respect to the loan evidenced
hereby, given the nature and all of the pertinent circumstances of
such loan, then all such sums in excess of such maximum shall be
deemed not to be interest, but rather to be payments on account of
principal, and without further agreement of the parties shall be so
applied without regard to any other provision of this Note, provided
that Payee may elect instead that no sums shall be payable in excess
of such maximum, whereupon this Note and such other documents and
instruments shall be deemed amended accordingly without further
action by any party.
7. This Note shall inure to the benefit of Payee and its successors
and assigns. This Note has been negotiated and delivered at
Sunnyvale, California, and shall be governed by and construed in
accordance with the internal laws of the State of California without
reference to (i) its judicially or statutorily pronounced rules
regarding conflict of laws or choice of law; (ii) where any
instrument is executed or delivered; (iii) where any payment or other
performance required by any such instrument is made or required to be
made; (iv) where any breach of any provision of any such instrument
occurs, or any cause of action otherwise accrues; (v) where any
action or other proceeding is instituted or pending; (vi) the
nationality, citizenship, domicile, principal place of business, or
jurisdiction or organization or domestication of any party; (vii)
whether the laws of the forum jurisdiction otherwise would apply the
laws of a jurisdiction other than the State of California; or (viii)
any combination of the foregoing.
The undersigned will upon demand pay to Payee the amount of any
and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which Payee
may incur in connection with (i) the administration of this Note,
(ii) the exercise or enforcement of any of the rights of Payee
hereunder or (iii) the failure by the undersigned to perform or
observe any of the provisions hereof.
LOGIC DEVICES INCORPORATED
By: /s/ Mary C. deRegt
Signature
Mary C.deRegt
Print Name
EXHIBIT 10.3
PROMISSORY NOTE EXTENSION
The undersigned, William J. Volz and The Holding Company, being
the holders of promissory notes (the "Notes") from Logic Devices
Incorporated dated February 24, 1999 in the principal amounts of
$100,000 and $150,000, respectively, hereby agree to the extension of
the Maturity Date, as defined in the Notes, to May 31, 1999.
April 1, 1999 /s/ William J. Volz
William J. Volz
The Holding Company
By: /s/ Burton W. Kanter
EXHIBIT 11
Logic Devices Incorporated
Computation of Earnings per Common Share
(unaudited)
Six months ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Weighted average shares of common 6,632,388 6,121,750
stock outstanding
Dilutive effect of common stock options - -
Dilutive effect of common stock warrants - -
Weighted average common and
common share equivalents 6,632,388 6,121,750
Net income (loss) $ 46,900 $ 12,000
Net income (loss) per common
share equivalent $ 0.01 $ 0.01
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1999
<CASH> 170,300
<SECURITIES> 0
<RECEIVABLES> 4,412,500
<ALLOWANCES> 195,000
<INVENTORY> 12,188,500
<CURRENT-ASSETS> 17,154,400
<PP&E> 14,658,800
<DEPRECIATION> 10,405,700
<TOTAL-ASSETS> 22,087,900
<CURRENT-LIABILITIES> 6,617,400
<BONDS> 0
0
0
<COMMON> 18,091,900
<OTHER-SE> (307,500)
<TOTAL-LIABILITY-AND-EQUITY> 22,087,900
<SALES> 6,327,000
<TOTAL-REVENUES> 6,327,000
<CGS> 3,492,800
<TOTAL-COSTS> 6,016,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 262,600
<INCOME-PRETAX> 47,700
<INCOME-TAX> 800
<INCOME-CONTINUING> 46,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,900
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
