Form 10-QSB CONFORMED Securities and Exchange Commission Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 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 (Exact name of registrant as specified 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 and ZIP Code) Registrant's Telephone Number, including area code 516-467-4200 Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001, par value None Title of Class Name of each exchange on which registered Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 As of November 1,1997, their were 3,412,059 shares of common stock outstanding. LOGITEK, INC. Quarterly Report on Form 10-QSB INDEX Page # Part 1:FINANCIAL INFORMATION Item 1.Financial Statements Balance Sheets as of March 31, 1998 and June 30, 1997 3 Statements of Operations and Retained Earnings for the Nine and Three Months Ended March 31, 1998 and 1997 4 Statements of Cash Flows for the Nine and Three Months Ended March 31, 1998 and 1997 5 Notes to Financial Statements 6 Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II:OTHER INFORMATION Item 4.Submission of Matters to a Vote of Security Holders Item 6.Exhibits and Reports on Form 8-K a) Exhibits 9 b) Reports on Form 8-K 9 Signatures 10 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS LOGITEK, INC BALANCE SHEETS ASSETS March 31,1998 June 30,1997 Current Assets: Cash $547,806 $393,797 Accounts Receivable 560,962 422,549 Inventories (Note 2) 1,025,793 1,046,082 Prepaid expenses and other 19,315 34,292 Due from officer 30,500 30,500 Total Current Assets 2,184,376 1,927,220 Property and equipment, less accumulated depreciation 625,103 668,861 Other Assets: Goodwill 34,441 34,441 Other 39,656 36,323 Total Assets 2,883,576 2,666,845 LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities: Current portion of debt $122,597 $145,182 Capitalized lease obligation 12,951 11,783 Accounts payable 281,818 385,882 Accrued expenses 264,460 154,507 Total current liabilities 681,826 697,354 Capitalized lease obligation,less current portion 32,169 50,119 Long-term debt, less current maturities 311,439 398,596 Deferred income taxes 65,380 15,380 Total Liabilities 1,090,814 1,161,449 STOCKHOLDERS' EQUITY Common stock$.01 par value; authorized 10,000,000 shares;issued 3,600,000 shares 36,000 36,000 Capital in excess of par value 280,355 280,355 Retained earnings 1,484,059 1,196,693 Sub-total 1,800,414 1,513,048 Less: Treasury shares, at cost, 176,000 shares (7,652) (7,652) Total stockholders' equity 1,792,762 1,505,396 Total liabilities and stockholders'equity $2,883,576 $2,666,845 See notes to the financial statements. LOGITEK, INC STATEMENTS OF OPERATIONS AND RETAINED EARNINGS For the Three and Nine Months Ended March 31, 1998 and 1997 (Unaudited) Three Months Ended Nine Months Ended March 31, March 31, 1998 1997 1998 1997 Net sales $1,249,888 $1,181,406 $3,560,150 $2,974,449 Cost of goods sold 703,348 676,210 2,112,834 1,787,002 Gross profit 546,540 505,196 1,447,316 1,187,447 Operating expenses: Selling 84,928 74,884 249,841 214,860 General and administrative 203,770 249,362 554,889 502,258 Research and development 52,834 61,953 130,754 157,639 Total operating expenses 341,532 386,199 935,484 874,757 Income (loss) from operations 205,008 118,997 511,832 312,690 Other (income) expense: Interest expense, net 11,899 19,991 40,464 61,436 Legal settlement (Note 4) 0 (50,000) 0 (50,000) Total other (income) expense 11,899 (30,009) 40,464 11,436 Income (loss) before provision for income taxes 193,109 149,006 471,368 301,254 Provision for income taxes (Note 3) 70,000 29,550 184,000 60,000 Net income (loss) 123,109 119,456 287,368 241,254 Retained earnings, beginning of period 740,826 568,165 612,152 517,919 Retained earnings, end of period 1,484,059 1,113,381 1,484,059 1,113,381 Per share amounts Net income (loss) $0.03 $0.03 $0.08 $0.07 Weighted average shares outstanding 3,412,059 3,424,000 3,412,059 3,424,000 See notes to financial statements. LOGITEK, INC. STATEMENTS OF CASH FLOWS For the Nine and Three Months Ended March 31, 1998 and 1997 (Unaudited) Three Months Ended Nine Months Ended March 31, March 31, 1998 1997 1998 1997 Net income (loss) $123,109 $119,456 $287,368 $241,254 Adjustments to reconcile net income (loss) to cash provided (used) by operations: Depreciation 23,250 34,075 69,750 82,575 Accounts receivable 150,981 65,538 (138,413)(131,369) Inventories 30,500 4,500 20,289 (90,890) Prepaid expenses and other 13,517 13,193 14,973 31,554 Other assets (4,241) (1,775) (3,333) (2,181) Accounts payable (76,039) (92,502) (104,064) (70,282) Accrued expenses 85,159 54,486 109,955 (29,581) Deferred taxes 10,000 (4,086) 50,000 0 Total adjustments 233,127 73,429 19,157 (210,174) Net cash provided (used) by operating activities 356,236 192,885 306,525 31,080 Cash flows from investing activities: Acquisition of equipment (25,992) (31,550) (25,992) (36,873) Net cash provided by investing activities (25,992) (31,550) (25,992) (36,873) Cash flows from financing activities: Repayment of long-term debt (38,137) (34,911) (109,742)(104,652) Capitalized lease obligation (6,245) 21,964 (16,782) 19,706 Net cash (used) by financing activities (44,382) (12,937) (126,524) (84,946) Netincrease(decrease)in cash 285,862 148,398 154,009 (90,739) Cash, beginning of period 261,944 109,842 393,797 348,979 Cash, end of period $547,806 $258,240 $547,806 $258,240 Supplemental disclosures: Cash paid for: Interest $9,697 $19,911 $45,207 $61,436 See notes to financial statements. LOGITEK, INC. Notes to Financial Statements Note 1 - Basis of Presentation The financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments which are, in the opinion of management, necessary to present fairly the information required therein. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-KSB filed with the Securities and Exchange Commission for the year ended June 30, 1997. The results of operations for the three and nine months ended March 31, 1998 are not necessarily indicative of the results of operations to be expected for the full year. NOTE 2 - Inventories Inventories consisted of the following: March 31, June 30, 1998 1997 Materials $484,991 $505,280 Work-in-process 326,954 326,954 Finished goods 213,848 213,848 Total $1,025,793 $1,046,082 For the three and nine months ended March 31,1998 the Company used the gross profit method to calculate ending inventory values. Note 3 - Provision for Income Taxes Income taxes were different from the amounts computed by applying the federal income tax rate to the income before taxes due to the following: Three Months Ended Nine Months Ended 3/31/98 3/31/97 3/31/98 3/31/97 Statutory rate 34% 34% 34% 34% State income taxes,net of federal tax benefit 4 2 4 2 Deferred Tax Provision 6 10 General business credit (8) (16) (9 ) (16) Effective tax rate 36% 20% 39% 20 % Note 4-Legal Settlement The Company has made a settlement on a trademark infringement suit. The settlement was for $105,000, of which $55,000 was received in the quarter ended June 30,1996 and the remaining $50,000 was received in the quarter ended March 31,1997. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table presents selected financial information for the periods March 31, 1998 and 1997, respectively. Three Months Ended Nine Months Ended March 31, March 31, 1998 1997 1998 1997 Net sales $1,249,889 $1,181,406 $3,560,150 $2,974,449 Gross profit $546,540 $505,196 $1,447,316 $1,187,447 Gross margin 43.7% 42.8% 40.7% 39.9% Operating expenses $341,532 $386,199 $935,484 $874,757 Legal settlement income $50,000 $50,000 Net income (loss) $123,109 $119,456 $287,368 $241,254 General Logitek, Inc. (the "Company") reported a profit of $287,368 for the nine months ended March 31, 1998 versus a profit of $241,254 for the prior year period.For the quarter ended March 31, 1998 the Company reported a profit of $123,109 compared to a profit of $119,456 for the prior year quarter. Results of Operations Net sales for the first nine months of fiscal 1998 were $3,560,150 compared to $2,974,449 or an increase of $585,701. Net sales for the quarter ended March 31, 1998 were $1,249,889 compared to $1,181,406 or an increase of $68,483. Gross profit increased to 40.7% in the current nine month period compared to 39.9% for the prior year. This increase is attributable to increased sales with only minimal additional manufacturing overhead. Operating expenses for the nine months ended March 31, 1998 increased $60,727. This occurred as a result of additional general and administrative overhead incurred as the Company plans for greater sales volume based on increased bookings and increased sales activity. Liquidity As of March 31, 1998 and June 30, 1997 the Company had cash on hand of $547,806 and $393,797, respectively; and, as of March 31, 1998 the Company's current ratio was 3.20 compared to 2.76 as of June 30, 1997. Total borrowings were $479,156 at March 31, 1998,and $ 605,680 at June 30, 1997 . This represents a decrease of $126,524. The Company does not anticipate any new borrowings, however, if the need arises to purchase equipment in its continuing effort to modernize its manufacturing capability it is the Company's intention to lease such equipment rather than purchase in order to conserve as much cash as possible. PART II - OTHER INFORMATION Item 4. Exhibits and Reports on Form 8-K a) Exhibits- There are no exhibits being filed with this report b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of The Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LOGITEK, INC. Registrant Date: 4/28/98 By: Herbert L. Fischer President and Chief Executive Officer