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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
                   For the Fiscal Year ended December 31, 1997

                         COMMISSION FILE NUMBER 0-17187

                           LOGIC DEVICES INCORPORATED
                          (Exact name of registrant as
                            specified in its charter)

       CALIFORNIA                                           94-2893789
(State of Incorporation)                                 (I.R.S. Employer
                                                        Identification  No.)

                     1320 ORLEANS DRIVE SUNNYVALE, CA 94086
                    (Address of principal executive offices,
                               including Zip Code)

                                 (408) 542-5400
                         (Registrant's telephone number,
                              including Area Code)

           Securities registered pursuant to Section 12(b) of the Act

Title of Class                        Name of each exchange on which registered

     NONE                                             NONE
  ----------                                       ----------

           Securities registered pursuant to Section 12(g) of the Act

                         COMMON STOCK, WITHOUT PAR VALUE
                         -------------------------------
                                (Title of Class)

                             -----------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]  No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of voting stock held by non-affiliates of the
registrant on March 24, 1998 was approximately $16,069,594. On that date, there
were 6,121,750 shares of Common Stock issued and outstanding.

Documents Incorporated By Reference: Proxy Statement for the 1998 Annual Meeting
of Shareholders.

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                                  Page 1 of 43



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                                     PART I

ITEM 1. BUSINESS

GENERAL DEVELOPMENT OF THE BUSINESS

        Logic Devices Incorporated (the "Company") develops and markets
high-performance digital integrated circuits. The Company's circuits address
applications which require high computational speeds, high-reliability, high
levels of circuit integration (complexity), and low power consumption. The
Company's circuits are incorporated into products manufactured by original
equipment manufacturers and utilized to provide high-speed electronic
computation in digital signal processing, video image processing, and
telecommunications applications. The Company's product strategy is to develop
and market industry standard circuits which offer superior performance, as well
as proprietary circuits to meet specific customer needs.

        The Company offers products in two areas: (1) Digital Signal Processing
(DSP) circuits consisting of high-performance arithmetic computational functions
(multipliers, arithmetic-logic units "ALUs", special math functions applicable
to digital signal processing computations, and programmable DSP multiple
processor units) ; and (2) high-speed Static Random Access Memories (SRAMs)
including FIFO (first in/first out) memories. During 1997, the Company
introduced 8 new products as well as obsoleted a number of maturing products. As
of December 31, 1997, the Company offered 45 products which are sold to a
diverse customer base. With the multiplicity of packaging and performance
options, the 45 basic products result in approximately 500 catalog items.

        Some of the Company's products are designed to replace existing industry
standard integrated circuits while offering superior performance, lower power
consumption, and reduced cost. The Company also develops proprietary catalog
products to address specific functional application needs or performance levels
that are not otherwise commercially available. The Company seeks to provide
related groups of circuits that OEMs purchase for incorporation into
high-performance electronic systems.

        The Company relies on third party silicon foundries to process silicon
wafers, each wafer having up to several hundred integrated circuits of a given
Company design, from which finished products are then assembled. The Company's
strategy is to out-source wafer processing to third party foundries in order to
avoid the substantial investment in capital equipment required to establish a
wafer fabrication facility. See "Business -- Background." The Company works
closely with the foundries in order to take advantage of their processing
capabilities and continues to explore and develop additional foundry
relationships in order to minimize its dependence on any single relationship.

        The Company markets its products worldwide through its own direct sales
force, a network of 25 national and international independent sales
representatives, and 15 international and domestic distributors. In 1997,
approximately 34% of the Company's net revenues were derived from OEMs, while
sales through foreign and domestic distributors accounted for approximately 66%
of net revenues. Among the Company's OEM customers are Honeywell, SDX, Solectron
Corporation, Acuson Corporation, DSC Communications Corporation, Lockheed
Martin, Boeing, Boston Technology, General Dynamics, ESI, Hewlett Packard and
Advanced Technologies Laboratories, Inc. Approximately 69% of the Company's net
revenues was derived from within the United States and approximately 31% was
derived from foreign sales.

        The Company was incorporated under the laws of the State of California
in April 1983. The Company's principal offices are located at 1320 Orleans
Drive, Sunnyvale, California 94089, and its telephone number is (408) 542-5400.





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BACKGROUND

        Continued rapid advances in fabricating silicon based semiconductors is
driving a global revolution in electronics. With these on-going advances the
ability to economically compute, communicate, and control seems to be limited
only by the creativity required to implement ever more complex electronic
systems. It is now not only possible, but becoming increasingly more common, to
implement entire electronic systems on a single small sliver of silicon. As a
result, the challenges to the industry have increasingly turned toward
innovative product definition, timely product development, technical customer
support, and heavy capital investments in advanced semiconductor wafer
fabrication facilities. The rapid advances in chip fabrication technology have
resulted in a specialization of skills within the industry. In addition to the
specialization in materials processing skills required to fabricate
semiconductor wafers, the industry increasingly requires and values system
architecture, signal processing algorithm, and circuit design expertise as
essential skills for developing financially successful products. Opportunities
have thus emerged for semiconductor companies which focus on product definition,
advanced design techniques and technical application support, and which rely on
third parties for wafer fabrication. The Company focuses its resources on
defining and developing high performance integrated circuit components for
growing markets which require demanding computational throughput.

        The semiconductor industry is intensely competitive and is characterized
by rapid technological change, product obsolescence, fluctuations in both demand
and capacity, and price erosion. These factors can obsolete processes and
products currently utilized or produced by the Company. In such cases, the
Company is required to develop products utilizing new processes and to either
integrate such products into its existing foundry relationships or establish new
foundry sources.

MARKETS AND PRODUCT STRATEGIES

        The Company believes it possesses advanced competencies in two areas:
DSP algorithm development and high speed, very large scale, integrated circuit
development.

        DSP involves converting light, sound, or other naturally occurring
analog waveforms into a stream of digital values which may then be processed,
manipulated, exchanged, or sorted by electronic systems. DSP provides many
advantages, including: i) the ability to process and manipulate digital data
with consistency and precision; ii) the ability to store and recall information;
and iii) the ability to extract information content and compress the amount of
data which must be stored, processed or transmitted. Manipulation of video
images and speech requires signal processing rates and precision that are not
practical with analog technology or with general purpose (non-DSP) processors.
DSP is an increasingly important technology for many emerging product
technologies.

        The Company?s advanced capability in high-speed circuit design
facilitates the implementation of very high performance DSP circuits. With the
increasing cost effectiveness of DSP as a result of rapid advances in
semiconductor process technology, DSP is becoming ubiquitous in our lives. As a
result DSP has attracted the considerable attention of very large and formidable
competitors. Of necessity, these competitors, however, tend to focus on very
high volume, application specific markets, or on general purpose programmable
DSP products which can be programmed to address a wide variety of applications.

        In order to avoid direct competition with these formidable competitors,
the Company seeks to identify products and markets which demand greater
performance than can be accomplished with a programmable DSP and markets for
application specific functions which are small enough not to attract significant
attention from larger chip manufacturers.

        High quality video image processing is one such area. Video image
processing requirements currently require between 10 and 100 times greater
computational capacity than programmable DSP processors can deliver. Mass market
video graphics and image processing products such as 3D personal computer
graphics boards are generally targeted at selling price points which cannot
support studio broadcast quality images. Moreover, studio broadcast quality
equipment may generally be required to process video images many times in the
composition and editing of on-air material. In contrast, personal



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computer graphics screens are processed for display in real time only. As a
result while the underlying mathematical computations for processing both
broadcast and computer images are similar, two distinct markets exist. As a
result of the very high volume potential available for a successful personal
computer graphics chip product, many companies compete fiercely over this market
opportunity. In contrast, the broadcast industry, while it requires more robust
mathematical precision in processing images, consumes far fewer chips. Due to
its more modest market size, this market has been relatively ignored by the chip
industry. As a result, the Company has identified this area as a productive area
to apply its core strengths.

        In the United States, television broadcasting is scheduled to begin a
transition from analog to digital transmission during 1998. In addition to
providing improved image quality as a result of increased resolution, the image
aspect ratio (width/height) will be changed from the traditional, nearly
rectangular 4 by 3 size of current televisions to a wider screen 16 by 9 ratio
more similar to motion picture screens. Due to the large base of currently
installed equipment, for a number of years both formats will co-exist. In
addition, due to the initially limited availability of content in the wide
format, the industry faces the need to resize images back and forth between the
two formats with exceptionally high computational precision, so as to preserve
the image quality advantages of the newer digital format.

        Many of the Company?s initial DSP building block components were the
first to achieve speeds necessary to process broadcast video images in real
time. Later, the low power consumption of the Company?s products allowed these
products to be offered in lower cost commercial grade packaging, as opposed to
high cost ceramic packages, which were required to dissipate the heat from
earlier high power bipolar components. As a result of these advantages, video
image processing applications have historically represented nearly 50% of the
Company?s revenues.

        With the Company?s significant presence in the broadcast equipment
industry, the Company has jointly defined with its existing customers a family
of very high performance digital image filtering circuits which facilitate the
smoothing of edges as video images are stretched and resized. During 1997, the
Company developed the initial members of this family and sampled them to
original equipment manufacturers for incorporation into high definition digital
television studio production systems.

        As a result of its initial work on digital filtering and image resizing
circuits, the Company has identified a number of secondary applications for this
product technology. Many of the current products are also applicable, and are
expected to be incorporated into, advanced medical imaging equipment such as CAT
and ultrasound scanners. Military applications include infra-red, radar, and
video image seekers, as well as multi-mode displays.

         In order to expand production unit volumes, the Company has recently
defined additional related products which it intends to develop to address the
multi-media projector market. While the core image processing requirements are
similar to the broadcast industry, this market requires higher levels of
integration in order to support a lower cost solution.

        Telecommunications, in all of its various forms, is the fastest growing
and largest current market for DSP chips. The Company has found that its digital
filtering components find occasional application in wireless base station
processing. Analogous to video image processing, major industry suppliers have
tended to concentrate their efforts on the high volume, handset side of the
wireless link, while the base station side has received far less attention. Due
to demands for fewer, smaller, and less intrusive antenna sites, the digital
filtering required in multichannel wireless base stations is computationally
intensive and power limited. The Company believes this area is an attractive
target for the Company?s future product directions.

        High-Speed Static Random Access Memories

        SRAMs are used for the high-speed storage and retrieval of data in
electronic systems. SRAMs enable faster storage and retrieve information than
DRAMs (dynamic random access memories). While SRAMs are more convenient to
utilize than DRAMs, they also are more costly (for a given number of bits
stored) due to greater internal circuit complexity. Because a computer may read
from or write to its memory several times to complete a single software
instruction, high-performance systems are sensitive



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to memory performance as a critical factor in determining overall system
performance.

        Data stored in a typical computer is segmented into a hierarchy of
memory types to maximize performance consistent with reasonable cost
constraints. Low-cost but relatively slow DRAMs are used in "main memory" to
store large amounts of data very economically. Faster but more costly SRAMs
serve as "cache memory" to store limited amounts of the data most frequently
required by the computer as it executes its programs. SRAMs are produced in a
wide variety of capacities (densities) and organizations (number of bits
available in a single memory access), which collectively result in a large
product matrix. This resulting product differentiation creates opportunities for
higher pricing and somewhat longer product life cycles than DRAMs. However, as
high performance processors have driven the demand for SRAMs, the market has
become increasingly competitive.

        The Company's current SRAM products, with densities ranging from 256K
bits to 1024K (K = 1024 or one megabit) bits, generally are targeted toward
high-speed applications which are experiencing high rates of growth in unit
demand due to sharply increasing performance demands of advanced processor
architectures.

        FIFO Memory Products

        FIFO (First-In/First-Out) memory products are frequently utilized at the
input and output of DSP systems to handle any mismatches between when input data
is available, or output data is required relative to the rate of which signals
can be digitally processed. FIFOs incorporate many elements of the Company's
memory design expertise and are synergistic to the Company's DSP customer base.

        Due to the very large market for SRAMs, many competitors have entered
this market making it extremely price competitive. In the past, particularly
during 1995, the Company was unable to meet demand for its SRAM products.
Conversely, in 1996, the SRAM market collapsed with average selling prices
falling nearly 80% within a few months. As a result of these dramatic market
swings, the Company attempts to limit its participation in the SRAM market to
military and high-reliability applications where the number of competitors who
can produce such grades of SRAMs is relatively limited and product pricing is
more stable. In spite of the exposure to market swings, the Company believes
that offering SRAM products provides the Company with a number of advantages.
First, due to the ubiquitous presence of SRAMs in electronic systems, they
provide the Company initial entry into a wide range of electronic systems
manufacturers. Second, the higher unit volume potential for SRAMs relative to
the Company's DSP products allows the Company to spread its fixed manufacturing
costs across more units, lowering the average overhead on all units. Third, SRAM
sales tend to increase the Company?s utilization of wafers, which allows the
Company better access to wafer foundry sources. Finally, the Company?s SRAM
capability is increasingly a competitive edge in its DSP products, in as much as
the Company?s DSP circuits invariably include large amounts of embedded SRAM
memory.

PRODUCTS IN DEVELOPMENT

        The Company has historically experienced a close correlation between its
success in introducing new products and increases in revenues. As a result, the
Company is committed to a high level of product design and development activity.
During 1996, the Company committed in excess of $2.5 million to purchase design
automation tools and to expand its product development group in order to
accelerate the rate of new product development. As a result, during 1997, the
Company developed circuits of aggregate transistor complexity approximately
equal to the entire number of transistors implemented during its entire prior
history.

        With the benefit of on-going customer input resulting from its current
digital filtering products, the Company has a number of new DSP product
opportunities which it will undertake to develop in 1998. These products
generally will be utilized in conjunction with the Company's current DSP
products to further facilitate high precision signal processing. At current
resource levels the Company does not expect to be able to complete all of the
new product opportunities which it has identified. The level of product
development expenditures will be dependent on the Company's success in meeting
its financial objectives.



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        The Company is increasingly developing more specialized products, as
well as implementing additional memory functions that work with, and compliment,
certain of the Company's DSP computational functions.

WAFER FABRICATION TECHNOLOGY

        The Company relies on third party silicon foundries to produce processed
wafers from mask patterns designed by the Company. Through its wafer suppliers,
the Company has access to advanced high-speed, high-density CMOS process
technology, without the significant investment in capital equipment and
facilities required to establish a wafer fabrication facility. Products
developed in 1997 utilize process technology with effective channel lengths
under 0.35 micron. Coupled with the Company's structured custom design
methodology and experience in high-speed circuit design, this technology has
allowed the Company to create products that offer high computational speeds,
high reliability, high levels of circuit integration (complexity) and low power
consumption.

        The Company currently is dependent on two silicon foundry sources.
Wafers are processed to pre-agreed specifications to produce integrated circuits
designed by the Company. There can be no assurance that such relationships will
continue to be on terms satisfactory to the Company. In general the Company's
foundry sources do not guarantee minimum supplies. At times the Company's
revenues have been limited by its inability to obtain adequate quantities of
processed wafers. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."

PRODUCTION, ASSEMBLY AND TEST

        The Company's production operations consist of functional and parametric
wafer testing, package marking, hot and cold testing, final inspection, quality
inspection, and shipment. During 1997, the Company integrated new high speed
production test and new package handling equipment to enable it to produce the
advanced products which it is developing. As is customary in the industry, the
Company's commercial grade plastic package devices are wafer tested and then
shipped to high-volume assembly subcontractors in the Far East for assembly.
Thereafter, the assembled devices are returned to the Company for final testing
and shipment to customers. The Company continues to test raw material through
finished product at various stages in the manufacturing process utilizing
automated test equipment capable of volume production.

MARKETING, SALES AND CUSTOMERS

        The Company markets its products worldwide to a broad range of customers
through its own sales efforts, a network of 25 national and international
independent sales representatives, and 15 electronics distributors. The Company
concentrates its direct marketing efforts on the high-performance segments of
the telecommunication, military, industrial, and computer markets in
applications where high-speed and low power consumption are critical. Among the
Company's OEM customers are Honeywell, SDX, Solectron Corporation, Acuson
Corporation, DSC Communications Corporation, Lockheed Martin, Boeing, Boston
Technology, General Dynamics, ESI, Hewlett Packard and Advanced Technologies
Laboratories, Inc.

        The Company coordinates sales from its Sunnyvale, California facility.
The Company also maintains regional sales offices on Long Island, New York, and
in Tampa-St. Petersburg, Florida as well as field applications support offices
in Raleigh, North Carolina to serve the East Coast and San Diego, California to
serve the West Coast. The Company also has a sales office in Warminster, England
to support the Company's European sales activities. The Company's sales managers
direct the activities of the independent sales representative firms and focus on
major target accounts. Sales representatives obtain orders on an agency basis
and the Company ships directly to its customers. Sales representatives receive
commissions on sales within their territories. Distributors purchase the
Company's products for resale generally to a broad base of small to medium-size
customers. North America is serviced by four regional and national stocking
distributors. As is customary in the industry, domestic distributors are
entitled to certain price rebates and limited stock rotation rights, for which
the Company has made a



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provision in its consolidated financial statements. During 1997 and 1996, sales
through both international and domestic distributors accounted for approximately
66% and 52% of net sales, respectively, while direct sales to OEMs accounted for
approximately 34% and 48%, respectively, of net sales.

        In 1997, two customers accounted for approximately 16% and 12%,
respectively, of net revenues. In 1996, two customers each accounted for
approximately 10% of net revenues.

        International sales are conducted by sales representatives and
distributors located in Japan, Canada, United Kingdom, Germany, France, Italy,
Netherlands, Sweden, Finland, Hong Kong, Israel, Korea, Taiwan, and Spain.
During 1997, 1996, and 1995, the Company's export sales were approximately 31%,
27%, and 20%, respectively, of net sales (see Note 11 in "Notes to the Financial
Statements" contained in Item 8 below). The Company's international sales are
billed in United States dollars and therefore settlements are not directly
subject to currency exchange fluctuations. However, changes in the relative
value of the dollar may create pricing pressures for the Company's products.
Although the Company's international sales are subject to certain export
restrictions, including the Export Administration Amendments Act of 1985 and the
regulations promulgated thereunder, the Company has not experienced any material
difficulties because of these restrictions.

        The Company's domestic distributors generally market products
competitive with the Company's products. The Company's independent sales
representatives and foreign distributors also may represent competitors of the
Company.

        The Company warrants its products against defects in materials and
workmanship for a period of 12 months from the date of shipment. Warranty
expenses to date have been nominal.

BACKLOG

        As of March 31, 1998, the Company's backlog was approximately
$4,386,300. The Company includes in its backlog all released purchase orders
shippable within the following 18 months, including orders from distributors.
The Company's backlog, although useful for scheduling production, does not
represent actual sales and the backlog at any particular time should not be used
as a measure of future sales or revenues. In accordance with accepted industry
practice, orders in the backlog are subject to cancellation without penalty at
the option of the purchaser at any time prior to shipment and to changes in
delivery schedules and do not reflect price adjustments that may be passed on to
distributors and credits for returned products. The Company produces certain
catalog products that may be shipped from inventory within a short time after
receipt of a purchase order. The Company's business for its catalog products,
like the businesses of many companies in the semiconductor industry, is
characterized by short-term orders and shipment schedules rather than by volume
purchase contracts.

RESEARCH AND DEVELOPMENT

        The Company's engineering staff is involved in the design of both
systems and integrated circuits. At the end of 1996, the Company sharply
increased the size of its product development team and committed to the
acquisition of software design automation tools in order to increase the rate of
new product development. In 1997, the Company's development efforts were focused
on the development of new digital processing circuits that address video image
processing applications, as well as to the enhancement or extension of existing
products, especially design of new integrated circuit layouts required for
compatibility with new silicon wafer sources. Product design efforts are
supplemented by computer-design and simulation equipment. The Company also has
an experienced test engineering group which works closely with the designers to
develop production test software. Research and development expenditures were 11%
of sales in 1997 and 12% in 1996 and historically have been approximately 10% of
net sales. See "Selected Financial Data," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Consolidated Statements
of Income" contained in Item 8.




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COMPETITION

        The semiconductor industry is intensely competitive and characterized by
rapid technological change and rates of product obsolescence, price erosion,
periodic shortage of materials, variations in manufacturing yields and
efficiencies, and increasing foreign competition. The industry includes many
major domestic and international companies which have substantially greater
financial, technical, manufacturing, and marketing resources than the Company.
In addition, there are many emerging companies which are attempting to obtain a
share of the existing market. The Company faces competition from other
manufacturers of high-performance integrated circuits, many of which have
advanced technological capabilities, are currently increasing their
participation in the high-performance CMOS market and have internal wafer
production capabilities. The ability of the Company to compete in this rapidly
evolving environment depends on elements both within and outside the control of
the Company. These elements include: the Company's ability to develop new
products in a timely manner; the cost effectiveness of its manufacturing; the
successful introduction to and acceptance by customers of new products; the
speed at which customers incorporate the Company's products into their systems;
the continued access to advanced semiconductor foundries; the number and
capabilities of its competitors as well as general economic conditions.

        In the area of high-performance DSP circuits, the Company competes with
Texas Instruments, Lucent Technology, Fairchild, Analog Devices and Harris among
others. In the area of high-performance static random access memories (SRAMs),
the Company competes with, among others, Integrated Device Technology, Cypress
Semiconductor, UMC, Micron Technology, Hitachi, NEC, Fujitsu, Motorola, Toshiba,
and Winbond.

PATENTS AND COPYRIGHTS

        Because of the rapidly changing technology in the semiconductor
industry, the Company relies primarily upon its design know-how and continued
access to advanced CMOS process technology, rather than patents and copyrights,
to develop and maintain its competitive position. The Company attempts to
protect its trade secrets and other proprietary information through
confidentiality agreements with employees, consultants, suppliers, and
customers, but there can be no assurance that those measures will be adequate to
protect the Company's interests. The Company is of the opinion that patent
maskwork protection is of less significance in the Company's business than
factors such as the experience and innovative skill of its personnel and the
abilities of its management. There can be no assurance that others will not
develop or patent technology similar to the Company's technology or copy or
otherwise duplicate the Company's products. The Company owns five patents
awarded by the United States Patent Office.

        Since others have obtained patents covering various semiconductor
designs and processes, certain of the Company's present or future designs or
processes may be claimed to infringe the patents of third parties. The Company
has previously received and may in the future receive claims that one or more
aspects or uses of the Company's products infringe on patent or other
intellectual property rights of third parties. Presently, there are no such
claims pending against the Company. The Company does not believe that it
infringes any known patents at this time. If any such infringements exist or
arise in the future, the Company may be liable for damages and may, like many
companies in the semiconductor industry, find it necessary or desirable to
obtain licenses relating to one or more of its current or future products. The
Company expects, based on industry practice, that any necessary licenses or
rights under patents could be obtained on conditions that would not have a
material adverse effect on the Company. There can be no assurance, however, that
licenses could in fact be obtained on commercially reasonable terms, or at all,
or that litigation would not occur. The Company's inability to obtain such
licenses or the occurrence of litigation could adversely affect the Company.

EMPLOYEES

        As of December 31, 1997, the Company had 58 full-time employees: 8 in
administration, 15 in research and development, 3 in quality assurance, 19 in
production/test and 12 in marketing and sales. In addition, from time to time,
the Company uses consultants and part-time employees. The Company's



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ability to attract and retain qualified personnel is an important factor in its
continued success. None of the Company's employees are represented by a
collective bargaining agreement, and the Company has never experienced any work
stoppage. The Company believes that its employee relations are good.

REGULATION

        Federal, state, and local regulations impose various environmental
controls on the discharge of chemicals and gases in connection with the wafer
manufacturing process. Since the Company relies on third party manufacturers and
its activities do not involve utilization of hazardous substances generally
associated with semiconductor processing, the Company believes such regulations
do not have a material affect on its business or operations.

ITEM 2. PROPERTIES

        The Company's executive offices, as well as its manufacturing and
principal research and design facilities, are located in approximately 21,600
square feet of space in Sunnyvale, California pursuant to a lease expiring on
December 15, 2002. The Company maintains additional sales or field application
support offices located in the metropolitan area of Raleigh, North Carolina,
Long Island, New York, Tampa-St. Petersburg, Florida, San Diego, California, and
Warminster, England. The Company currently leases these sales and field
application support offices on a month-to-month basis. The Company believes that
its facilities will be adequate to meet its reasonably foreseeable needs and, if
necessary, that alternative facilities will be available to it on acceptable
terms so as to meet its requirements.

ITEM 3. LEGAL PROCEEDINGS

INSURANCE LITIGATION

        The Company tendered the defense of a wrongful termination action
brought by several former employees (which action was settled in 1994 with
formal settlement documents completed in early 1996) to several of its insurance
carriers, only one of which provided a partial defense. Accordingly, to recover
defense fees incurred in defending the wrongful termination action, on September
21, 1992, the Company filed a Complaint for Breach of Contract, Bad Faith
Insurance Practices, and Declaratory Relief against those insurance carriers
which did not provide defense. [Logic Devices, Inc. v. St. Paul Fire and Marine
Ins. Co., Centennial Insurance Co., Fireman's Fund Ins. Co., case number
724849.] St. Paul Fire and Marine Insurance Co. has agreed to a mediation and
arbitration procedure in connection with this action. The Company's Complaint is
pending against the remaining insurance carriers.



ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

        No matters were submitted to a vote of the Company's security holders
during the last quarter of fiscal 1997.




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                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

        The Company's Common Stock is traded under the symbol "LOGC" on the
Nasdaq National Market System. The following table sets forth for the period
indicated, the high and low closing prices for the Company's Common Stock as
reported by Nasdaq:

              1996                          HIGH           LOW
              ----                          ----           ---

              First Quarter                $ 7 7/8        $ 4 7/8
              Second Quarter               $ 6 1/4        $ 4
              Third Quarter                $ 4 5/8        $ 3 1/4
              Fourth Quarter               $ 3 3/4        $ 2 1/16

              1997

              First Quarter                $ 2 3/4       $ 2 5/16
              Second Quarter               $ 2 1/2       $ 1 15/16
              Third Quarter                $ 3 1/2       $ 1 15/16
              Fourth Quarter               $ 4 7/16      $ 2 5/32

HOLDERS

        As of March 24, 1998, there were approximately 3,900 holders of the
Common Stock.

DIVIDENDS

        The Company has not paid any dividends on its Common Stock and does not
anticipate that it will do so in the foreseeable future. The Company has entered
into bank credit agreements which preclude the payment of dividends without the
prior consent of the parties to such agreements. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources - Financing". Regardless of any such restrictions in its bank
credit agreement, the present policy of the Company is to retain earnings to
provide funds for the expansion of its business.




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ITEM 6. SELECTED FINANCIAL DATA

        The following selected financial data of the Company set forth below for
the years ended December 31, 1997, 1996, 1995, 1994 and 1993 has been derived
from the Company's audited consolidated financial statements. This data should
be read in conjunction with the consolidated financial statements, related notes
and other financial information included elsewhere in this report.

(Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                              Year ended December 31,
                           -----------------------------------------------------------------
                             1997           1996          1995          1994          1993
                           --------       --------      --------      --------      --------
<S>                        <C>              <C>           <C>           <C>           <C>
Net revenues               $ 12,519         12,525        16,611        13,492        12,817

Net (loss) income              (399)           122         1,384           708           277

Basic (loss) income
per common share              (0.07)          0.02          0.26          0.15          0.06

Weighted average
common shares
outstanding
(thousands)                   6,122          6,041         5,420         4,841         4,862

Working capital            $ 15,184         16,641        17,148         7,218         6,515

Property and
equipment (net)               5,110          4,204         2,410         2,163         2,371

Total assets                 27,493         26,500        23,366        14,925        13,682

Long-term liabilities         1,125          1,206           391         1,228         1,780

Shareholders' equity         20,727         21,126        20,711         8,810         7,902

Research and
development expenses          1,406          1,450         1,451         1,338         1,285
</TABLE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Overview

        The Company derives its revenues primarily from the sale of
semiconductor products falling into two main groups: DSP circuits and SRAM
circuits. The revenue and gross margin contributed by each of the 45 products
making up these groups are subject to: (i) availability of such product from the
wafer foundry producing it, (ii) market demand for the product, (iii) average
selling price for the product and (iv) costs of production. The Company's net
revenues, gross margin, operating income and net income can depend upon the
success of one or a small number of its products in any given accounting period.
The Company believes that in the future its net revenues and operating results
may change from period to period depending upon the success of new product
introductions, the timing of large orders, and other cyclical factors affecting
the semiconductor industry in general. The Company has derived revenues from
technology licensing fees, but does not expect such fees to be a significant
portion of revenues in the future.



                                       11
<PAGE>   12

        The Company believes that relationships with silicon wafer suppliers can
provide it with reliable sources of wafers while sparing the Company the
substantial investment in capital equipment required to establish a wafer
fabrication facility. During 1992 and 1995, the Company was unable to receive
adequate supplies of processed wafers conforming to the Company's quality
standards from its then foundry suppliers, and accordingly, the Company's
business and relationships with its customers were adversely affected. In 1997,
the Company had an abundant supply of wafer material from its suppliers as world
wide wafer fabrication capacity became more readily available. The Company took
advantage of this capacity by purchasing last run material on several of its
products utilizing older process technologies rather than re-tool these products
to newer process technologies. The Company works closely with the foundries in
order to take advantage of their processing capabilities and continues to
explore and develop additional foundry relationships in order to minimize its
dependence on any single relationship. See "Business -- Wafer Fabrication
Technology."

         The Company's in-house production capabilities consist of wafer
testing, package marking, hot and cold testing, assembled product testing, final
inspection, and quality/reliability screening. These production activities are
included as cost components in the Company's cost of sales. The Company began
subcontracting all its assembly operations in 1993 as a means for further cost
savings and more efficient operations.

        The Company historically has maintained high levels of inventory in
recognition of the economics of having relatively small lot-runs of its products
processed by third-party suppliers and in order to protect against disruptions
in supplies. It is the Company's policy to provide reserves for any product
material that is over one year old with no back-log or sales activity, and to
book reserves for future obsolescence.

        The Company expects to continue to make substantial commitments to
research and development of new products and to improve existing products. The
Company introduced 8 new products in 1997. In addition to the 45 catalog
products currently offered, the Company is continuously developing additional
products, some of which are expected to be introduced in 1998.


                                       12
<PAGE>   13

        The following table sets forth for the periods indicated the percentage
of net revenues (rounded to the nearest whole percent) represented by certain
items of the Company's Consolidated Statements of Operations:

<TABLE>
<CAPTION>
                                                Year ended December 31,
                                   --------------------------------------------------
                                   1997        1996       1995       97/96       96/95
                                   ----        ----       ----       ----        ----
<S>                               <C>         <C>        <C>         <C>        <C>
Net revenues                        100%        100%       100%        -%         (25)%
Cost of revenues                     64%         56%        56%        13%        (25)%
                                   ----        ----       ----
    Gross margin                     36%         44%        44%       (17)%       (25)%

Operating expenses:

Research and development             11%         12%         9%        (3)%         -%

Selling, general and
    administrative                   28%         30%        21%        (8)%         4%
                                   ----        ----       ----

    Total operating expenses         39%         42%        30%        (7)%
                                   ----        ----       ----
                                                                                    5%

(Loss) income from operations        (3)%         2%        14%      (237)%       (90)%
Interest expense, net                (3)%         -%         2%        87%        (84)%
                                   ----        ----       ----

(Loss) income before
    income taxes                     (6)%         2%        12%      (471)%       (90)%

Income taxes                          3%          1%         4%      (540)%       (89)%
                                   ----        ----       ----

Net (loss) income                    (3)%         1%         8%      (426)%       (91)%
                                   ====        ====       ====
</TABLE>


RESULTS OF OPERATIONS

Year Ended December 31, 1997 compared to the Year ended December 31, 1996

        Net revenues for the year ended December 31, 1997 were $12,518,500,
essentially unchanged from the $12,524,900 recorded in the year ended December
31, 1996. In early 1997, the Federal Communication Commission announced that it
would require broadcasters in the ten largest market areas to begin digital
television broadcasting by the fall of 1998. The immediate response to this
announcement was to slow planned incremental upgrades of existing studio
equipment while broadcasters assessed the requirements to move to digital
television broadcasting. As a result of this pause in end equipment purchases,
sales of the Company's components to studio equipment manufacturers was
adversely impacted. Also during 1997, the Company experienced periods where it
was unable to support certain of its SRAM product types due to a transition to
manufacturing these products with newer process technology.

        Cost of revenues increased from $7,008,900 in the year ended December
31, 1996 to $7,933,100 in the year ended December 31, 1997. Gross profit
decreased from $5,516,000 in 1996 to $4,585,400 due to this increase in cost of
goods sold. Gross profit margin as a percentage of sales decreased from 44% for
1996 to 36% in 1997. This decrease in gross profit dollars and lower gross
profit margin on revenue from product sales in 1997 was due to higher inventory
write downs in the 1997 period.



                                       13
<PAGE>   14

        Research and development expenses were $1,405,600 in the year ended
December 31, 1997 versus $1,450,100 in the year ended December 31, 1996.
Research and development expenses as a percentage of net revenues decreased from
12% in 1996 to 11% in 1997. Research and development expenses were essentially
the same for the 1997 and 1996 periods as a result of fewer mature product
re-tooling charges for the period offset by substantial investments in R&D
personnel and design software which will increase the new product development
during 1998.

        Selling, general and administrative expenses decreased 8% from
$3,827,000 in the year ended December 31, 1996 to $3,507,500 in the year ended
December 31, 1997. The decrease was largely due to cost containment initiatives
instituted in light of the Company's losses during the early part of 1997. As a
percentage of net revenues, selling, general and administrative expenses
decreased from 30% in 1996 to 28% in 1997.

        In the year ended December 31, 1997, operating income (loss) decreased
237% to $(327,700) from $238,900 in the year ended December 31, 1996, due to the
above-mentioned factors. As a percentage of net revenues, operating income
decreased from 2% in the 1996 period to negative (3)% in the 1997 period.

        Interest expense increased from $94,500 in 1996 to $439,700 in 1997 as
the Company's borrowing increased from $2,000,000 at year end 1996 to $3,525,000
at year end 1997. This was offset by interest income of $72,200 in 1996 and
$4,900 in 1997.

        As a result of the foregoing, net income decreased from $122,300 in the
year ended December 31, 1996 to a loss of $(398,600) in the year ended December
31, 1997.

Year Ended December 31, 1996 compared to the Year ended December 31, 1995

        Net revenues for the year ended December 31, 1996 were $12,524,900, a
25% decrease over the $16,611,100 in the year ended December 31, 1995. The
decrease was due entirely to reduced sales of the Company's SRAM products, which
decreased substantially over the former period. The market price for SRAMs fell
nearly 80% in a matter of months during the first half of 1996. SRAMs, which
accounted for 45% of revenues in 1995, accounted for only 14% of revenues in
1996. The short fall was due to both price deterioration and order cancellation
from many of the Company's first tier customers. The Company re-directed its
SRAM sales activity towards the high reliability military and industrial
segments where superior performance and reliability command more favorable
pricing. The Company's DSP product line experienced a 20% growth rate from 1995
to 1996. This growth in revenue from the Company's DSP product was not enough to
overcome the weakness in the SRAM market.

        Cost of revenues decreased from $9,259,200 in the year ended December
31, 1995 to $7,008,900 in the year ended December 31, 1996. Gross profit
decreased from $7,351,900 in 1995 to $5,516,000 due to the decrease in net
revenues. Gross profit margin as a percentage of sales remained constant at 44%
for 1995 and in 1996. The decrease in gross profit dollars was due to the
decrease in revenues for 1996. The Company experienced a higher gross profit
margin on revenue from product sales in 1996 (as explained above), however, this
was offset by higher inventory write-downs for the 1996 period.

        Research and development expenses were $1,450,100 in the year ended
December 31, 1996 versus $1,450,600 in the year ended December 31, 1995.
Research and development expenses as a percentage of net revenues increased from
9% in 1995 to 12% in 1996. Research and development expenses were essentially
the same for the 1996 and 1995 periods as a result of fewer new product
development tooling charges for the period offset by substantial investments in
R&D personnel and design software which increased the new product development
during 1997. Although the new personnel and software were employed in late 1996,
the full year effect of their costs along with new product


                                       14
<PAGE>   15
tooling costs primarily impacted 1997 R&D expenditures.

        Selling, general and administrative expenses increased 7% from
$3,572,200 in the year ended December 31, 1995 to $3,827,000 in the year ended
December 31, 1996. The increase was largely due to higher sales and marketing
expenses associated with increased sales personnel and the opening of new sales
offices in late 1995 and in 1996 and a decrease in the overall revenues of the
Company. The Company incurred additional marketing expenses in an effort to
identify new potential markets and products for future development. The Company
incurred some nonrecurring costs associated with the move of its corporate
headquarters in the fourth quarter of 1996. As a percentage of net revenues,
selling, general and administrative expenses increased from 21% in 1995 to 30%
in 1996.

        In the year ended December 31, 1996, operating income decreased 90% to
$238,900 from $2,329,100 in the year ended December 31, 1995, due to the
above-mentioned factors. As a percentage of net revenues, operating income
decreased from 14% in the 1995 period to 2% in the 1996 period.

        Interest expense decreased from $339,700 in 1995 to $94,500 in 1996 as
the Company's borrowing decreased from 1995 to 1996. This was offset by interest
income of $102,300 in 1995 and $72,200 in 1996.

        As a result of the foregoing, net income decreased from $1,383,800 in
the year ended December 31, 1995 to $122,300 in the year ended December 31,
1996.

LIQUIDITY AND CAPITAL RESOURCES

        For the three years ended December 31, 1997 the Company's after-tax cash
earnings (net loss plus non-cash items) significantly exceeded its net loss, due
to significant non-cash charges for depreciation. Such after-tax cash earnings
($1,104,500 in 1997, $1,595,200 in 1996, and $2,020,900 in 1995) as well as bank
borrowings have served as a primary source of financing for the Company's
working capital needs and for capital expenditures during these years.

        During 1997, the Company's after-tax cash earnings (net loss of $398,600
plus non-cash items of $1,503,200) along with a decrease in inventories of
$1,529,800, was offset by growth in accounts receivables of $2,179,300. These
items along with net other cash flows items from operations provided a total of
$292,800 in net cash from operating activities. Capital equipment expenditures
and increases to other assets used $1,740,100 in cash. Bank borrowing provided
$2,325,000 in cash, and repayment of long-term capital lease obligation used
$660,700 in cash. Net of such amounts resulted in a decrease in cash and cash
equivalents of $583,000 for the 1997 period.

        During 1996, the Company's after-tax cash earnings (net income of
$122,300 plus non-cash items of $1,472,900) along with cash provided from
accounts receivables of $1,191,500, was more than offset by increases in
inventories of $5,632,900 (increases in inventories was funded by after-tax cash
earnings, cash provided from receivables and cash on hand). These items along
with net other cash flows items from operations used a total of $4,060,700 in
net cash from operating activities. Capital equipment expenditures and increases
to other assets used $1,517,500 in cash. Bank borrowing provided $2,000,000 in
cash, exercise of warrants and stock options provided $292,500 in cash and
repayment of long-term capital lease obligation used $421,900 in cash. Net of
such amounts resulted in a decrease in cash and cash equivalents of $3,707,600
for the 1996 period.

        During 1995, the Company's after-tax cash earnings provided funding for
increases of $1,214,400 in inventories, $1,856,400 of accounts receivable and
$199,800 in net other resulting in net cash used by operations of $457,700.
Capital equipment expenditures and increases to other assets used $1,703,700 net
in cash. The Company completed three private placements of securities during the
period, which



                                       15
<PAGE>   16

provided $9,665,200 in net cash. Repayment of bank notes (including a term loan
in the principal amount of $800,000, which had been used previously to repay
certain debt to shareholders) used $6,657,800 net in cash. The Company was also
provided with cash flow from the exercise of certain warrants and employee stock
options, which provided $542,100 in cash flow for the period.

        The Company believes that its after-tax cash earnings, combined with
reductions in the levels of inventories and accounts receivable, and financing
available under its existing bank line of credit and future lease lines of
credit, if any, will be sufficient to support its working capital and capital
expenditure requirements for at least the next twelve months.

Working Capital

        The Company's investment in inventories and accounts receivable has been
significant and will continue to be significant in the future. Over prior
periods, the Company, as a nature of its business, has maintained high levels of
inventories and accounts receivable.

        The Company relies on third party suppliers for raw materials and as a
result maintains substantial inventory levels to protect against disruption in
supplies. The Company has historically maintained inventory turn over of
approximately 225 days to 365 days, since 1990. A low point in inventory levels
came in 1992 and 1993 when the Company had supply disruptions from one of its
major suppliers.

        The Company looks at its inventories in relationship to its sales, which
have ranged from 140 days to 362 days within the periods between 1997 and 1990.
This inventory to sales ratio is a more stable measure of inventory levels,
versus the traditional inventory turnover measure because, at the times when the
Company is experiencing supply disruptions, and therefore lower inventory
levels, the Company is also experiencing increased costs of goods due to
inefficiencies in its operations stemming from sporadic deliveries which skews
the numerator and denominator in different directions for inventory turns
calculations. During 1997, the Company reduced its inventory by $1,529,800, or
by 11% of the value at the beginning of the year. The Company seeks to continue
to reduce its inventories, although new product introductions continue to assert
upward pressure on inventory levels which tend to be offset by reductions in
existing product inventories.

        The Company provides reserves for any product material that is over one
year old with no backlog or sales activity, and reserves for future
obsolescence. The Company also takes physical inventory write-downs for
obsolescence. For the year ended December 31, 1997, the Company took physical
inventory write-downs of approximately $1,224,000. See "Schedule 2" of the
accompanying consolidated financial statements.

        The Company's accounts receivable level is generally correlated to the
Company's previous quarter revenue level. Because of customer order scheduling,
up to 80% of the quarterly revenues are sometimes shipped in the last month of
the quarter. This has the effect of placing a large portion of the quarterly
shipments reflected in accounts receivable still not yet due per the Company's
net 30 day terms. This, combined with the fact that the Company's distributor
customers (which made up 66% of the Company's 1997 revenues) generally pay 90
days and beyond, results in the account receivable balances at the end of the
quarterly period being at its highest point for the period.

        Although current levels of inventory and accounts receivable impact the
Company's liquidity, the Company believes that it is a cost of doing business
given the Company's fabless operation. The Company continues to evaluate
possibilities for diversifying its supplier base to reduce the risk of supply
disruption. However, this continues to require a significant investment in
product development to tooling with new suppliers. The Company expects that as
it expands its customer base it will be able to even out



                                       16
<PAGE>   17

the flow of its shipments within its quarterly reporting periods. The Company
seeks to achieve on-going reductions in inventory and accounts receivable levels
although it cannot guarantee that such reductions will be achieved within a
precise period of time due to both its current high rate of introductions of new
products into the inventory pool and its inability to control customer order
schedules.

Financing

        On June 1, 1997, the Company renewed a $6,000,000 revolving line of
credit with Sanwa Bank extending the maturity to May 31, 1998. The line of
credit bears interest at the bank's prime rate (8.50% at December 31, 1997). The
line of credit requires the Company to maintain a minimum tangible net worth of
$17,500,000, a maximum ratio of debt to tangible net worth of not more than 0.50
to 1.00, a minimum current ratio of not less than 2.00 to 1.00, a minimum quick
ratio of not less than 1.50 to 1.00, and profitability on a year to date basis.
As of December 31, 1997 the Company was not in compliance with certain covenants
under the borrowings, however, the Company obtained a waiver from the Bank. (See
Note 6 of Notes to Consolidated Financial Statements.) The line of credit
facility is secured by all of the assets of the Company. As of December 31,
1997, $2,475,000 was available under the line of credit facility.

        Under the terms of its line of credit facility, the Company is precluded
from paying any cash dividends without the consent of the lender even if the
Company is in compliance with all of the financial covenants but is allowed to
pay stock dividends whether or not there was any other covenant violation.
Regardless of any such restrictions in its bank loan agreements, the Company
does not intend to pay cash dividends in the near future and anticipates
reinvesting its cash flow back into operations.

        Warrants to purchase an aggregate of 150,000 shares of Common Stock had
been issued in connection with an extension of the Shareholder Loan under a Loan
Extension and Warrant Purchase Agreement entered into in March 1991. Warrants to
purchase 74,955 shares were exercised during the year ended December 31, 1995
and warrants to purchase 75,045 were exercised in February of 1996. The exercise
price of the warrants was $3.45 per share.

        On February 15, 1995, the non-employee directors of the Company were
granted warrants to purchase an aggregate of 220,000 shares of Common Stock. The
grants were ratified by shareholders of the Company at the Company's 1996 annual
meeting of shareholders held June 13, 1996. The warrants have an exercise price
of $2.5625 per share, which was the last reported transaction price of the
Common Stock on February 15, 1995, and expire on February 15, 2000. Of these
warrants 120,000 were exercised in 1996 by two of the non-employee directors
through loans made to them from the Company. The loans mature July 1998 and
accrue interest at reference rate plus 2%. Certain other warrants to purchase an
aggregate of 34,350 shares of Common Stock were issued by the Company in
connection with two of the private placements which occurred in 1995. Under one
transaction, the warrant gives the holders the right to purchase from the
Company up to 31,850 shares of Common Stock at an exercise price equal to
$12.625 per share (the last reported transaction price on August 21, 1996). The
warrant was exercisable immediately upon its issuance and expires on August 21,
1998. Under the other transaction, the warrants gives the holders the right to
purchase from the Company up to 2,500 shares of Common Stock at an exercise
price equal to $11.875 per share (the closing bid price on September 14, 1996).
These warrants were exercisable immediately upon their issuance and expire on
September 19, 1998. All of the warrants granted in these transactions are
transferable by the holders thereof in accordance with applicable securities
laws and the shares underlying these warrants have been registered under the
Securities Act of 1933, as amended.

        While the Company will continue to evaluate debt and equity financing
opportunities, it believes its financing arrangements and cash flow generated
from operations provide a sufficient base of liquidity



                                       17
<PAGE>   18
for funding operations and capital needs to support the Company's operations.

                                       18


<PAGE>   19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENT
SCHEDULES

<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS:                                                        Page
                                                                                          ----
<S>                                                                                       <C>
Independent Auditors' Report................................................................20
Consolidated Balance Sheets, December 31, 1997 and 1996.....................................21
Consolidated Statements of Operations, years ended
  December 31, 1997, 1996 and 1995..........................................................22
Consolidated Statements of Shareholders' Equity,
  years ended December 31, 1997, 1996 and 1995..............................................23
Consolidated Statements of Cash Flows, years ended
  December 31, 1997, 1996 and 1995..........................................................24
Notes to Consolidated Financial Statements..................................................25
Quarterly Financial Data (unaudited) years ended
  December 31, 1997 and 1996................................................................36

CONSOLIDATED FINANCIAL STATEMENT SCHEDULES:

Schedule II -  Valuation and Qualifying Accounts............................................41
Exhibit 11 - Computation of Earnings per Common Share.......................................44
</TABLE>


                                       19
<PAGE>   20
                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Shareholders
Logic Devices Incorporated

We have audited the consolidated financial statements of Logic Devices
Incorporated and subsidiaries as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we also have audited
the consolidated financial statement schedules as listed in the accompanying
index. These consolidated financial statements and financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedules 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Logic Devices
Incorporated and subsidiaries as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.




San Jose, California
March 2, 1998


                                       20
<PAGE>   21
                           LOGIC DEVICES INCORPORATED
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1997 AND 1996

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                  1997                     1996
                                                                              ------------             ------------
<S>                                                                           <C>                      <C>
Current assets:
    Cash and cash equivalents                                                 $     87,900             $    670,900
    Accounts receivable, net of allowance for doubtful
      accounts of $169,500 and $403,700, respectively (Note 12)
                                                                                 6,781,800                4,368,300
    Inventories (Note 3)                                                        12,399,100               13,928,900
    Prepaid expenses and other assets                                              412,000                  130,600
    Income taxes receivable (Note 7)                                               522,000                  789,800
    Deferred income taxes (Note 7)                                                 621,900                  920,900
                                                                                ----------               ----------
        Total current assets                                                    20,824,700               20,809,400

Property and equipment, net (Notes 4 and 9)                                      5,110,000                4,204,300
Other assets (Notes 2 and 8)                                                     1,558,300                1,486,300
                                                                              ------------             ------------

                                                                              $ 27,493,000             $ 26,500,000
                                                                              ============             ============

                              LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Bank borrowings (Note 6)                                                  $  3,525,000             $  2,000,000
    Accounts payable                                                             1,011,400                1,074,600
    Accrued expenses                                                               446,300                  531,800
    Current portion of obligations under capital leases (Note 9)                   658,500                  561,900
                                                                              ------------             ------------
        Total current liabilities                                                5,641,200                4,168,300

Obligations under capital leases, less current portion (Note 9)                    705,300                  786,600
Deferred income taxes (Note 7)                                                     419,500                  419,500
                                                                              ------------             ------------
                                                                                 6,766,000                5,374,400
                                                                              ------------             ------------
Shareholders' equity (Notes 5 and 10):
    Preferred Stock, no par value; 1,000,000
      shares authorized; 5,000 designated as
      Series A; 0 shares issued and outstanding                                       --                       --
    Common Stock, no par value; 10,000,000
      shares authorized; 6,121,750 shares issued
      and outstanding                                                           17,341,900               17,341,900
    Common Stock subscribed                                                       (307,500)                (307,500)
    Retained earnings                                                            3,692,600                4,091,200
                                                                              ------------             ------------
        Total shareholders' equity                                              20,727,000               21,125,600
                                                                              ------------             ------------

Commitments and contingencies (Notes 5, 6, 8, 9 and 12)
                                                                              ------------             ------------
                                                                              $ 27,493,000             $ 26,500,000
                                                                              ============             ============
</TABLE>


          See accompanying Notes to Consolidated Financial Statements.


                                       21
<PAGE>   22
                           LOGIC DEVICES INCORPORATED
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


<TABLE>
<CAPTION>
                                                                    1997                     1996                     1995
                                                                ------------             ------------             ------------
<S>                                                             <C>                      <C>                      <C>
Net revenues (Note 11)                                          $ 12,518,500             $ 12,524,900             $ 16,611,100
Cost of revenues (Note 11)                                         7,933,100                7,008,900                9,259,200
                                                                ------------             ------------             ------------
           Gross margin                                            4,585,400                5,516,000                7,351,900
                                                                ------------             ------------             ------------

Operating expenses:
    Research and development                                       1,405,600                1,450,100                1,450,600
    Selling, general and administrative                            3,507,500                3,827,000                3,572,200
                                                                ------------             ------------             ------------
        Total operating expenses                                   4,913,100                5,277,100                5,022,800
                                                                ------------             ------------             ------------

           (Loss) income from operations                            (327,700)                 238,900                2,329,100
                                                                ------------             ------------             ------------

Other (income) expense:
    Interest expense                                                 439,700                   94,500                  339,700
    Interest income                                                   (4,900)                 (72,200)                (102,300)
    Other                                                            (12,200)                  14,300                   (7,900)
                                                                ------------             ------------             ------------
                                                                     422,600                   36,600                  229,500
                                                                ------------             ------------             ------------

           (Loss) income before income taxes                        (750,300)                 202,300                2,099,600

Income tax (benefit) expense (Note 7)                               (351,700)                  80,000                  715,800
                                                                ------------             ------------             ------------

           Net (loss) income                                    $   (398,600)            $    122,300             $  1,383,800
                                                                ============             ============             ============


Basic (loss) earnings per common share                          $      (0.07)            $       0.02             $       0.26
                                                                ============             ============             ============

Weighted average common shares outstanding                         6,121,750                6,041,483                5,419,672
                                                                ============             ============             ============

Diluted (loss) earnings per common share                        $      (0.06)            $       0.02             $       0.25
                                                                ============             ============             ============

Weighted average common shares outstanding - diluted               6,171,959                6,041,483                5,428,286
                                                                ============             ============             ============
</TABLE>


          See accompanying Notes to Consolidated Financial Statements.


                                       22
<PAGE>   23
                           LOGIC DEVICES INCORPORATED
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


<TABLE>
<CAPTION>
                                        Preferred Stock              Common Stock                          Common
                                    -----------------------   --------------------------    Retained        Stock
                                     Shares       Amount         Shares        Amount       Earnings      Subscribed      Total
                                    --------   ------------   ------------  ------------  ------------   ------------  ------------
<S>                                 <C>        <C>            <C>           <C>           <C>            <C>           <C>

Balances as of December 31, 1994         154   $    154,000      4,762,584  $  6,071,200  $  2,585,100   $       --    $  8,810,300

    Proceeds from exercise
      of common stock options           --             --           66,000       283,500          --             --         283,500

    Private stock offerings, net
      of issuance costs of $416,300     --             --          912,500     9,665,200          --             --       9,665,200

    Conversion of Series A
      preferred stock into
      common stock                      (154)      (154,000)        25,666       154,000          --             --            --

    Purchase of assets for
      stock (Note 2)                    --             --           75,000       309,400          --             --         309,400

    Conversion of stock
      warrants (Note 5)                 --             --           74,955       258,600          --             --         258,600

    Net income                          --             --             --            --       1,383,800           --       1,383,800
                                    --------   ------------   ------------  ------------  ------------   ------------  ------------

Balances as of December 31, 1995        --             --        5,916,705    16,741,900     3,968,900           --      20,710,800

    Proceeds from exercise
      of common stock options           --             --           10,000        33,600          --             --          33,600

    Conversion of stock
      warrants (Note 5)                 --             --          195,045       566,400          --         (307,500)      258,900

    Net income                          --             --             --            --         122,300           --         122,300
                                    --------   ------------   ------------  ------------  ------------   ------------  ------------

Balances as of December 31, 1996        --             --        6,121,750    17,341,900     4,091,200       (307,500)   21,125,600

    Net loss                            --             --             --            --        (398,600)          --        (398,600)
                                    --------   ------------   ------------  ------------  ------------   ------------  ------------

Balances as of December 31, 1997        --     $       --        6,121,750  $ 17,341,900  $  3,692,600   $   (307,500) $ 20,727,000
                                    --------   ------------   ------------  ------------  ------------   ------------  ------------
</TABLE>


          See accompanying Notes to Consolidated Financial Statements.


                                       23
<PAGE>   24
                           LOGIC DEVICES INCORPORATED
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                    (NOTE 13)


<TABLE>
<CAPTION>
                                                          1997           1996           1995
                                                      ------------   ------------   ------------
<S>                                                   <C>            <C>            <C>
Cash flows from operating activities:
    Net (loss) income                                 $   (398,600)  $    122,300   $  1,383,800
    Adjustments to reconcile net (loss) income
    to net cash provided by (used in)
    operating activities:
        Depreciation and amortization                    1,438,400      1,210,400      1,120,100
        Allowance for doubtful accounts                   (234,200)       284,200         70,000
        Deferred income taxes                              299,000        (21,700)      (553,000)
        Changes in current assets and liabilities:
           Accounts receivable                          (2,179,300)     1,191,500     (1,856,400)
           Inventories                                   1,529,800     (5,632,900)    (1,214,400)
           Prepaid expenses and other assets              (281,400)        57,700        217,500
           Income taxes receivable                         267,800       (789,800)          --
           Accounts payable                                (63,200)        83,600       (279,200)
           Accrued expenses                                (85,500)      (566,000)       653,900
                                                      ------------   ------------   ------------
               Net cash provided by (used in)
               operating activities                        292,800     (4,060,700)      (457,700)
                                                      ------------   ------------   ------------

Cash flows from investing activities:
    Capital expenditures                                (1,522,700)    (1,344,400)      (884,800)
    Other assets                                          (217,400)      (173,100)      (818,900)
                                                      ------------    -----------   ------------
               Net cash (used in) investing
               activities                               (1,740,100)    (1,517,500)    (1,703,700)
                                                      ------------   ------------   ------------

Cash flows from financing activities:
    Proceeds from bank borrowings                        2,325,000      2,000,000      3,011,400
    Repayments of bank borrowings                         (800,000)          --       (5,857,800)
    Proceeds from long-term debt obligations                  --             --          800,000
    Repayments of long-term debt obligations                  --             --         (913,900)
    Payments of obligations under capital lease           (660,700)      (421,900)       (65,500)
    Repayments of obligations to shareholders                 --             --         (863,900)
    Sale of common stock                                      --          292,500     10,207,300
                                                      ------------   ------------   ------------
               Net cash provided by financing
               activities                                  864,300      1,870,600      6,317,600
                                                      ------------   ------------   ------------

Net (decrease) increase in cash and cash equivalents      (583,000)    (3,707,600)     4,156,200

Cash and cash equivalents at beginning of year             670,900      4,378,500        222,300
                                                      ------------   ------------   ------------
Cash and cash equivalents at end of year              $     87,900   $    670,900   $  4,378,500
                                                      ============   ============   ============
</TABLE>


                                       24
<PAGE>   25
1.      Summary of Significant Accounting Policies

        The Company

        LOGIC Devices Incorporated (the Company) develops and markets
        high-performance digital complementary metal oxide silicon (CMOS)
        integrated circuits for applications that require high-operating speeds
        and low-operating power.

        Principles of Consolidation
        The accompanying consolidated financial statements include the accounts
        of the Company and its wholly owned subsidiary. All significant
        intercompany accounts and transactions have been eliminated.

        Cash Equivalents
        For purposes of the statements of cash flows, the Company considers all
        highly liquid investments with original maturities of three months or
        less to be cash equivalents.

        Inventories
        Inventories are stated at the lower of cost (first-in, first-out method)
        or market.

        Equipment and Leasehold Improvements
        Equipment and leasehold improvements are stated at cost. Depreciation on
        equipment is calculated on the straight-line method over the estimated
        useful lives of the assets, generally three to seven years. Leasehold
        improvements and assets held under capital leases are amortized on a
        straight-line basis over the shorter of the lease term or the estimated
        useful life of the asset. Certain tooling costs are capitalized by the
        Company and amortized on a straight-line basis over the shorter of the
        related product life cycle or five years.

        Cost in Excess of Fair Value of Net Assets Acquired
        The Company amortizes costs in excess of the fair value of net assets
        acquired on a straight-line basis, over 7 years.

        Capitalized Software Costs
        Internal test computer software development costs incurred subsequent to
        the determination of its technical feasibility are capitalized and
        amortized on a straight-line basis over the shorter of the related
        expected product life cycle or five years. As of December 31, 1997, and
        1996, such costs aggregated $2,202,000 and $1,903,700, respectively, and
        are included in other assets in the consolidated financial statements
        net of accumulated amortization of $1,812,300 and $1,708,700,
        respectively.


                                       25
<PAGE>   26
        Revenue Recognition
        Revenue is generally recognized upon shipment of product. Sales to
        distributors are made pursuant to agreements that provide the
        distributors certain rights of return and price protection on unsold
        merchandise. Revenues from such sales are recognized upon shipment, with
        a provision for estimated returns and allowances recorded at that time.

        Income Taxes
        The Company accounts for income taxes in accordance with Statement of
        Financial Accounting Standards (SFAS) No. 109. Under SFAS No. 109,
        deferred tax liabilities or assets at the end of each period are
        determined using the tax rate expected to be in effect when taxes are
        actually paid or recovered. Deferred income taxes as of December 31,
        1997 and 1996, primarily result from certain expenses that are not
        currently deductible for tax purposes.

        Advertising Expense
        The cost of advertising is expensed as incurred. Advertising costs were
        not significant in 1997, 1996, and 1995.

        Earnings Per Common Share
        In February 1997, the Financial Accounting Standards Board (FASB) issued
        SFAS No. 128, "Earnings Per Share," which is required to be adopted on
        December 28, 1997. Conforming to SFAS No. 128, the Company has changed
        its method of computing earnings per share and restated all prior
        periods. Under the new requirements for calculating basic earnings per
        share, the dilutive effect of stock options has been excluded. The
        impact of SFAS No. 128 was not significant for the prior years reported.

        Long-Lived Assets
        The Company periodically reviews its long-lived assets and certain
        identifiable intangibles for impairment. When events or changes in
        circumstances indicate that the carrying amount of an asset may not be
        recoverable, the Company writes the asset down to its net realizable
        value.

        Fair Values of Financial Instruments
        In estimating its fair value disclosures for financial instruments, the
        Company used the following methods and assumptions:

        Cash and cash equivalents: The carrying amount reported in the balance
        sheet for cash and cash equivalents approximates fair value.

        Investment securities: The fair values for marketable debt and equity
        securities are based on quoted market prices.

        Short-term debt: The fair value of short-term debt approximates cost
        because of the short period of time to maturity.

        Long-term debt: The fair value of long-term debt is estimated based on
        current interest rates available to the Company for debt instruments
        with similar terms and remaining maturities.


                                       26
<PAGE>   27
                           LOGIC DEVICES INCORPORATED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

        As of December 31, 1997, the fair values of the Company's financial
        instruments approximate their historical carrying amounts.

        Stock-Based Incentive Program
        SFAS No. 123, "Accounting for Stock-Based Compensation," encourages
        entities to recognize compensation costs for stock-based employee
        compensation plans using the fair value based method of accounting
        defined in SFAS No. 123, but allows for the continued use of the
        intrinsic value based method of accounting prescribed by Accounting
        Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
        Employees." The Company continues to use the accounting prescribed by
        APB Opinion No. 25 and as such is required to disclose pro forma net
        income and earnings per share as if the fair value based method of
        accounting had been applied (Note 10).

        Adoption of New Accounting Pronouncements
        In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
        Income." SFAS No. 130 establishes standards for reporting comprehensive
        income and its components in a financial statement that is displayed
        with the same prominence as other financial statements. Comprehensive
        income, as defined, includes all changes in equity (net assets) during
        the period from non-owner sources. Examples of items to be included in
        comprehensive income, which are excluded from net income, are foreign
        currency translation adjustments and unrealized gains/losses on
        available-for-sale securities. The disclosure prescribed by SFAS No. 130
        is not expected to have a material impact on the Company.

        Also, in June 1997, the FASB issued SFAS No. 131, "Disclosures about
        Segments of an Enterprise and Related Information." SFAS No. 131
        establishes standards for the way companies report information about
        operating segments in annual financial statements. It also establishes
        standards for related disclosures about products and services,
        geographic areas, and major customers. The Company has not yet
        determined the impact, if any, of adopting this new standard. The
        disclosures prescribed by SFAS No. 131 are effective in 1998.

        Use of Estimates
        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 liabilities
        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.


                                       27
<PAGE>   28
                           LOGIC DEVICES INCORPORATED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


        Reclassifications
        Certain 1996 and 1995 amounts in the financial statements and notes
        thereto have been reclassified to conform to the 1997 presentation.

2.      Acquisition

        In 1995, the Company acquired and accounted for as a purchase, certain
        intellectual and intangible assets of STAR Semiconductor Corporation.
        Total consideration for the acquisition was 75,000 shares of the
        Company's common stock valued at $309,400, for which the entire amount
        was assigned to costs in excess of fair value of the net assets acquired
        and other intangible assets. As of December 31, 1997 and 1996, such
        costs are included in other assets on the consolidated balance sheets
        net of accumulated amortization of $84,000 and $42,000, respectively.

3.      Inventories

        A summary of inventories at December 31 follows:

<TABLE>
<CAPTION>
                                                     1997         1996
                                                 -----------  -----------
<S>                                              <C>          <C>
Raw materials                                    $ 2,824,400  $ 3,165,400
Work-in-process                                    6,468,900    6,744,900
Finished goods                                     3,105,800    4,018,600
                                                 -----------  -----------
                                                 $12,399,100  $13,928,900
                                                 ===========  ===========
</TABLE>

4.      Property and Equipment

        A summary of property and equipment at December 31 follows:

<TABLE>
<CAPTION>
                                                     1997         1996
                                                 -----------  -----------
<S>                                              <C>          <C>
Equipment                                        $ 9,302,800  $ 7,752,200
Tooling costs                                      5,518,500    4,870,600
Leasehold improvements                               225,200      225,200
                                                 -----------  -----------
                                                  15,046,500   12,848,000
Less accumulated depreciation and amortization     9,936,500    8,643,700
                                                 -----------  -----------
                                                 $ 5,110,000  $ 4,204,300
                                                 ===========  ===========
</TABLE>

        Equipment under capital lease obligations aggregated $2,679,100 and
        $1,763,000 in 1997 and 1996, with related accumulated amortization of
        $950,700 and $622,000, respectively.


                                       28
<PAGE>   29
                           LOGIC DEVICES INCORPORATED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


5.      Related Party Transactions

        Warrants
        Between 1991 and 1993, the Company granted warrants to purchase 150,000
        shares of the Company's common stock to two groups of family trusts
        related to two of the Company's Board of Directors. Of these warrants,
        74,955 and 75,045 were exercised at $3.45 in 1995 and 1996,
        respectively.

        In 1995, the Company granted 220,000 warrants to three non-employee
        directors to purchase the Company's common stock. These warrants are
        exercisable at $2.5625 per share and expire February 15, 2000 (Note 10).
        In 1996, 120,000 of these warrants were exercised via the issuance of
        two promissory notes maturing July 1998, and bearing interest at a
        reference rate plus 2%. These notes are included in common stock
        subscribed in the accompanying consolidated financial statements.

6.      Debt Financing

        Bank Borrowings
        The Company has a $6,000,000 revolving line of credit with a bank, which
        expires on May 31, 1998, bears interest at the bank's prime rate (8.5%
        at December 31, 1997), and is secured by the assets of the Company. The
        line of credit requires the Company to maintain a minimum tangible net
        worth, a maximum ratio of debt to tangible net worth, a minimum current
        ratio, a minimum quick ratio, and profitability over a specified
        interval of time. As of December 31, 1997, the Company was not in
        compliance with certain covenants under the bank borrowings, however,
        the Company has obtained a waiver from the bank. At December 31, 1997,
        the Company had $2,475,000 available under the revolving line of credit.

7.      Income Taxes

        Income tax (benefit) expense for the years ended December 31, 1997, 1996
        and 1995 comprise:

<TABLE>
<CAPTION>
           Current      Deferred         Total
         -----------   -----------   -----------
<S>      <C>           <C>           <C>
1997:
Federal  $  (650,700)  $   317,400   $  (333,300)
State           --         (18,400)      (18,400)
         -----------   -----------   -----------
         $  (650,700)  $   299,000   $  (351,700)
         ===========   ===========   ===========

1996:
Federal  $    86,200   $   (18,400)  $    67,800
State         15,500        (3,300)       12,200
         -----------   -----------   -----------
         $   101,700   $   (21,700)  $    80,000
         ===========   ===========   ===========
1995:
                                     -----------
Federal  $ 1,075,100   $  (468,800)  $   606,300
State        193,700       (84,200)      109,500
         -----------   -----------   -----------
         $ 1,268,800   $  (553,000)  $   715,800
         ===========   ===========   ===========
</TABLE>

        Deferred income tax (benefits) expenses result from timing differences
        in the recognition of


                                       29
<PAGE>   30
                           LOGIC DEVICES INCORPORATED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


        certain expenses and income items for tax and financial reporting
        purposes as follows:

<TABLE>
<CAPTION>
                                     1997        1996        1995
                                  ---------   ---------   ---------
<S>                               <C>         <C>         <C>
Distributor sales                 $(160,100)  $ (40,100)  $  (5,700)
Capitalized inventory costs         146,400     (81,700)   (223,100)
Reserve not currently deductible    160,200    (120,800)    (71,900)
Depreciation                        108,400     264,400    (191,200)
Capitalized software costs           44,100     (43,500)    (61,100)
                                  ---------   ---------   ---------
                                  $ 299,000   $ (21,700)  $(553,000)
                                  =========   =========   =========
</TABLE>

        The following summarizes the difference between the income tax (benefit)
        expense and the amount computed by applying the Federal income tax rate
        of 34% in 1997, 1996 and 1995 to income before income taxes:

<TABLE>
<CAPTION>
                                          1997        1996        1995
                                       ---------   ---------   ---------
<S>                                    <C>         <C>         <C>
Federal income tax at
   statutory rate                      $(255,100)  $  68,800   $ 717,300
Utilization of tax credits               (81,300)    (13,200)   (121,400)
   State income taxes, net of federal
       tax benefit                       (45,800)     12,400     129,500
Other, net                                30,500      12,000      (9,600)
                                       ---------   ---------   ---------
                                       $(351,700)  $  80,000   $ 715,800
                                       =========   =========   =========
</TABLE>

        Deferred tax assets comprise the following:

<TABLE>
<CAPTION>
                                     1997        1996
                                  ---------   ---------
<S>                               <C>         <C>
Distributor sales                 $ 240,500   $  80,400
Capitalized inventory costs         348,000     494,400
Reserve not currently deductible    268,500     428,700
Depreciation                       (595,900)   (487,500)
Capitalized software costs          (58,700)    (14,600)
                                  ---------   ---------
Net deferred tax asset            $ 202,400   $ 501,400
                                  =========   =========
</TABLE>


                                       30
<PAGE>   31
                           LOGIC DEVICES INCORPORATED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


8.      Product Development and Foundry Agreements

        In order to secure a long-term volume source of wafer production, in
        December 1995, the Company entered into a foundry capacity agreement
        (the Agreement) with Zenitrum Mikroelektronik Drespin (ZMD), a German
        limited liability company. Under the terms of the Agreement, the Company
        secured a non-cancelable purchase commitment for one year's production
        capacity of certain of its products with ZMD, at predetermined prices.
        The Agreement required a $792,000 pre-payment for the year's purchases,
        which is included in other assets, and is renewable annually upon
        satisfaction of various provisions. In 1997, the Company extended its
        foundry capacity agreement with ZMD through March 1998, and expects to
        extend the Agreement in 1998, as well.

9.      Commitments

        The Company leases its facilities and certain equipment under operating
        leases. The facility lease requires the Company to pay certain
        maintenance and operating expenses such as taxes, insurance, and
        utilities. Rent expense related to these operating leases was
        $1,163,300, $1,174,400, and $939,100, during 1997, 1996 and 1995,
        respectively.

        A summary of the future minimum lease payments under capitalized leases
        together with the present value of such minimum lease payments and
        future minimum payments required under non-cancelable operating leases
        with terms in excess of one year follows:

<TABLE>
<CAPTION>
        Years ending                                               Capitalized       Operating
        December 31,                                                    leases          leases
        ------------                                              ------------    ------------
<S>                                                               <C>            <C>
        1998                                                      $    749,100   $   1,191,700
        1999                                                           488,800         862,500
        2000                                                           182,200         443,900
        2001                                                            71,600         323,700
        2002                                                                 -         323,600
                                                                  ------------    ------------
        Future minimum lease payments                                1,491,700   $   3,145,400
                                                                                  ============
        Less amount representing interest (9.5% to 15.8%)              127,900
                                                                  ------------
        Present value of future minimum lease payments               1,363,800
        Less current portion                                           658,500
                                                                  ------------
                                                                  $    705,300
                                                                  ============
</TABLE>

10.     Capital Stock

        Common Stock
        During 1995, the Company issued 912,500 shares of the Company's common
        stock in private placement transactions exempt from registration under
        the Securities Act, which generated net proceeds of approximately
        $9,665,200. These proceeds were used to repay the then outstanding bank
        debt of $3,697,000.


                                       31
<PAGE>   32
                           LOGIC DEVICES INCORPORATED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


        Also during 1995, the Company purchased certain assets of Star
        Semiconductor Corporation for 75,000 shares of the Company's common
        stock (Note 2).

        Stock Purchase Warrants
        As of December 31, 1997, the following common stock warrants were issued
        and outstanding:

<TABLE>
<CAPTION>
               Issued with      Shares Subject     Exercise          Expiration
               Respect to:        To Warrant         Price              Date
               -----------      --------------     --------          ----------
<S>                             <C>                <C>               <C>
               Private Placement       31,850      $ 12.6250         August 21, 1998
               Private Placement        2,500      $ 11.8750         September 19, 1998
               Non-employee:
                  Board of Directors
                  Compensation        100,000      $  2.5625         February 15, 2000
</TABLE>

        Stock Option Plan
        FASB Statement 123, "Accounting for Stock-Based Compensation", requires
        the Company to provide pro forma information regarding net (loss) income
        and (loss) earnings per share as if compensation cost for the Company's
        stock option plans had been determined in accordance with the fair value
        based method prescribed in FASB Statement 123. The Company estimates the
        fair value of stock options at the grant date by using the Black-Scholes
        option pricing-model with the following weighted average assumptions
        used for grants in 1997, 1996, and 1995, respectively: dividend yield of
        0; expected volatility of 139, 129, and 112 percent; risk-free interest
        rates of 8.5, 6.6, and 6.4 percent; and expected lives of 4 years for
        all plan options.

        Under the accounting provisions of FASB Statement 123, the Company's net
        (loss) would have increased and the Company's net income would have been
        reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                         1997            1996           1995
                                    -------------   -------------  -------------
<S>                                 <C>             <C>            <C>
Net (loss) income:
   As reported                      $    (398,600)  $     122,300  $   1,383,800
                                    =============   =============  =============
   Pro forma                        $    (507,000)  $      39,200  $   1,320,300
                                    =============   =============  =============

Basic (loss) earnings per share:
   As reported                      $       (0.07)  $        0.02  $        0.26
                                    =============   =============  =============
   Pro forma                        $       (0.08)  $        0.01  $        0.24
                                    =============   =============  =============

Diluted (loss) earnings per share:
   As reported                      $       (0.06)  $        0.02  $        0.25
                                    =============   =============  =============
   Pro forma                        $       (0.08)  $        0.01  $        0.24
                                    =============   =============  =============
</TABLE>


                                       32
<PAGE>   33
                           LOGIC DEVICES INCORPORATED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


        A summary of the status of the Company's stock option plan as of
        December 31, 1997, 1996 and 1995, and changes during the years ended on
        those dates is presented below:

<TABLE>
<CAPTION>
                                                            Options Outstanding
                          -----------------------------------------------------------------------------------------
                              December 31, 1997             December 31, 1996                December 31, 1995
                          -------------------------     ---------------------------      --------------------------
                                        Wtd. Avg.                      Wtd. Avg.                     Wtd. Avg.
                           Shares    Exercise Price      Shares      Exercise Price       Shares     Exercise Price
                          --------   --------------     --------     --------------      --------    --------------
<S>                       <C>        <C>                <C>          <C>                 <C>         <C>
Outstanding at
 beginning of year          94,000       $ 7.963          97,500         $ 7.270           78,000        $ 2.760
Granted                    203,000       $ 2.125          10,000         $ 6.000           85,500        $ 8.000
Exercised                      --             --         (10,000)        $ 1.625          (66,000)       $ 2.886
Forfeited                  (36,000)      $ 8.000          (3,500)        $ 8.000              --             --
                          --------       -------        --------         -------         --------        -------
Outstanding at
 end of year               261,000       $ 3.402          94,000         $ 7.963           97,500        $ 7.270
                          ========       =======        ========         =======         ========        =======

Options exercisable
 at year-end               104,700                        43,000                           12,000
                          ========                      ========                         ========

Weighted-average fair
 value of options granted
 during the year                         $ 2.125                         $ 6.000                         $ 8.000
                                         =======                         =======                         ========
</TABLE>

        The following table summarizes information about stock options
outstanding at December 31, 1997:

<TABLE>
<CAPTION>
                                Options Outstanding                            Options Exercisable
                  ---------------------------------------------------     ------------------------------
                     Number     Weighted-Average         Weighted-          Number          Weighted-
   Range of       Outstanding      Remaining              Average         Exercisable        Average
Exercise Prices   at 12/31/97   Contractual Life       Exercise Price     at 12/31/97     Exercise Price
---------------   -----------   ----------------       --------------     -----------     --------------
<S>               <C>           <C>                    <C>                <C>             <C>

    $ 2.125          203,000       9.50 years              $ 2.125             50,700         $ 2.125
    $ 4.250            2,000       2.25 years              $ 4.250              2,000         $ 4.250
    $ 8.000           56,000       8.00 years              $ 8.000             42,000         $ 8.000
                 -----------                                              -----------
                     261,000                               $ 3.402             94,700         $ 4.775
                 ===========                               =======        ===========         =======
</TABLE>

11.     Major Customers, Suppliers and Export Sales

        Major Customers
        In 1997, two customers accounted for approximately 16% and 12%,
        respectively, of net revenues. In 1996, two customers each accounted for
        approximately 10% of net revenues. In 1995, two customers each accounted
        for approximately 13% of net revenues, and one customer accounted for
        approximately 10% of net revenues.

        Major Suppliers
        In 1996, two suppliers were in excess of 10% of the Company's total
        purchases and aggregated approximately $ 4,094,600. There were no
        outstanding accounts payable to these suppliers at December 31, 1996.


                                       33
<PAGE>   34
                           LOGIC DEVICES INCORPORATED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


        Export Sales
        The Company had the following export sales:

<TABLE>
<CAPTION>
                   1997        1996        1995
                ----------  ----------  ----------
<S>             <C>         <C>         <C>
Western Europe  $3,077,000  $2,341,300  $1,831,400
Far East           717,000     904,000   1,500,600
Other               80,300      99,600     108,800
                ----------  ----------  ----------
                $3,874,300  $3,344,900  $3,440,800
                ==========  ==========  ==========
</TABLE>

12.     Use of Estimates and Concentration of Other Risks

        The Company's consolidated financial statements are prepared in
        accordance with generally accepted accounting principles, which require
        the use of management estimates. These estimates are impacted, in part,
        by the following risks and uncertainties:

        Financial instruments, which potentially subject the Company to
        concentration of credit risk, consist principally of cash and cash
        equivalents and trade receivables. The Company places its cash and cash
        equivalents with high quality financial institutions and, by policy,
        limits the amounts of credit exposure to any one financial institution.

        A significant portion of the Company's accounts receivable are derived
        from one major class of customer (distributors) with the remainder
        spread across many other customers in various electronic industries. The
        Company believes any risk of accounting loss is significantly reduced
        due to provision being made at the date of the sale for returns and
        allowances, diversity of its products, end-customers, and geographic
        sales areas. The Company performs credit evaluations of its customers'
        financial condition whenever necessary. The Company generally does not
        require cash collateral or other security to support customer
        receivables.

        The Company produces inventory based on orders received and forecasted
        demand. The Company must order wafers and build inventory well in
        advance of product shipments. Because the Company's markets are volatile
        and subject to rapid technology and price changes, there is a risk that
        the Company will forecast incorrectly and produce excess or insufficient
        inventories of particular products. This inventory risk is heightened
        because many of the Company's customers place orders with short lead
        times. Demand will differ from forecasts and such differences may have a
        material effect on actual operations.


                                       34
<PAGE>   35
13.     Statements of Cash Flows

        The Company paid $411,700, $94,500, and $339,700 for interest in 1997,
        1996, and 1995, respectively, and $1,794,300, and $454,600 in income
        taxes in 1996 and 1995, respectively. The Company did not make any
        income tax payments during 1997.

        Noncash investing activities for the years ended December 31, 1997, 1996
        and 1995 consisted of the acquisition of $675,800, $1,429,000 and
        $240,200, respectively, of equipment under capital leases.

        In addition, as discussed in Note 2, noncash investing activities in
        1995 included the issuance of 75,000 shares of the Company's common
        stock for certain assets of STAR Semiconductor Corporation.


                                       35
<PAGE>   36
Quarterly Financial Data (Unaudited)

The following is a summary of unaudited results of operations (dollars in
thousands, except per share data) for the years ended December 31, 1997 and
1996.


<TABLE>
<CAPTION>
                                                           Quarter ended
                                   --------------------------------------------------------------
                                   3/31/97       6/30/97       9/30/97      12/31/97        Total
                                   -------       -------       -------      -------       -------
<S>                                <C>           <C>           <C>          <C>           <C>
Net revenues                       $ 2,803         3,022         3,182        3,511        12,518
Gross margin                       $ 1,042           988         1,247        1,308         4,585

(Loss) income from
operations                         $  (307)         (242)           65          156          (328)

(Loss) income before
 income taxes                      $  (349)         (328)            4          (77)         (750)

Net (loss) income                  $  (211)         (198)            3            8          (399)

Basic loss per share               $ (0.03)        (0.03)         --           --           (0.07)

Weighted average
Common shares                        6,122         6,122         6,122        6,122         6,122
</TABLE>


<TABLE>
<CAPTION>
                                                               Quarter ended
                                         --------------------------------------------------------
                                         3/31/96      6/30/96     9/30/96     12/31/96      Total
                                         -------      -------     -------     --------      -----
<S>                                      <C>          <C>         <C>         <C>          <C>
Net revenues                              $3,609       3,496       3,390       2,030       12,525
Gross margin                              $1,634       1,696       1,542         643        5,516

Income from operations                    $  329         186         156        (432)         239

Income before income taxes                $  369         214         161        (542)         202

Net income                                $  221         134          95        (328)         122

Earnings per share                        $ 0.04        0.02        0.02       (0.06)        0.02

Weighted average
common shares                              6,219       6,222       6,222       6,041        6,041
</TABLE>


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.


                                       36
<PAGE>   37
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Executive Officers

The following is a list of the directors and executive officers of the Company
as of March 24, 1998, all of whom are elected annually:

                                            Positions Held
        Name                 Age            With the Company
        ----                 ---            ----------------

        William J. Volz      50             President
                                            Director

        Mary C. deRegt       28             Chief Financial Officer
                                            Secretary

        William Jackson      50             Vice President/Manufacturing

        Michael S. Andrews   35             Chief Technical Officer

        Howard L. Farkas     73             Chairman of the Board

        Burton W. Kanter     67             Director

        Albert Morrison, Jr. 59             Director

        Bruce B. Lusignan    47             Director

        Mr. Volz is a founder of the Company. He has served as a director since
its inception and has been the President of the Company since December 1987. Mr.
Volz served as the Company's Vice President of Engineering from 1983 to 1987. He
was previously employed by Texas Instruments, Inc., Mostek Corporation, and
E-Systems, Inc.

        Ms. deRegt joined the Company in 1997 as Controller and was promoted to
Chief Financial Officer on March 23, 1998. Ms. deRegt is a Certified Public
Accountant, with 3 years public acccounting experience and 3 years industry
experience. She graduated from Loyola Marymount University with a Bachelor of
Science degree in Accounting in May 1992.

        Mr. Jackson joined the Company in 1990. Before joining the Company, Mr.
Jackson held various engineering and management positions at Advanced Micro
Devices ("AMD") and Monolithic Memories Inc. ("MMI"). Prior to AMD and MMI, he
was employed by Raytheon Corporation, Litronix Corporation, and Western
Electric. Mr. Jackson was appointed Vice President of Manufacturing in 1992.

        Mr. Andrews joined the Company in 1996 and was appointed Chief Technical
Officer in 1997. He has earned a B.S. in Computer Engineering from Florida
Institute of Technology in 1986, a M.S. in Electrical Engineering from the
University of Texas at Dallas in 1989, and a Ph.D. in Electrical Engineering
from the University of Texas at Dallas in 1998. He is an adjunct professor with
San Diego State University where he has taught courses in digital signal
processing and video processing. Just prior to joining Logic Devices he was with
Texas Instruments, Inc., Dallas, Texas, and previously with STAR Semiconductor
Corporation, New Jersey.


                                       37
<PAGE>   38
        Mr. Farkas is Chairman of the Board of the Company and has been a
director since 1983. Mr. Farkas has been part owner of and a broker with Farkas
Group, Inc., a commercial real estate company, since 1981. He has been a
business advisor to Mr. S. A. Hellerstein, trustee of the Farkas Trusts, and Mr.
Hellerstein's predecessor since 1964. He serves as a director of Synthetech,
Inc., Power Cell, Inc. and Acquisition Industries, Inc. Mr. Farkas is vice
president of G.A.S. Corp., a privately held corporation which serves as the
corporate general partner of Gas Acquisition Services Limited Partnership. On
June 27, 1990, such limited partnership sought protection under Chapter 11 of
the federal bankruptcy laws and was subsequently liquidated. On September 22,
1992, Mr. Farkas filed for personal protection under Chapter 7 of the federal
bankruptcy laws, and was released on November 26, 1996.

        Mr. Kanter has served as a director of the Company since 1983. He is "of
counsel" to the law firm of Neal Gerber & Eisenberg in Chicago. He serves as a
director of numerous companies, including the following public companies: Walnut
Financial Services, Inc., HealthCare COMPARE Corp., Scientific Measurement
Systems, Inc., Channel America, Inc. and PowerCell-Inc. He also is a member of
the Board of Directors or the Board of Trustees of: the Midwest Film Center of
the Chicago Art Institute, the Chicago International Film Festival and the
Museum of Contemporary Art of Chicago. He is also on the advisory board of the
Wharton School of the University of Pennsylvania Real Estate Center and the
University of Chicago Annual Tax Conference.

        Mr. Morrison has served as a director since 1983 and has been President
of Morrison, Brown, Argiz & Company, P.C., a certified public accounting firm in
Miami, Florida, since 1969. Mr. Morrison is Vice Chairman of the Dade County
Industrial Development Authority, Treasurer of the Board of Trustees of Florida
International University and a member of the Board of Directors of Chicago
Holdings, Inc., Heico Corporation and a Trustee of the Greater Miami Chamber of
Commerce.

        Dr. Lusignan was elected to the Board of Directors in 1996. Dr. Lusignan
is Director of the Communications Satellite Planning Center, a research
laboratory of Stanford University's Electrical Engineering Department. Dr.
Lusignan is Vice President of Engineering for Primary Communication, Inc., a
small telecommunications consulting firm and does consulting work for Becker,
Gurman, Lucas, Meyers and O'Brien (regulatory law), Mendes and Mount (satellite
insurance), the Intergovernmental Bureau of Informatics, Cairo University, King
Saud University, E.F. Johnson Corporation, and the U.S. Congress Office of
Technology Assessment.

Committees of the Board of Directors

        The Board has an Audit Committee and a Compensation Committee.
Currently, the members of the Audit Committee are Howard L. Farkas, Burton W.
Kanter and Albert Morrison, Jr., and the members of the Compensation Committee
are Howard L. Farkas, William J. Volz and Burton W. Kanter.

        The functions of the Audit Committee include reviewing the independence
of the Company's independent auditors, recommending to the Board the engagement
and discharge of independent auditors, reviewing with the independent auditors
the plan and results of auditing engagements, reviewing the scope and adequacy
of internal accounting controls and directing and supervising special
investigations. The Audit Committee held one meeting during 1997.

        The functions of the Compensation Committee include reviewing and making
recommendations to the Board with respect to the compensation of officers and
other employees of the Company and establishing employee benefit programs. The
Compensation Committee held three meetings during 1997.

        The Board held four meetings during 1997. All members of the Board
attended each meeting during the year.


                                       38
<PAGE>   39
Compliance with Section 16(a) of the Exchange Act

        Based solely upon a review of Form 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) during its most recent fiscal
year and Form 5 and amendments thereto furnished to the Company with respect to
its most recent fiscal year, the Company is not aware of any directors, officer
or beneficial owner of more than 10% of the shares of the Company's Common Stock
who failed to file on a timely basis, as disclosed in the above Forms, reports
required by Section 16(a) of the Exchange Act during the most recent fiscal year
or prior fiscal year except that Michael A. Andrews did not timely file Form 3
when he was elected Chief Technical Officer in March of 1997. The Form 3 was
filed in December 1997.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item will be included in the Proxy Statement
and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item will be included in the Proxy Statement
and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item will be included in the Proxy Statement
and is incorporated herein by reference.


                                       39
<PAGE>   40
                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)     The following documents are filed as part of this report:

        (1)     The Company's Consolidated Financial Statements and Notes to
        Consolidated Financial Statements appear at pages 21 to 35 of this
        report; see Index to Consolidated Financial Statements at page 19 of
        this report.

        (2)     Consolidated Financial Statement Schedules appear at page 41 of
        this report; see Index to Consolidated Financial Statement Schedules at
        page 19 of this report.

        (3)     The Index to Exhibits appears at page 43 of this report.

(b)     Reports on Form 8-K: During the last quarter of fiscal 1997, the Company
filed no Current Report on Form 8-K.


                                       40
<PAGE>   41
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS


<TABLE>
<CAPTION>
                         Balance       Charged to                                            Balance
                            at            costs        Charged to                               at
                        beginning          and            other                               end of
Description             of period       expenses        accounts            Deductions        period
                       ----------      ----------      -----------          ----------      ----------
<S>                    <C>             <C>             <C>                  <C>             <C>

1997

Allowance for:

Doubtful accounts      $  403,700      $               $        --        $               $  169,500

Inventory reserve      $  575,000      $1,224,000      $        --        $1,299,000      $  500,000

Sales returns          $  200,500      $   80,000      $        --        $   80,000      $  200,500


1996

Allowance for:

Doubtful accounts      $  119,500      $  400,000      $        --        $  115,800      $  403,700
Inventory reserve      $  575,000      $1,783,900      $        --        $1,783,900      $  575,000

Sales returns          $  100,500      $  100,000      $        --        $     --        $  200,500


1995

Allowance for:

Doubtful accounts      $   49,500      $  120,000      $        --        $   50,000      $  119,500

Inventory reserve      $  478,500      $  749,800      $        --        $  653,300      $  575,000

Sales returns          $  100,500      $  507,600      $        --        $  507,600      $  100,500
</TABLE>


                                       41
<PAGE>   42
                                   SIGNATURES


        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

        LOGIC DEVICES INCORPORATED


Date:  March 27, 1998               By:   /s/ William J. Volz
                                       ----------------------
                                              William J. Volz, President and
                                              Principal Executive Officer


  Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
  Signature                                     Title                          Date
  ---------                                     -----                          ----
<S>                                     <C>                               <C>
    /s/ William J. Volz                 President                         March 27, 1998
  ------------------------------        (Principal Executive Officer)
      William J. Volz


    /s/ Mary C. deRegt                  Chief Financial Officer           March 27, 1998
  ------------------------------        (Principal Financial
      Mary C. deRegt                    and Accounting Officer)



    /s/ Howard L. Farkas                Chairman of the Board             March 27, 1998
  -----------------------------
      Howard L. Farkas                  of Directors


   /s/ Burton W. Kanter                 Director                          March 27, 1998
  -----------------------------
      Burton W. Kanter


    /s/ Albert Morrison, Jr.            Director                          March 27, 1998
  ------------------------------
      Albert Morrison, Jr.

    /s/ Bruce B. Lusignan               Director                          March 27, 1998
  ------------------------------
      Bruce B. Lusignan
</TABLE>


                                       42
<PAGE>   43
                                INDEX TO EXHIBITS

  Exhibit No.                                                       Description

3.1     Articles of Incorporation, as amended [3.1] (1).

3.2     Bylaws, as amended. [3.2] (1).

4.1     Form of Warrant to purchase an aggregate of 2,500 shares of common
        stock. [4.1] (15)

4.2     Form of Warrant to purchase an aggregate of 31,850 shares of common
        stock. [10.2] (13)

10.1    Master Agreement dated August 11, 1988 between Registrant, Howard L.
        Farkas, Burton W. Kanter, William Volz, Albert Morrison, Jr., as trustee
        of the T.C. Family Trust, Burton W. Kanter, as trustee of the Logical
        Trust, L.A. Hellerstein, as trustee, the Farkas Trusts, and Solomon A.
        Weisgal as trustee of the Bea Ritch Trusts, with exhibits. [10.1] (1).

10.2    Logic Devices Incorporated Stock Purchase Plan. [10.2] (1).

10.3    Incentive Stock Agreement dated September 1, 1986 between Registrant and
        certain employees and former employees of Registrant, including William
        Volz, James McAllister, Todd Ashford and Jesse Huffman. [10.3] (1).

10.4    Agreement of Lease dated May 4, 1989 between Registrant and the Koger
        Company covering Registrant's facility in St. Petersburg, Florida.
        [10.7] (5)

10.5    Sales Incentive Plan. [10.11] (1).

10.6    Logic Devices Incorporated incentive and non-qualified stock option
        plan. [10.26] (6).

10.7    Stock option agreement between Todd J. Ashford and the Registrant, dated
        May 15, 1990. [10.27] (7)

10.8    Stock option agreement between Tony Bell and the Registrant, dated April
        16, 1990. [10.28] (7)

10.9    SRAM Development Memorandum of Understanding between the Registrant and
        OKI Electric Industry Co., Ltd. dated March 3, 1992. [10.32] (9) (17)

10.10   Form of Warrant to purchase an aggregate of 220,000 shares of Common
        Stock. [10.23] (12)

10.11   Form of Registration Agreement regarding the Warrants referenced in
        Exhibit 10.14. [10.24] (12)

10.12   Foundry Capacity Agreement between Zentrum Mikroelektronik Dresden (ZMD)
        and Logic Devices Incorporated, dated December 14, 1995. [10.27](12)(17)

10.13   Real Estate lease regarding Registrant's Sunnyvale facilities.
        [10.1](16)

10.14   Assignment of Warrant to purchase an aggregate of 100,000 shares of
        Common Stock. [10.1](14)

10.15   Secured Promissory Note between Howard Farkas and Registrant. [10.4](14)

10.16   Secured Promissory Note between Albert Morrison, Jr. and Registrant.
        [10.5](14)

10.17   Logic Devices Incorporated 1996 Stock Incentive Agreement [99.1](18)

11.1    Computation of Earnings per Common Share

23.1    Consent letter of Meredith, Cardozo, Lanz & Chiu LLP

27.1    Financial Data Schedule

-------------------

[ ]     Exhibits so marked have been previously filed with the Securities and
        Exchange Commission as exhibits to the filings shown below under the
        exhibit numbers indicated following the respective document description
        and are incorporated herein by reference.

(l)     Registration Statement on Form S-18 ("Registration Statement"), as filed
        with the Securities and Exchange Commission ("SEC") on August 23, 1988.

(2)     Amendment No. 1 to Registration Statement as filed with the SEC on
        September 27, 1988.

(3)     Amendment No. 2 to Registration Statement, as filed with the SEC on
        October 7, 1988.

(4)     Annual Report on Form 10-K for the fiscal year ended December 31, 1988,
        as filed with the SEC on April 14, 1989.

(5)     Annual report on Form 10-K for the fiscal year ended December 31, 1989,
        as filed with the SEC on April 14, 1990.

(6)     Proxy Statement relating to the Annual Meeting of Shareholders held on
        June 12, 1990, as filed with the SEC on May 24, 1990.

(7)     Annual Report on Form 10-K for the fiscal year ended December 31, 1990,
        as filed with the SEC on April 14, 1991.

(8)     Annual Report on Form 10-K for the fiscal year ended December 31, 1991,
        as filed with the SEC on April 14, 1992.

(9)     Annual Report on Form 10-K for the fiscal year ended December 31, 1992,
        as filed with the SEC on April 15, 1993.

(10)    Annual Report on Form 10-K for the fiscal year ended December 31, 1993,
        as filed with the SEC on March 31, 1994.

(11)    Annual Report on Form 10-K for the fiscal year ended December 31, 1994,
        as filed with the SEC on March 31, 1995.

(12)    Annual Report on Form 10-K for the fiscal year ended December 31, 1995,
        as filed with the SEC on April 12, 1996.

(13)    Registration Statement on Form S-3 as filed with the SEC on August 31,
        1995 [Registration No. 33-62299]

(14)    Registration Statement on Form S-3 as filed with the SEC on November 21,
        1996 [Registration No. 333-16591]

(15)    Quarterly Report on Form 10-Q for the quarter ended September 30, 1995,
        as filed with the SEC on November 14, 1995.

(16)    Quarterly Report on Form 10-Q for the quarter ended September 30, 1996,
        as filed with the SEC on November 14, 1996.

(17)    Confidential treatment requested with respect to certain portions of
        such agreements.

(18)    Registration Statement on Form S-8 as filed with the SEC on August 4,
        1997. [Registration No. 333-32819]


                                       43