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>
LOGITEK, INC.
FORM 10-KSB - Year Ended June 30, 1997
TABLE OF CONTENTS
PART I Page
Item 1.Business 3
Item 2.Properties 6
Item 3.Legal Proceedings 6
Item 4.Submission of Matters to a Vote of Security
Holders 6
PART II
Item 5.Market for Registrant's Common Equity
and Related Stockholder Matters 7
Item 6.Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
Item 7.Financial Statements and
Supplementary Data 10
Item 8.Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure 10
PART III
Item 9.Directors and Executive Officers of
the Registrant 11
Item 10.Executive Compensation 11
Item 11.Security Ownership of Certain
Beneficial Owners and Management 11
Item 12.Certain Relationships and Related
Transactions 11
Item 13.Exhibits and Reports on Form 8-K 11
Signature Page 12
Report of Independent Certified Public
Accountants 13
Financial Statements 14
Notes to Financial Statements 17
<PAGE>
PART I
ITEM 1. BUSINESS
General
Logitek, Inc. (the "Company"), a New York
corporation, organized in 1969, is engaged
in the design, development and production
of electronic monitors and controls which
include electronic time delays, flashers, and
voltage, frequency, phase and power
monitors and switch mode power supplies.
Power monitors are generally used to
continuously and automatically monitor the
characteristics of electrical power systems
for conformance to design limits in order to
insure proper and safe operation of
equipment which utilize the monitored
power. These devices provide for timed
control of system shutdown and transfer in
addition to visual fault annunciation.
Although the Company manufactures
products "built to specifications" most of its
sales are for its standard products.
The Company developed and manufactures
a line of time delay relays designed to cause
a system to perform or not to perform a
specific function for, during or after a
precise interval of time. The time delay
relay is used in those instances, among
others, where a system must be turned on
for a specific period of time after application
of power and then shut down; where it is
necessary to operate a system for an interval
of time after the complete loss of power; or
to regulate the precise time interval between
various functions. Among its practical
applications, time delay relays are used in
navigation systems of missiles and in radar
equipment as well as to sequence aircraft
functions. When the navigation system in a
missile or projectile determines that the
missile or projectile is off course, a signal
may be applied to a time delay relay. If the
missile returns to course prior to the
expiration of the preset time delay, the
signal is removed and the timer does not
operate. If the missile remains off course
for a period of time greater than the preset
interval of the time delay relay, the time
delay relay will actuate causing the missile
to self destruct. Some elements of certain
types of radar equipment can be damaged if
high voltage is applied prior to sufficient
warm-up time. These elements can be
protected by the use of time delay relays
which provide an automatic time delay
between the application of warm-up voltage
and high voltage. These devices may also
be used to sequence the time interval
between the ejection of external fuel pods
on fighter aircraft. The relays vary in price
from approximately $100 to $700 depending
on the type of function and complexity
required; however, most time delay relays
sell for $150 to $300.
The Company has also developed and
produces solid state flashers designed to
cause an alternating electrical impulse. The
flasher may be used to cause aircraft
position lights to flash on and off as well as
to sense and indicate a malfunction in certain
systems by causing a warning light to
flash/or activate an alarm device. The
flasher varies in price from $100 to $500
depending on the type of function and
complexity required with most types of
flashers selling in the $125 to $225 range.
The Company has also designed and markets
equipment to monitor the characteristics of
the phase, voltage and frequency elements of
electric power. These devices are connected
to electric power lines to monitor each of the
aforesaid input elements for deviation from
acceptable limits and can find application in
most electrical systems, machinery and
equipment where power source performance
is questionable and/or where equipment
damage may result from inadequate or
improper power. The acceptable limits of
deviation of each element are pre-determined
and built into the monitor. The Company
has also developed and manufactures power
monitors used to sense all three of the
aforesaid power elements. In the event that
any element is not within pre-determined
specifications, the monitor shuts down the
system, transfers to another system and/or
operates an alarm. The Company also
manufactures each of the aforesaid types of
monitors with time delay features. These
types of monitors allow a deviation beyond
specified limits for a specified pre-set period
before initiating appropriate action. The
internal time delay thereby prevents
unnecessary system response. In the event
the system is activated, the element must
return to normal limits for a minimum pre-
set period before the power will resume
normal flow. This equipment is presently in
use in auxiliary generating systems in planes
and ships to prevent damage to the
equipment operated by such systems. Phase,
voltage and frequency sensors vary in price
from $300 to $900 and the power monitors
from $900 to $7,000 depending on the type
of function and complexity required.
The Company has designed and markets
switch mode power supplies for military,
industrial and commercial applications.
These power supplies are used to convert
AC voltage to DC voltage or to convert DC
voltage to a different level of DC voltage for
use by various types of electronic
equipment. Power supplies vary in price
from $400 to $3,000 depending on the
function, complexity and power levels
involved. The Company markets 13 basic
models within this product line and
approximately 424 different sub-models. In
addition, the Company will modify these
power supplies to customer specification for
an additional cost.
The components of the Company's products
include integrated circuits,transistors,diodes,
relays, resistors, capacitors and metal
casings which are purchased from a variety
of readily available sources on an as needed
basis. The Company has not experienced
delays in obtaining any required materials.
The widest application of the Company's
products is in systems such as aircraft and
space vehicles, aboard ships, vehicular
mobile communications,radar systems,and
data processing and telecommunication
systems. The Company's products are sold
to major system manufacturers and to the
United States Government. Customers
include General Dynamics Falstrom,
Boeing, Lockheed, McDonnel Douglas, E-
Systems, Westinghouse and Hughes Aircraft.
In terms of competition in the product line
of power moniotors, to the best of the
Company's knowledge there are companies
similar to Logitek and the Company is aware
of four or five of these companies. In the
product line of power supplies there are
many competitors in the broad scope, but in
Logitek's niche market the field is
significantly narrowed. Logitek has a
trademark on its name but does not have any
patents.
The Company's backlog as of June 30, 1997
was approximately $ 2,500,000 as compared
to $2,000,000 as of June 30 1996.
Sales made directly to government agencies
are effected primarily through competitive
bidding and to a lesser extent are a result of
negotiated contracts. Other sales arise
principally through personal solicitations by
the Company's personnel and also through
independent sales representatives who are
compensated solely on a commission basis.
During the year ended June 30,1997 sales
to major customers were as follows: Boeing
Aircraft 14%, U.S. Government and its
agencies 21% and Loral and its affiliates
22%. During the year ended June 30,1996
sales to major customers were as follows:
Boeing Aircraft 12%, U.S. Government
and its agencies 11% Falstrom 14% and
Loral and its affiliates 9%.
While it is possible one or more of the
Company's major customers might someday
choose another vendor, the Company feels
this is highly unlikely. However, should all
the major customers leave the impact on the
financial statements would be a decrease in
sales of 57%.
All government contracts or subcontracts are<PAGE>
subject to cancellation by the government or
it's subcontractor at or for the convenience
of the government. In the event of contract
termination, the Company would ordinarily
be entitled to recover payment for its costs
and a reasonable pro rata share of profit
based on work completed prior to
termination.
Current research is focused on the
continuous development of switch mode
power supplies, a high density power supply
and a digital power monitor. During the
two fiscal years ended June 30, 1997 and
1996, the Company expensed approximately
$221,000 and $194,000, respectively, on
research and development.
As of June 30, 1997 the Company had
approximately 50 employees,of which one
was a part time employee.
The following table sets forth the
approximate percentage each of the
Company's product lines contributed to total
sales for the periods indicated:<PAGE>
BREAKDOWN OF GROSS SALES
For the years ended June 30,
1997 1996
% %
Time delay relays 14.1 10.0
Flashers 4.8 4.0
Power supplies 24.8 23.7
Voltage, frequency and
phase sensor relays
and power monitors 55.0 60.7
Contract manufacturing & Other 1.3 1.6
Company Totals 100.0 100.0
<PAGE>
ITEM 2. PROPERTIES
The Company's executive offices and
production facilities are located in a one
story free standing building comprising
approximately 20,000 square feet, such
building is owned by the Company. The
building is located on approximately one and
one-half acres of land in Ronkonkoma, New
York. The property is subject to a mortgage
held by the New York Job Development
Authority ("JDA"), payable in monthly
installments as of June 30, 1997 of
approximately $2,656, including interest at
8.25% through June 2004 and a subordinate
mortgage to Long Island Development
Corp., payable in monthly installments of
$4,427 including interest at 14.296%
through June 2004. As of June 30, 1997 the
JDA mortgage had a balance of $154,340
and the subordinate mortgage had a balance
of $229,340.
Located at the Company's facilities are
testing apparatus, machinery and equipment
including oscilloscopes, differential
voltmeters,spray painting equipment,
production electrical test fixtures,auto test
and manufacturing equipment, environmental
and vibration test equipment and other
items. Certain of this equipment is pledged
as collateral for two notes payable in
monthly principal installments of $1,806 and
$ 1,319 through June 1998 and December
1998, plus interest at prime plus 1 1/2%
with an outstanding balance as of June 30,
1997 of $44,098. In addition, the Company
has given a security interest to a lender
covering all fixed assets, accounts receivable
and inventory on $116,000 of debt with
monthly payments of $5,750, plus interest at
10.50% as of June 30, 1997.
ITEM 3. LEGAL PROCEEDINGS
None. (See Note 12)
ITEM 4. SUBMISSION OF MATTERS
TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of
security holders through the solicitation of
proxies or otherwise during the fourth
quarter of fiscal 1997.<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock, $.01 par
value (the "Common Stock"), was traded on
the National Association of Securities
Dealers Automated Quotation System
("NASDAQ") under the symbol "LGTK"
until May, 1992. The Common Stock was
delisted when NASDAQ increased its
minimum capital, surplus and stock price
requirements and the Company was unable
to meet such requirements. The Common
Stock currently trades in the over-the-
counter market. The table which appears
below sets forth the quarterly range of high
ask and low bid prices for the Common
Stock for the periods indicated, as reported
by The National Quotation Bureau, Inc.
The figures shown represent "inter-dealer"
prices without adjustment for markups,
markdowns or commissions and may not
necessarily represent actual transactions.<PAGE>
On September 3, 1997 the closing bid and
asked prices for the Common Stock
were $.69 and $.84 per share, respectively.
As of September 16, 1997 there were
3,412,059 shares of Common Stock
outstanding and approximately 150 record
holders of Common Stock, which includes
stock being held by brokers in street name.
The Company has never paid cash dividends
on its Common Stock and does not intend to
do so for the foreseeable future. It is
anticipated that earnings, if any, will be
retained to finance the Company's growth.
Future payments of cash dividends, if any,
will be determined by the Board of Directors
based upon circumstances then existing,
including contractual restrictions, financial
condition, capital requirements and business
outlook of the Company.<PAGE>
<PAGE>
Quarter Ended Ask Price - High Bid Price - Low
September 30, 1995 1/2 1/4
December 31, 1995 3/4 3/8
March 31, 1996 5/8 3/8
June 30, 1996 1 1/4 1/2
September 30, 1996 7/8 1/2
December 31, 1996 7/8 1/2
March 31, 1997 25/32 9/16
June 30 , 1997 15 /16 9/16
<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.
Valuation Allowance
The Company has recorded a valuation
allowance against its deferred tax asset due
to the fact that the deferred tax asset consists
of state credits and it is management's
judgement that a portion of these credits may
expire prior to the Company's utilization of
the credits.<PAGE>
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements, notes thereto, and supplementary
schedules are included in this Report on Form 10-KSB as follows:
Index
Item Page Number
Report of Independent Certified Public Accountants 13
Balance Sheets as of June 30, 1997 and 1996 14
Statements of Income and Retained Earnings
for the Years Ended June 30, 1997 and 1996 15
Statements of Cash Flows for the Years
Ended June 30, 1997 and 1996 16
Notes to Financial Statements 17
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to the Company's 1997 Proxy statement.
ITEM 10. EXECUTIVE COMPENSATION
Incorporated by reference to the Company's 1997 Proxy statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Incorporated by reference to the Company's 1997 Proxy statement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the Company's 1997 Proxy statement.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on form 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
LOGITEK, INC.
By: /s/Herbert L. Fischer
Herbert L. Fischer
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signedbelow by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Herbert L. Fischer
Herbert L. Fischer
President and
Principal Executive Officer
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of Logitek,Inc.
We have audited the accompanying balance sheets of Logitek, Inc. as of June
30,1997 and 1996,and the related statements of income and retained earnings
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects,the financial position of Logitek, Inc. as of June
30,1997 and 1996, and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
Marcum & Kliegman LLP
Woodbury, New York
September 3,1997
LOGITEK, INC.
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 AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; authorized
10,000,000 shares; issued 3,600,000 shares,
of which 187,941 shares are held in treasury 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>
LOGITEK, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
For the Years Ended June 30,
1997 1996
Net sales $4,157,472 $3,461,412
Cost of goods sold 2,549,797 2,046,622
Gross profit 1,607,675 1,414,790
Operating expenses:
Selling 291,034 256,411
General and administrative 675,343 603,162
Research and development 221,180 194,488
Total operating expenses 1,187,557 1,054,061
Income from operations 420,118 360,729
Other income (expense):
Interest expense (81,300) (90,496)
Interest income 10,748 10,742
Other income 50,000 55,000
______ ______
Total other expense (20,552) (24,754)
Income before income taxes 399,566 335,975
Income tax expense 75,000 76,000
Net income 324,566 259,975
Retained earnings, beginning of year 872,127 612,152
Retained earnings, end of year $1,196,693 $872,127
Per Share Amounts:
Net income $.10 $.08
Fully diluted earnings per common share $.09 -
Weighted average shares
outstanding 3,423,730 3,424,000
The accompanying notes are an integral part of the financial statements
.<PAGE>
LOGITEK, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended June 30,
1997 1996
Cash Flows from Operating Activities:
Net income $324,566 $259,975
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 91,441 110,037
(Increase) decrease in operating assets:
Accounts receivable (93,748) 12,976
Inventories (28,008) (207,038)
Prepaid expenses and other current assets (351) 4,823
Other assets (3,212) (3,355)
Increase (decrease) in operating liabilities:
Accounts payable (78,007) 150,937
Accrued expenses (12,054) 74,016
Deferred Taxes 9,000 0
Total adjustments (114,939) 142,396
Net cash provided by operating activities 209,627 402,371
Cash Flows From Investing Activities
Advances to Officer 0 (27,000)
Purchases of property,plant and equipment (39,373) (88,942)
Net cash used in investing activities (39,373) (115,942)
Cash Flows from Financing Activities:
Repayment of long-term debt (148,284) (124,701)
Proceeds from long-term debt 25,000 47,500
Purchase of Treasury Stock (2,152) 0
Net cash used in financing activities (125,436) (77,201)
Net increase in cash and equivalents 44,818 209,228
Cash and cash equivalents, beginning of year 348,979 139,751
Cash and cash equivalents, end of year $393,797 $348,979
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid during the years for:
Interest $72,400 82,801
Income taxes $75,000 $13,270
Noncash Investing and Financing Activities
During the year ended June 30,1997, a note payable of $23,695 was incurred
when the Company purchased equipment.
The accompanying notes are an integral part of the financial statements
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
LOGITEK,INC.
Notes to Financial Statements
Note 1- Description of Business and Summary of Significant Accounting
Policies Income Taxes, Continued:
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 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 proforma 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.
NOTE 2 - Inventories
Inventories consist of the following:
June 30,
1997 1996
Raw materials $505,280 $479,414
Work-in-process 326,954 282,155
Finished goods 213,848 256,505
Total $1,046,082 $1,018,074
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.
NOTE 4 - Related Party Transactions
The Company has an uncollateralized loan receivable from its president and
principal stockholder.The loan balance of $30,500 accrues interest at 6%
and is payable on demand.
NOTE 5-Other Assets
Included in Other Assets is $36,024 and $32,811 of restricted cash as of
June 30, 1997 and 1996, respectively, which is held as collateral for the
mortgage payable to Long Island Development Corp. (See Note 7).
NOTE 6 - Leases
Capitalized lease obligation
During the year ended June 30,1997 the Company obtained equipment under a
capital lease expiring in June 2002. During the year ended June 30,1996, the
Company obtained equipment under a capital lease expiring in 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:
LOGITEK, INC.
Notes to Financial Statements
Note 6- Leases - Continued
Year ending Amount
June 30,
1998 $ 11,783
1999 13,673
2000 15,863
2001 16,145
2002 4,438
Total minimum lease payments 61,902
Less: current portion 11,783
Total long term minimum lease payments $ 50,119
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
mprovements with a net book value of
approximately $406,822 (a) $ 154,340 $ 170,309
LOGITEK ,INC.
Notes to Financial Statements
Note 7- Long Term Debt- Continued
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
of $ 3,125 plus interest at 1.5% above prime
through November 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 theCompany 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
LOGITEK, INC.
Notes to Financial Statements
Note 8 - Retirement Plans
The Company has a defined contribution plan for all eligible employees
under Internal Revenue Code Section 401(k). The plan states that the
Company will provide a matching contribution of up to 25% of the first 3% of
a participant's compensation as well as a discretionary payment.
The Company has recorded expense associated with the plan of $30,000 and
$32,735 for the years ended June 30, 1997 and 1996, respectively.The Company
has an Employee Stock Ownership Plan(ESOP) for the benefit of certain
employees. As of June 30,1997 all shares in the ESOP have been earned and
assigned to the respective employee accounts.
Note 9 - Income Taxes
The provision for (benefit from) income taxes is as follows:
Year ended June 30,
1997 1996
Deferred : Federal $ 9,000 $ 0
: State 0 0
Current : Federal 65,000 70,000
:State 1,000 6,000
$ 75,000 $ 76,000
Deferred income taxes result from temporary differences in the recognition
of expenses for income tax and financial reporting purposes. Such
differences result principally from the use for income tax purposes of
accelerated depreciation.The net deferred tax liability in the accompanying
balance sheets includes the following amounts of deferred tax assets and
liabilities:
1997 1996
Deferred tax liability $ 15,380 $ 13,380
Deferred tax asset 0 (34,000)
Valuation allowance for
deferred tax asset 0 27,000
Net deferred tax liability $ 15,380 $ 6,380
Income taxes were different from the amount computed by applying the federal
statutory tax rate to income before income taxes due to the following:
1997 1996
Statutory rate 34.0 34.0
State income taxes 3.0 1.8
Income tax credits (20.5) (13.2)
Net change in items giving rise to deferred
taxes 2.3 0.0
Effective rate 18.8 22.6
LOGITEK,INC.
Notes to Financial Statements
Note 9-Income Taxes Continued
The components of the deferred tax liability are as follows:
Accumulated depreciation $ 15,380
Net Deferred Tax Liability $ 15,380
Note 10 - Stock Options
The following options were granted during the years ended June 30, 1997 and
June 30,1996.All options as of June 30, 1997 were exercisable for a total
exercise price of $127,380.
SHARES EXERCISE PRICE
Balance July 1,1995 386,000 Various
Granted June 30,1996 10,000 $.25
Balance June 30,1996 396,000
Granted June 30,1997 10,000 $.50
Balance June 30,1997 406,000
The exercise price of the options were set at fair market value on the date
of grant. In the application of APB 25 it was determined that the
compensation expense was immaterial to our financial statements taken as a
whole. As of the balance sheet date no options have been exercised.
Note 11 - Major Customers
During the year ended June 30,1997 the Company sold a substantial portion of
its merchandise to three customers. Net sales to these customers were
approximately $ 575,000(14%),$868,000 (21%) and $933,000(22%). At June 30,
1997 amounts due from these customers and included in accounts receivable
were $37,809,$59,545 and $110,769,respectively. During the year ended
June 30,1996, the Company sold a substantial portion of its merchandise to
three customers. Net sales to these customers accounted for $469,000 (14%)
$417,000 (12%) and $ 379,000 (11%) At June 30,1996 amounts due from these
customers were $0 ,$16,638 and $68,115,respectively.
LOGITEK , INC.
Notes to Financial Statements
Note 12 - Settlement Income and Legal Expenses
The Company incurred legal expenses in 1995 and 1996 as a result of a claim
filed by the Company in which it opposed an application by another company
for the use of Logitek's trade-name. This claim was settled in the year
ended June 30,1996 for $105,000 with $55,000 received during the year ended
June 30,1996 and $50,000 received during the year ended June
30,1997.
Note 13 - Treasury Stock
Treasury stock at June 30,1997 consists of 187,941 shares at various prices
per share.
Auditors
Marcum & Kliegman LLP
Certified Public Accountants & Consultants
130 Crossways Park Drive
Woodbury , N.Y. 11797
Transfer Agent
Continental Stock Transfer
& Trust Co.
2 Broadway
New York, N.Y. 10004
Form 10-KSB or additional information about the Company
Stockholders and others interested in obtaining additional information about
the Company may do so by writing or calling Logitek, Inc., 101 Christopher
Street., Ronkonkoma, N.Y. 11779,(516) 467-4200. The Form 10-KSB Annual
Report will be furnished without charge.
Affirmative Action Policy
It is the policy of Logitek, Inc. that all employees will be judged on the
basis of qualifications and ability, without regard to age, sex, race, creed,
color or national origin, in all personnel actions. No employee or
applicant for employment will receive discriminatory treatment because of
physical or mental handicap in regard to any position for which the employee
or applicant is qualified.
Annual Stockholders' Meeting
The annual meeting of stockholders will be held at offices of Logitek, Inc.,
101 Christopher Street., Ronkonkoma, N.Y. 11779 on November 24, 1997 at
6:00 P.M.
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