U.S. Securities and Exchange Commission
Washington, D.C. 20549
CONFORMED
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission File Number 0-15545
Logitek, Incorporated
(Name of small business issuer in its charter)
New York No. 11-2203507
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Christopher St., Ronkonkoma, N.Y. 11779
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code 516-467-4200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment
to this Form 10-KSB
[ X ]
Issuer's revenues for its most recent fiscal year: $4,157,472
The aggregate market value of voting common stock held by non-affiliates,
computed based upon the average of the closing bid and asked prices on
September 3, 1997 was $2,617,990. As of September 3, 1997, there were
3,423,730 shares of common stock outstanding (of which 1,925,753 shares were
held by non-affiliates).
Documents Incorporated by Reference: 1996 Proxy Statement<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company ("Logitek, Inc.") reported a
net profit after tax of $324,566 for the year
ended June 30,1997 compared to a $259,975
profit for the year ended June 30, 1996.
Results of Operations
Comparison of Fiscal Years Ended June 30,
1997 and 1996
Sales for fiscal 1997 were $4,157,472
compared to $3,461,412 for the prior year,
or a 20% increase of $696,060. The increase
was due primarily to additional sales as a
result of new product lines. The company
has also begun to utilize fully automated test
and automatic assembly equipment and has
redesigned certain of its products to take
advantage of the more cost effective surface
mount manufacturing technologies.
Gross profit margins were 38.7 % and
40.9% for the twelve month periods ended
June 30, 1997 and 1996. This reflects the
company's committment to manufacturing its
products in a more efficient manner, as well
as close cost containment.
Operating expenses for fiscal 1997 were
approximately $1,188,000 compared to
$1,054,000 or a increase of $134,000. Of
this increase,research and development
expenses accounted for approximately
$27,000. This increase is a reflection of the
company's efforts to develope the digital
power monitor and a high density power
supply, both of which will be unique in the
marketplace and differentiate he company.
The remaining $ 107,000 consists of a
reclassification of the Vice President &
General Manager's salary as well as an
increase in general overhead.
Interest expense decreased approximately10%
due to decreased borrowing levels. During the
past twelve month period the Company has
reduced total debt by $123,284. By December
1994 all then existing equipment loans had
been satisfied. The Company will now be
required to service its two mortgages on the
building and a term loan with a balance of
$116,000 as of June 30, 1997 (see Notes 7
and 8). In June 1995 and October 1995 the
Company decided to borrow $ 65,000 and
$47,500 in order to pay off its remaining
equipment leases and to purchase additional
new equipment as part of its plan to
streamline its operations and to make more of
the manufacturing an automatic process
rather than labor intensive.
The legal expenses of $47,000 for the twelve
month period ended June 30, 1997 were for
normal ongoing legal matters, compared to
$24,000 for the year ended June 30,1996. The
company has made a settlement on a
trademark infringement suit. The settlement
is for $105,000 of which $55,000 was collected
in the year ended June 30,1996 and the
remaining $50,000 was collected during the
year ended June 30,1997.
The Company's effective tax rate of 18.8%
differs from the statutory tax rate of 34% due
principally to the impact of a deferred tax ,
utilization of federal tax credits and a state
income tax provision.
Liquidity and Capital Resources
Total borrowings were $605,680 and $728,964,
at June 30, 1997 and 1996 , respectively, which
represent decreases of $123,284, or 17%, and
$29,555, or 4%, for the latest two twelve
month periods. As of June 30, 1997 the
Company has decreased total debt, accounts
payable and accrued expenses by
approximately $211,000 . As of June 30,1996
the Company had increased total
debt,accounts payable and accrued expenses
by $195,398. During this two year period the
Company has built its cash reserves to
approximately $394,000 as of June 30, 1997.
During the year ended June 30,1997, the
Company increased its cash by about $45,000
through its operating activities primarily from
its net income and depreciation.The Company
used its cash to purchase equipment of
$39,000 and paid down debt by about
$123,000.
The Company is not aware of any
committments or contingencies that are likely
to have a material impact on the financial
statements.
Term Loan
In January 1996 the lender agreed to extend
the loan to March 1999. Therefore the loan
of $116,000 was classified partially as current
and partially as long term as of the date of the
June 30,1997 report.
Due to the Company's current cash resources
of $394,000 and it's continued profitability the
Company does not anticipate a need for
additional outside financing. <PAGE>
Directors Fees
The Board of Directors meets annually each
year as well as on an interim basis as the need
arises. All Directors, with the exception of
Herbert Fischer are paid $ 150 per meeting
for their services.
<PAGE>
<PAGE>
BALANCE SHEETS
June 30,
ASSETS 1997 1996
Current Assets:
Cash and cash equivalents $393,797 $348,979
Accounts receivable 422,549 328,801
Inventories 1,046,082 1,018,074
Prepaid expenses and other current assets 34,292 33,941
Due from officer 30,500 30,500
Total Current Assets 1,927,220 1,760,295
Property, Plant, and Equipment, net 668,861 720,929
Deferred income taxes,state 0 7,000
Goodwill 34,441 34,441
Other Assets 36,323 33,111
TOTAL ASSETS $2,666,845 $2,555,776
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $145,182 $140,491
Capitalized lease obligation, current 11,783 7,150
Accounts payable 385,882 463,889
Accrued expenses and taxes 154,507 166,561
Total Current Liabilities 697,354 778,091
Capitalized lease obligation, less current portion
50,119 39,402
Long-term debt, net of current portion 398,596 541,921
Deferred income taxes payable 15,380 13,380
TOTAL LIABILITIES 1,161,449 1,372,794
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; authorized
10,000,000 shares; issued 3,600,000 shares, of which
187,941 and 176,000 shares are held in treasury, respectively
36,000 36,000
Capital in excess of par value 280,355 280,355
Retained earnings 1,196,693 872,127
1,513,048 1,188,482
Less: Treasury stock, at cost 7,652 5,500
Total Stockholders' Equity 1,505,396 1,182,982
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,666,845 $2,555,776
The accompanying notes are an integral part of the financial statements. <PAGE>
Weighted average shares
outstanding 3,423,730 3,424,000
<PAGE>
LOGITEK, INC.
Notes to Financial Statements
NOTE 1 - Description of Business and Summary of Significant Accounting
Policies:Description of business:
Logitek, Inc. ("the Company") is engaged in the design, development and
production of electronic power monitoring equipment and electronic power
supplies. The Company sells its products and provides services to domestic
customers, and to a lesser extent to international customers, and to the
United States government.
Revenue recognition:
The Company recognizes sales when merchandise is shipped. For contracts
subject to Department of Defense regulations, the Company recognizes revenue
when the earnings process is deemed completed.
Inventories:
Inventories are carried at the lower of cost (based on a moving average) or
market.
Property,plant and equipment and depreciation:
Property, plant and equipment is recorded at cost. Expenditures for major
renewals and betterments to property and equipment are capitalized, and
expenditures for maintenance and repairs are charged to operations as
incurred. When assets are retired or otherwise disposed of, their cost and
related accumulated depreciation are eliminated from the accounts. Any
resulting gain or loss is reflected in income. Depreciation is provided
using the straight-line method over the estimated useful lives of the
related assets, which are as follows:
Buildings and improvements 15 to 31.5 years
Machinery and equipment 5 to 7 years
Furniture and fixtures 5 to 7 years
Automobiles 5 years
Goodwill:
Goodwill arose from a 1969 acquisition, is being reviewed by management as
to its continuing value. The Company believes its value has diminished in
recent years and is contemplating writing this off to earnings in the near
term.
Income taxes:
Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities.
Tax credits are accounted for on the flow-through method.
Research and development costs:
Research and development costs are expensed as incurred.
Cash and cash equivalents:
The Company considers all highly liquid debt instruments purchased with a
maturity date of three months or less to be cash equivalents. At June 30,
1997 and June 30, 1996 the Company has cash deposits in banks in excess of
the maximum amount insured by the Federal Deposit Insurance Corp.
Earnings per share:
Earnings per share for both years have been presented based on the weighted
average number of shares outstanding. The treasury stock method was used to
compute the fully diluted earnings per common share. This method assumes
that the proceeds to be obtained when an option is exercised will be used to
purchase common stock at the average market price during the period.
Reclassifications:
Certain accounts in the prior year financial statements have been
reclassified for comparative purposes to conform with the presentation in
the current year financial statements. These reclassifications have no
effect on previously reported income.
Use of Estimates in the Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liablilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Advertising Costs
Advertising costs are expensed as incurred.
LOGITEK,INC.
Notes to Financial Statements
Note 1- Description of Business and Summary of Significant Accounting
Policies Fair Value of Financial Instruments
The Company's financial instruments include cash, accounts receivable and
accounts payable.Due to the short-term nature of these instruments, the fair
value of these instruments approximate their recorded value. The Company has
long term debt which it believes is stated at estimated
fair market value.
Impairment of Long Lived Assets
In 1996, the Company adopted Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long Lived Assets and for Long Lived
Assets to Be Disposed Of"(SFAS No. 121).The statement requires the
recognition of an impairment loss for an asset held for use when the
estimate of undiscounted future cash flows expected to be generated by
the asset is less than its carrying amount. Measurement of the impairment
loss is based on fair value of the asset. Generally, fair value will be
determined using valuation techniques such as the present value of expected
future cash flows. It was the Company's past policy to measure an impairment
loss for assets held for use based on expected undiscounted future cash flows.
Adoption of this statement will result in recognition of a larger loss,
based on discounted future cash flows, in the year of impairment and lower
depreciation charges over the remaining life of the asset. Since adoption,
no impairment losses have been recognized. The recognition and
measurement of impairment losses for long-lived assets to be disposed of
under SFAS No. 121 is consistent with the Company's past practice.
Stock- Based Compensation
In October 1995, Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 123 " Accounting for Stock Based
Compensation"("SFAS No. 123"). SFAS No. 123 requires compensation expense to
be recorded (i) using the new fair value method or (ii) using existing
accounting rules prescribed by Accounting Principles Board Opinion No.25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations with pro forma disclosure of what net income and earnings
per share would have been had the Company adopted the new fair value method.
The Company intends to continue to account for its stock based compensation
plans in accordance with the provision of APB 25. Had the Company elected
to recognize compensation costs based on the fair value of the options at
the date of grant as prescribed by SFAS No. 123, there would be no material
effect from that recognized under APB 25 for the years ended June 30,1997
and 1996.
LOGITEK ,INC.
Notes to Financial Statements
Note 3 - Property, Plant and Equipment
Property, plant and equipment consists of the following:
June 30,
1997 1996
Land $78,000 $78,000
Buildings and improvements 802,850 802,850
Machinery and equipment 1,150,902 1,111,529
Furniture and fixtures 142,876 142,876
Automobiles 68,988 68,988
Total 2,243,616 2,204,243
Less:Accumulated Depreciation (1,574,755 ) (1,483,314)
Property Plant and Equipment,Net $ 668,861 $ 720,929
(a)Depreciation expense charged to operations was $ 91,441 and $ 110,037 for
the years ended June 30, 1997 and June 30,1996,respectively.
(b)The cost of equipment under a capital lease and accumulated depreciation
on these assets was $ 72,646 and $ 11,994, respectively, at June 30,1997,
and $47,646 and $3,403 respectively at June 30,1996
NOTE 6 - Leases
Capitalized lease obligation-During the year ended June 30,1997 and June 30,
1996 the Company obtained equipment under capital leases expiring in June
2002 and June 2001. The assets and liabilities under capital leases
are recorded at the lower of the present values of the minimum lease
payments or the fair values of the assets. The assets are included in
property and equipment and are depreciated over their estimated useful
lives.As of June 30,1997 , minimum future lease payments under all capital
leases are:
Year ending Amount
June 30,
1998 $ 11,783
1999 13,673
2000 15,863
2001 16,145
2002 4,438
Total capitalized lease payments 61,902
Less: current portion 11,783
Total capitalized lease payments net of $ 50,119
current portion
Operating leases
The Company leases certain equipment to support its manufacturing and test
capabilities and certain office equipment. Such leases expire through June
2000. Rent expense for the years ended June 30, 1997 and 1996 was $5,252
and $2,580 respectively. Future minimum rental payments under noncancelable
operating leases as of June 30,1997 are as follows:
Year Ending
June 30, Amount
1998 $5,252
1999 5,252
2000 2,672
Total $13,176
NOTE 7 - Long-Term Debt
Long-term debt consists of the following:
June 30,
1997 1996
Mortgage payable to NY Job Development
Authority (JDA) in monthly installments
of $2,656 including interest (8.25% at
June 30, 1997 and 1996) through June 2004,
collateralized by restricted cash, building and
improvements with a net book value of
approximately $406,822 (a) $154,340 $ 170,309
Mortgage payable to Long Island
Development Corp. (LIDC) in monthly
installments of $4,427, including
interest at 14.296% through June 2004,
subordinate to the JDA mortgage,
collateralized by restricted cash, land,
building and improvements with a net
book value of $406,822 (b) 229,340 247,755
Notes payable to bank in monthly installments in the
the aggregate amount of $3,125 plus interest at 1.5%
above prime through October 1998, collateralized
by a secondary lien on all assets
of the Company (d) 44,098 81,598
Term loan payable to bank (c) 116,000 182,750
Total debt 543,778 682,412
Less: Current Portion (145,182) (140,491)
Total Long term debt $398,596 $541,921
(a) Interest rate varies in response to market conditions. This mortgage is
guaranteed by the U.S.Small Business Administration. The loan contains
restrictive convenants including default if the Company defaults on any
superior debt.
(b) This mortgage is personally guaranteed by the Company's president and
principal stockholder. The mortgage contains restrictive covenants which
include, among others, limiting property, plant and equipment additions in
each year, obtaining written consent of the lender prior to incurring
additional financing obligations and prior to transferring ownership of
common stock belonging to the Company's president and principal stockholder.
The mortgage is subordinated to the JDA mortgage.
(c) The term loan payable to bank requires monthly principal payments of
$5,750 plus interest at 2% above the bank's prime rate ( 8.25% at June 30,
1997) through March 1999. The note is collateralized by accounts
receivable, inventory and certain machinery and equipment.
(d) Interest rate varies in response to market conditions.
Aggregate long-term debt maturities for the five fiscal years subsequent to
June 30, 1997 are:
Year Ending June 30, Amount
1998 $145,182
1999 97,123
2000 48,991
2001 55,163
2002 62,134
Thereafter 135,185
Total $543,778
Note 13 - Treasury Stock
Treasury stock at June 30,1997 and June 30,1996 consists of 187,941 and
176,000 shares at various prices per share.
