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, 1998
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: $4,815,518
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
August 18, 1998 was $2,537,144. As of August 18,1998, there were
3,382,859 shares of common stock outstanding (of which 1,884,882 shares
were held by non-affiliates).
Documents Incorporated by Reference: 1998 Proxy Statement
<PAGE>
LOGITEK, INC.
FORM 10-KSB - Year Ended June 30, 1998
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 activate 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, 1998
was approximately $ 2,192,000 as compared
to $2,500,000 as of June 30 1997.
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 30,1998 sales
to major customers were as follows: Boeing
Aircraft 22%, various agencies of the U.S.
Government 16%, Falstrom 8% and various
affiliates of the Loral group 7%. During the
year ended June 30,1997 sales to major
customers were as follows: Boeing Aircraft
14%, various agencies of the U.S.
Government 21% and various agencies of
the Loral group 22%.
It should be noted that each of these major
customers is comprised of a group of
separate and distinct business units that make
up the total sales. 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
approximately 53%.
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 upgrading of current products,
development of new switch mode power
supplies and a high density power supply.
During the two fiscal years ended June 30,
1998 and 1997, the Company expensed
approximately $246,000 and $221,000,
respectively, on research and development.
As of June 30, 1998 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, 1998 1997
% %
Time delay relays 13.1 14.1
Flashers 1.5 4.8
Power supplies 27.5 24.8
Voltage, frequency and
phase sensor relays
and power monitors 51.8 55.0
Contract manufacturing & Other 6.1 1.3
Company Totals 100.0 100.0
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, 1998 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, 1998 the
JDA mortgage had a balance of $135,632
and the subordinate mortgage had a balance
of $208,253.
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 three leases payable in
monthly installments of $1,123,$573 and $
1,118 through June 2001, March 2002 and
February 2003,. In addition, the Company
has given a security interest to a lender
covering all fixed assets, accounts receivable
and inventory on $47,000 of debt with
monthly payments of $5,750, plus interest at
prime plus 2% as of June 30, 1998.
ITEM 3. LEGAL PROCEEDINGS
None.
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 1998.<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 August 18, 1998 the closing bid and
asked prices for the Common Stock
were $.69 and $.81 per share, respectively.
As of August 18, 1998 there were 3,382,859
shares of Common Stock outstanding and
approximately 120 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, 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
September 30, 1997 27/32 21/32
December 31, 1997 29/32 5/8
March 31, 1998 27/32 17/32
June 30 , 1998 31 /32 5/8
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company reported a net profit after tax
of $400,790 for the year ended June
30,1998 compared to a $324,566 profit for
the year ended June 30, 1997.
Results of Operations
Comparison of Fiscal Years Ended June 30,
1998 and 1997
Sales for fiscal 1998 were $4,815,518
compared to $4,157,472 for the prior year,
or a 16% increase of $658,046. 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 40.8 % and
38.7% for the twelve month periods ended
June 30, 1998 and 1997. 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 1998 were
approximately $1,329,000 compared to
$1,188,000 or a increase of $141,000. Of
this increase,research and development
expenses accounted for approximately
$25,000. This increase reflects the
Company's ongoing design efforts including
upgrading existing designs and completing
design of certain unfinished models of the
standard power supply products. These efforts
also include modifications in order to improve
manufacturing efficiency. Additional efforts
are contemplated to continue design of the
MC series high density power supply. The
remaining $ 116,000 consists of numerous
overhead items, but primarily a $61,000
increase in sales expenses. Of this amount,
sales commissions were $16,000 and
advertising was $45,000.
Interest expense decreased approximately 3%
due to decreased borrowing levels. During the
past twelve month period the Company has
reduced total debt by $168,153. The Company
will now be required to service its two
mortgages on the building and a term loan
with a balance of $47,000 as of June 30, 1998
(see Note 7 ). 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. Both of these
loans were paid off in the year ended June 30,
1998.
Legal expenses of $29,000 for the twelve
month period ended June 30, 1998 were for
normal ongoing legal matters, compared to
$47,000 for the year ended June 30, 1997. 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 30.3%
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 $488,358 and $605,680,
at June 30, 1998 and 1997, respectively, which
represent decreases of $168,153, or 28%, and
$123,284 or 17%, for the latest two twelve
month periods. As of June 30, 1998 the
Company has decreased total debt, accounts
payable and accrued expenses by
approximately $102,000 . As of June 30,1997
the Company had decreased total debt,
accounts payable and accrued expenses by
$211,000. During this two year period the
Company has built its cash reserves to
approximately $430,000 as of June 30, 1998.
During the year ended June 30,1998, the
Company increased its cash by about $36,000
through its operating activities primarily from
its net income and depreciation.The Company
used its cash to purchase equipment of
$41,000 and paid down debt by approximately
$168,000.
The Company is not aware of any
committments or contingencies that are likely
to have a material impact on the financial
statements.
Due to the Company's current cash resources
of $430,000 and its continued profitability the
Company does not anticipate a need for
additional outside financing. <PAGE>
Year 2000 Issue
The Year 2000 Issue is the result of computer
programs being written using two digits rather
than four to define a specific year. Absent
corrective actions, a computer program that
has date sensitive software may recognize a
date using "00" as the year 1900 rather than
the year 2000. This could result in system
failures or miscalculations causing disruptions
to various activities and operations.
The Company has performed an assessment of
major information technology systems and
expects that all necessary replacements will be
completed in a timely manner to ensure that
systems are Year 2000 compliant.
The Company believes the cost of
administering its year 2000 compliance plan
will not have a material adverse impact on
future earnings.
Directors Fees
The Board of Directors meets annually as well
as on an interim basis as the need arises. All
Directors, with the exception of Mr. Herbert
Fischer are paid $ 150 per meeting for their
services.
<PAGE>
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements and notes thereto, 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, 1998 and 1997 14
Statements of Income for the Years
Ended June 30, 1998 and 1997 15
Statements of Stockholders' Equity for the Years 16
Ended June 30,1998 and 1997
Statement of Cash Flows for the Years 17
Ended June 30,1998 and 1997
Notes to Financial Statements 18
ITEM 8. CHANGES 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 1998 Proxy statement.
ITEM 10. EXECUTIVE COMPENSATION
Incorporated by reference to the Company's 1998 Proxy statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Incorporated by reference to the Company's 1998 Proxy statement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the Company's 1998 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 signed below 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, 1998 and 1997,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, 1998 and 1997, 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 4,1998
LOGITEK, INC.
BALANCE SHEETS
June 30,
ASSETS 1998 1997
Current Assets:
Cash and cash equivalents $429,713 $393,797
Accounts receivable 676,704 422,549
Inventories 1,061,103 1,046,082
Prepaid expenses and other current assets 15,332 34,292
Due from officer 0 30,500
Total Current Assets 2,182,852 1,927,220
Property, Plant, and Equipment, net 680,134 668,861
Deferred income taxes,state 7,000 0
Goodwill 34,441 34,441
Other Assets 48,695 36,323
TOTAL ASSETS $2,953,122 $2,666,845
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $90,525 $145,182
Capitalized lease obligation, current 22,123 11,783
Accounts payable 324,736 385,882
Accrued expenses and taxes 194,398 154,507
Total Current Liabilities 631,782 697,354
Capitalized lease obligation, less current portion 75,350 50,119
Long-term debt, net of current portion 300,360 398,596
Deferred income taxes payable 52,000 15,380
TOTAL LIABILITIES 1,059,492 1,161,449
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; authorized
10,000,000 shares; issued 3,600,000 shares,
of which 217,141 and 187,941 shares
are held in treasury,respectively 36,000 36,000
Capital in excess of par value 280,355 280,355
Retained earnings 1,597,483 1,196,693
1,913,838 1,513,048
Less: Treasury Stock at cost 20,208 7,652
Total Stockholders' Equity 1,893,630 1,505,396
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,953,122 $2,666,845
The accompanying notes are an integral part of the financial statements. <PAGE>
LOGITEK, INC.
STATEMENTS OF INCOME
For the Years Ended June 30,
1998 1997
Net sales $4,815,518 $4,157,472
Cost of goods sold 2,852,002 2,549,797
Gross profit 1,963,516 1,607,675
Operating expenses:
Selling 352,567 291,034
General and administrative 730,726 675,343
Research and development 245,912 221,180
Total operating expenses 1,329,205 1,187,557
Income from operations 634,311 420,118
Other income (expense):
Interest expense (78,882) (81,300)
Interest income 19,361 10,748
Other income 0 50,000
Total other expense (59,521) (20,552)
Income before income taxes 574,790 399,566
Income tax expense 174,000 75,000
Net income $400,790 $324,566
Per Share Amounts:
Basic earnings per share $.12 $.10
Diluted earnings per common share $.11 $.09
The accompanying notes are an integral part of the financial statements.
<PAGE>
LOGITEK INC.
Statements of Stockholders' Equity
For the Years Ended June 30,1998 and 1997
Common Stock Capital in Retained Treasury
Shares Amount Excess of Par Earnings Stock Total
Balance at 3,424,000 $36,000 $280,355 $872,127 $(5,500) $1,182,982
July 1,1996
Net earnings 324,566 324,566
Purchase of
Treasury Stock (11,941) (2,152) (2,152)
Balance at 3,412,059 $36,000 $280,355 $1,196,693 $(7,652) $1,505,396
June 30,1997
Net earnings 400,790 400,790
Purchase of
Treasury Stock (29,200) (12,556) (12,556)
Balance at 3,382,859 $36,000 $280,355 $1,597,483 $(20,208) $1,893,630
June 30,1998
The accompanying notes are an integral part of the financial statements
LOGITEK, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended June 30,
1998 1997
Cash Flows from Operating Activities:
Net income $400,790 $324,566
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 80,978 91,441
(Increase) decrease in operating assets:
Accounts receivable (254,155) (93,748)
Inventories (15,021) 28,008)
Prepaid expenses and other current assets 18,960 (351)
Other assets (12,372) (3,212)
Increase (decrease) in operating liabilities:
Accounts payable (61,146) (78,007)
Accrued expenses and taxes 70,391 (12,054)
Deferred income taxes payable 29,620 9,000
Total adjustments (142,745) (114,939)
Net cash provided by operating activities 258,045 209,627
Cash Flows from Investing Activities
Purchases of property,plant and equipment (41,420) (39,373)
Net cash used in investing activities (41,420) (39,373)
Cash Flows from Financing Activities:
Repayment of long-term debt (168,153) (148,284)
Proceeds from long-term debt 0 25,000
Purchase of treasury stock (12,556) (2,152)
Net cash used in financing activities (180,709) (125,436)
Net increase in cash and equivalents 35,916 44,818
Cash and cash equivalents, beginning of year 393,797 348,979
Cash and cash equivalents, end of year $429,713 $393,797
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid during the years for:
Interest $68,966 $72,400
Income taxes $174,000 $75,000
Noncash Investing and Financing Activities
During the year ended June 30,1998, a lease payable of $50,831 was incurred
when the Company purchased equipment. During the year ended June 30, 1998
an advance to the Company president was written off against a bonus payable
to him which was accrued for at June 30, 1998. During the year ended June
30, 1997 a lease payable of $23,695 was incurred when the Company purchased
equipment.
The accompanying notes are an integral part of the financial statements
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.
Accounts Receivable
Accounts receivable have been adjusted for all known uncollectible accounts.
An allowance for doubtful accounts is not provided since, in the opinion of
management, all accounts recorded on the books are deemed collectible.
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 that 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.
LOGITEK,INC.
Notes to Financial Statements
Note 1-Description of Business and Summary of Significant Accounting Policies
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,
1998 and June 30, 1997 the Company has cash deposits in banks in excess of
the maximum amount insured by the Federal Deposit Insurance Corp.
Net earnings per common share:
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 "Earnings per Share"
("SFAS 128"), which establishes standards for computing and presenting
earnings per share. The new standard replaces the presentation of primary
earnings per share prescribed by Accounting Principles Board Opinion No. 15
"Earnings per Share" ("APB 15"), with a presentation of basic earnings per
share and also requires dual presentation of basic and diluted earnings per
share on the face of the statement of operations for all entities with
complex capital structures. Basic earnings per share excludes dilution and
is computed by dividing income available to common shareholders by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share is computed similarly to fully diluted earnings per share
pursuant to APB 15. The Company adopted SFAS 128 in the fourth quarter of
fiscal 1998 and has restated the prior period in its financial statements.
Basic earnings per share are based on the weighted-average number of shares
of common stock outstanding, which were 3,407,192 at June 30,1998 and
3,423,730 at June 30,1997. Diluted earnings per share are based on the
weighted-average number of shares of common stock adjusted for the effects
of assumed exercise of options under the treasury stock method,
LOGITEK,INC.
Notes to Financial Statements
Note 1-Description of Business and Summary of Significant Accounting Policies
Net earnings per share-continued
which were as follows: 3,595,166 at June 30,1998 and 3,676,394 at
June 30,1997.
The following is a reconciliation of the earnings per share calculations for
the years ended June 30, 1998 and 1997:
1998 1997
Basic Earning per share computation
Numerator $400,790 $324,566
Denominator:
Common shares outstanding 3,407,192 3,423,730
Basic earnings per share $ .12 $ .10
Diluted earnings per share computation
Numerator $400,790 $324,566
Denominator:
Common shares outstanding 3,407,192 3,423,730
Options 187,974 252,664
Total shares 3,595,166 3,676,394
Diluted earnings per share $ .11 $ .09
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.
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.
LOGITEK ,INC.
Notes to Financial Statements
Note 1-Description of Business and Summary of Significant Accounting Policies
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 30,1998 and 1997.
Recently Issued Statements of Financial Accounting Standards
In June 1997, the Financial Accounting Standards Board issued two new
disclosure standards. Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income"("SFAS 130") establishes standards for
reporting and display of comprehensive income.
Among other disclosures, SFAS 130 requires that all items that are required
to be recognized as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements.
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131") establishes
standards for the way that public enterprises report information about
operating segments. SFAS 131 defines operating segments as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. SFAS 131 requires separate
disclosures for different operating segments.
Both of these new standards are effective for financial statements for
periods beginning after December 15,1997 and require comparative information
for earlier years to be restated. The Company does not expect that adoption
of these standards will significantly impact its financial statements.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits" ("SFAS 132") which standardizes
the disclosure requirements for pensions and other postretirement benefits.
The adoption of SFAS 132 is not expected to significantly impact the
Company's financial statements.
LOGITEK, INC.
Notes to Financial Statements
NOTE 2 - Inventories
Inventories consist of the following:
June 30,
1998 1997
Raw materials $547,117 $505,280
Work-in-process 347,760 326,954
Finished goods 166,226 213,848
Total $1,061,103 $1,046,082
Note 3 - Property, Plant and Equipment
Property,plant and equipment consists of the following:
June 30,
1998 1997
Land $78,000 $78,000
Buildings and improvements 802,850 802,850
Machinery and equipment 1,243,153 1,150,902
Furniture and fixtures 142,876 142,876
Automobiles 68,988 68,988
Total 2,335,867 2,243,616
Less: Accumulated Depreciation (1,655,733) (1,574,755)
Property Plant and Equipment, Net 680,134 668,861
(a) Depreciation expense charged to operations was $80,978 and $91,441 for
the years ended June 30, 1998 and June 30,1997,respectively.
(b) The cost of equipment under a capital lease and accumulated depreciation
on these assets was $122,646 and $25,930,respectively,at June 30,1998,
$72,646 and $11,994 respectively at June 30,1997.
NOTE 4-Related Party Transactions
The Company had an uncollateralized loan receivable from its president and
principal shareholder. The loan balance of $30,500 of June 30,1997 was paid
in full during June 1998.
NOTE 5-Other Assets
Included in Other Assets is $39,390 and $36,024 of restricted cash as of
June 30, 1998 and 1997, respectively, which is held as collateral for the
mortgage payable to Long Island Development Corp. (See Note 7).
LOGITEK, INC.
Notes to Financial Statements
NOTE 6 - Leases
Capitalized lease obligation
During the years ended June 30,1998 and June 30,1997 the Company obtained
equipment under capital leases expiring in February 2003 and March 2002
respectively. 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, 1998,future
minimum lease payments under all capital leases are:
Year ending Amount
June 30,
1999 $ 22,123
2000 25,339
2001 26,770
2002 16,751
2003 6,490
Total capitalized lease payments 97,473
Less: current portion 22,123
Total capitalized lease payments,net of current portion $ 75,350
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, 1998 and 1997 was $5,252
and $5,252 respectively. Future minimum rental payments under noncancelable
operating leases as of June 30,1998 are as follows:
Year Ending
June 30, Amount
1999 $5,252
2000 3,532
Total $8,784
LOGITEK,INC.
Notes to Financial Statements
NOTE 7 - Long-Term Debt
Long-term debt consists of the following:
June 30,
1998 1997
Mortgage payable to NY Job Development
Authority (JDA) in monthly installments
of $2,656 including interest (8.25% at
June 30, 1998 and 1997) through June 2004,
collateralized by restricted cash, building and
improvements with a net book value of
approximately $406,822 (a) $135,632 $ 154,340
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) 208,253 229,340
Notes payable to a bank in monthly
installments in 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) 0 44,098
Term loan payable to bank (c) 47,000 116,000
Total debt 390,885 543,778
Less: Current Portion (90,525) (145,182)
Total Long term debt $300,360 $398,596
(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,
1998) 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.
LOGITEK,INC.
Notes to Financial Statements
Note 7-Long Term Debt -Continued
Aggregate long-term debt maturities for the five fiscal years subsequent to
June 30, 1998 are:
Year Ending June 30, Amount
1999 $90,525
2000 48,991
2001 55,163
2002 62,134
2003 70,011
Thereafter 64,061
Total $390,885
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 $41,500 and $30,000 for the
years ended June 30, 1998 and 1997, respectively.
The Company has an Employee Stock Ownership Plan("ESOP") for the benefit of
certain employees. As of June 30,1998 all shares in the ESOP have been
earned and assigned to the respective employee's accounts. There is no
expense associated with this plan for the years ended June 30, 1998 and 1997.
Note 9 - Income Taxes
The provision for income taxes is as follows:
Year Ended June 30,
1998 1997
Deferred : Federal $21,000 $ 9,000
: State 0 0
Current : Federal 144,000 65,000
: State 9,000 1,000
$174,000 $ 75,000
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.
LOGITEK,INC.
Notes to Financial Statements
Note 9-Income Taxes-Continued
The Company recognizes deferred tax assets or liabilities for the future tax
consequences of events that have been recognized in its financial statements
or tax returns. Accordingly, the Company has recorded a net deferred tax
liability for the increase in income taxes payable in future years related
to accumulated depreciation and inventory reserve.
The net deferred tax liability in the accompanying balance sheets includes
the following amounts of deferred tax (assets) liabilities:
1998 1997
Federal $ 52,000 $ 15,380
New York State (7,000) 0
Net deferred tax liability $ 45,000 $ 15,380
Income taxes were different from the amount computed by applying the
federal statutory tax rate to income before income taxes due to the
following:
1998 1997
Statutory rate 34.0 34.0
State income taxes(net of federal benefit) 1.1 3.0
Income tax credits (5.8) (20.5)
Net change in items giving rise to
deferred taxes .7 2.3
Effective rate 30.0 18.8
Note 10 - Stock Options
The following options were granted, under a nonqualified stock option plan,
during the years ended June 30, 1998 and June 30,1997. All options as of
June 30, 1998 were exercisable for a total exercise price of $236,780.
SHARES RANGE OF
EXERCISE PRICE
Balance June 30,1996 396,000 $.25
Granted June 30,1997 10,000 $.50
Balance June 30,1997 406,000
Granted June 30,1998 225,000 $.70-$.81
Expired June 30,1998 (125,000) $.25
Balance June 30,1998 506,000
LOGITEK, INC.
Notes to Financial Statements
Note 10 Stock Options -Continued
The exercise price of the options were set at fair market value on the date
of grant. As of the balance sheet date no options have been exercised. All
of the options, with the exception of a 250,000 share option held by a major
shareholder, are exercisable no sooner than over five years, due to an
annual limit of 20%. These remaining options are held by various employees
and members of the board of directors.
Note 11 - Major Customers
During the year ended June 30,1998 the Company sold a substantial portion of
its merchandise to four customers. Net sales to these customers were
approximately $1,079,000(22%),$789,000 (16%) $368,000(8%) and 337,000(7%) .
At June 30,1998 amounts due from these customers and included in accounts
receivable were $63,825,$129,450, $0 and $20,856,respectively.
During the year ended June 30,1997, the Company sold a substantial portion
of its merchandise to three customers. Net sales to these customers
accounted for $575,000 (14%),$868,000 (21%) and $ 933,000 (22%) At June 30,
1997 amounts due from these customers were $37,809,$59,545 and $110,769,
respectively.
Note 12 - Treasury Stock
During the years ended June 30,1998 and 1997 the Company acquired 11,941 and
29,200 shares of treasury stock for $2,152 and $12,556,respectively. The
treasury stock was recorded at cost.
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 23, 1998 at
6:00 P.M.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 429,713
<SECURITIES> 0
<RECEIVABLES> 676,704
<ALLOWANCES> 0
<INVENTORY> 1,061,103
<CURRENT-ASSETS> 15,332
<PP&E> 2,335,867
<DEPRECIATION> 1,655,733
<TOTAL-ASSETS> 2,953,122
<CURRENT-LIABILITIES> 631,782
<BONDS> 0
0
0
<COMMON> 36,000
<OTHER-SE> 1,857,630
<TOTAL-LIABILITY-AND-EQUITY> 2,953,122
<SALES> 4,815,518
<TOTAL-REVENUES> 4,815,518
<CGS> 2,852,002
<TOTAL-COSTS> 2,852,002
<OTHER-EXPENSES> 1,329,205
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,521
<INCOME-PRETAX> 574,790
<INCOME-TAX> 174,000
<INCOME-CONTINUING> 400,790
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 400,790
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